Dam for hydroelectric power generation Photo: iStock

This is a story of love spurned. It is also a personal story, so it comes with all the caveats that ought to be expected because of one’s capacity to be less than objective about such matters.

I am not a citizen of Nepal. If I had been, my daughter and I would never have suffered the loss of our home there.

But citizenship apart, Nepal is where my heart lies: I have had a love affair with the country and its people for more than 50 years.

Undeterred by the damage sustained in a brutal divorce and the unmitigated greed and dishonesty of my ex-in-laws, I invested in a 2.4-megawatt hydroelectric project in Jiri.

Imprudently, I took no part in selecting the executive director for the project, even more unwisely, I did not study the loan agreements with the banks providing the non-equity element of the funding.

I complained bitterly when informed that the interest on the bank loan would be 15%, but by then the company was on a tight time schedule to commence work, failing which the license would be revoked.

By this point in the story you are saying, “This man’s improvidence was its own reward.”

My guiding principle for the investment was that if we could demonstrate that a medium-scale industrial enterprise could be funded by foreign direct investment and brought to fruition, that would serve as an object example to encourage other foreign investors to regard Nepal as a worthwhile country into which to invest.

Inevitably, the project encountered problems, but the major source of the problems was the bank and its own appointed structural engineer, whose design was fundamentally flawed. The bank contract excluded vicarious liability for negligence on the part of its appointee.

Ultimately, the project was commissioned and power began to flow to the national grid.

But instead of resolving the earlier problems, we began to suffer a  series of financial lesions.

If we generated more power than we had contracted to supply, we were not paid for it, but if we did not meet the target, we were fined.

Next, I learned that even to get the Nepal Electricity Authority to pay the revenue due to us, payment would not be signed off unless the respective NEA official responsible for the payment had first been bribed.

Under the agreement with the banking consortium, the total revenue received from the NEA is paid into an escrow account with the lead bank and the company receives 12% of the revenue, ostensibly to cover operating expenses.

However, 12% does not cover the basic running costs, so consequently the investors have had to keep feeding the company with money just to keep it operating.

Under the terms of the contract with the NEA, we were due for a 20% increase on the tariff owing to us for power generated, but for no reason whatsoever the uplift was not paid. I was informed that three other hydroelectric companies were suffering the same treatment.

When I advised that we sue the NEA under the contract, I was informed that the company had been approached by a “facilitator” who would ensure that we were paid the 20% uplift as well as the accumulated backlog if he was paid an “incentive.” By this time there were only two investors shouldering all the additional expenditure of keeping the company afloat. As one of the two, I refused to contribute to the bribe for the “facilitator.”

Consequently, our company still has not received its 20% uplift.

Significantly, that 20% would have enabled the company to maintain the interest payments to the bank as well as meet its operating costs.

Without the 20% we can neither service the loan nor meet the operating overheads.

Now the bank wants to sequester the company’s assets. Having been largely responsible for the cost overrun, it now wants to take the benefit of its obscene money-grubbing practices.

It does not take rocket science to appreciate that if the operating costs are not met, the power plant will cease to run and the asset will become worthless.

In such circumstances, in any intelligent society, the banks would ensure that the operational costs were covered, so as to maintain the value of the asset. Not, however, the brilliant financial minds behind Nepal’s banking industry.

Hydroelectric power is Nepal’s greatest natural asset. If properly harnessed, it could turn the country into an economic powerhouse, selling electricity to India and China. But the benefit of this industry will be grabbed by large Indian industrialists and China’s Belt and Road neo-colonial activities.

Nepal’s government lacks the expertise – and courage – to negotiate beneficial terms either with China or any of the major Indian industrialists who want to get their hands on the hydropower potential.

The people of Nepal will not benefit from exploitation of their great natural asset but the usurious Nepalese bankers will drown in their ill-gotten gains while some politicians and government officials will doubtless hoard their “incentives” in offshore banks.

Successive Nepalese governments have touted the benefits to foreign direct investors in the hydroelectric field, but in reality only the banks and NEA officials at various levels flourish.

The NEA’s chief executive officer came to that post with an enviable reputation for being incorruptible. One can only surmise that his subordinates are concealing their mendacity.

Nepal is hemorrhaging from corruption. Lunatics like me keep trying to help it to progress, to throw off the stifling cloak of bribery, nepotism and greed that is eating the heart out of this beautiful land and its people like a wasp inside a spider’s nest.

It is a tragic truth that the people you love are the ones who can hurt you most. What is true of people is also true of countries.


Asia Times has relaunched on www.asiatimes.com. Download our brand new native App for a sweeping selection of geopolitical and business news from across Asia.

Neville Sarony QC is a noted Hong Kong lawyer with more than 50 years at the Bar.

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