Face-to-Face: Dividend two years after generation

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    FEB 16 –

    TUK_PAUDELTuk Prasad Paudel is chief executive officer of Sanima Mai Hydropower Project. The Kathmandu Post caught up with Paudel to talk about the progress made by the company and its success in the recent initial public offering (IPO). Excerpts:

    Tell us about Sanima Mai Hydropower Project. What is the current status of the construction?

    As of now, we have completed 85 percent of the construction work. We will start electricity generation by mid-August, 2014. Sanima Mai Hydrpower Company Limited is carrying out two projects—one with 22MW capacity and the other 7MW. Within mid-August, 2015, work on the 7MW project will also complete.

    What is the project cost?

    We have invested Rs 3.11 billion for the 22MW project, and Rs 1.26 billion for the 7MW. Unlike other hydropower companies, Sanima Mai went to initial public offering (IPO) during the construction phase.

    Do you think this model can be replicated by other projects as well?

    It is actually the model of Chilime Hydropower Project, in which the government has a stake. Chilime’s model cannot be sustainable without going public. The company needs to go public and should be managed efficiently. However, before taking the public money, the promoters should manage all the equity, and guarantee financial closure.

    I think this is a sustainable model. We have followed the same. I also feel the government should have a 5-10 percent stake in PPP projects. This will help companies get cheap loans from international financial institutions, mainly EXIM banks.

    What is your company planning after this project?

    We are planning 54MW middle Tamor hydropower project. We have also filed an application for another 50-60 MW project.
    For many under-construction projects, transmission line has emerged as the one of major problems. What is the case with Sanima Mai?

    Unlike other projects, Sanima Mai does not have such problem. We are constructing an 11-km 132-KV transmission line to evacuate electricity from Sanima Mai, which will be connected with the national grid through Kabeli Transmission Line at Godhar, Ilam. The construction of Kabeli Transmission is currently under way. And, if the construction work moves at the current pace, we are hopeful it will complete in time.
    One of the major problems faced by independent power producers (IPPs) is the delay in power purchase agreement (PPA). Nepal Electricity Authority (NEA) has been reluctant in signing PPA of late, citing its weak financial health. Don’t you think we need to go for a larger reform in the power sector where there will be separate agencies looking after generation, transmission and distribution?

    Talks on the unbundling of the NEA have been going on for some time. It’s up to the government to decide whether it wants to unbundle the NEA.

    However, there is a need for a separate authority to look after transmission lines. In the current fiscal year’s budget, there has been huge budget allocation for transmission lines, but nothing has happened. Currently, the NEA does everything—from electricity generation, distribution to transmission line construction. This is also a reason why it needs to be unbundled.

    There was huge public interest in Sanima Mai IPO. When will your company start giving returns to shareholders?

    As per our plan, we’ll start giving dividend to the shareholders from the second year after generation. Within the second year, we will give five percent dividend.

    And in the third and fourth years, it will be around 10 percent. Within 10-11 years of the loan repayment period, we will give 15-20 percent dividend.

    When will Sanima Mai move to big hydro projects?

    It’s difficult for private sector companies to construct reservoir-type hydropower projects. There are many issues—one is cost and the other is resettlement. The government needs to support the private sector to go for larger projects.

    Source: The Kathmandu Post