HIDCL gets into gear, signs Rs 2b loan deals

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    KATHMANDU, MAR 10 –

    HIDCLHydroelectric Investment and Development Company Limited (HIDCL) has been gradually moving towards making investments in hydropower projects two and a half years after its establishment.

    The state-owned company was set up to generate resources and invest them in hydropower development amid a crippling power crisis in the country. So far, it has signed agreements with four hydropower projects to provide them consortium loans by working with other banks and financial institutions.

    Among the projects in which the company is putting money are the 42 MW Mristi Khola, 30 MW Khani Khola, 27 MW Dordi Khola and 23.5 MW Solu Khola projects. HIDCL is making a total outlay of Rs 2.06 billion.

    “We are holding negotiations for possible investment in two other projects with capacities of 24 MW and 25 MW,” said Deepak Rauniyar, chief executive officer of the company. “A consortium led by Prime Bank and

    Nepal Investment Bank are preparing to lend to those two projects,” he added.

    As it is a new company with no experience in hydropower development and investment, Nepal Rastra Bank has told it to invest in hydropower projects only in consortium with other banks and financial institutions for the time being. So it has been lending to projects where there is already a consortium of banks ready to invest in the project.

    Meanwhile, HIDCL is also handling the lending arrangement for the US$ 40 million provided by the World Bank to a 37.6 MW project being developed by Butwal Power Company. It holds a 14 percent stake in PTCN, the company which is building and managing the cross-border transmission line on the Nepal side.

    “There is growing demand for investment from us, but we only invest in projects which we find feasible and provide good returns,” said Rauniyar.

    The Mristi Hydropower Project in Myagdi is the first scheme which HIDCL has pledged to finance. Its rate of return on

    equity has been projected at 24.04 percent.

    HIDCL has promised to provide 23.26 percent of the loans in the Nabil Bank-led consortium. This is equivalent to Nabil’s committed investment. Nepal Investment Bank, Nepal Bank, Laxmi Bank, Siddhartha Bank and Ace Development Bank are the

    other consortium partners for this project.

    Dolakha-based Khani Khola project’s return on equity has been projected at 35.52 percent and Prime Bank is the leader the consortium financing this project. Prime and HIDCL each have promised to invest an amount equal to 19.23 percent of debt financing. Other lending partners are Civil Bank, Century Commercial Bank, Machhapuchchhre Bank, Siddhartha Bank, Global IME Bank, Nepal SBI Bank and Siddhartha Development Bank.

    Lamjung-based Dordi Khola’s return on equity has been projected at 18.29 percent. The leader in the consortium financing is Prime Bank. It will have a 26.6 percent stake among the consortium partners while Nabil Bank and HIDCL each will have a 16 percent stake. Commerz and Trust Bank, Civil Bank, Machhapuchchhre Bank, Nepal Credit and Commerce Bank and Siddhartha Bank are the other consortium partners.

    Likewise, Solu Khola, which is one of the super six projects that received a construction licence on free competition basis, is receiving loans from Laxmi Bank, HIDCL, Nepal Investment Bank, NMB Bank, Everest Bank, NIC (Asia) Bank, Bank of Kathmandu, Machhapuchchhre, Civil Bank, Janata and Commerz and Trust Bank. Here, Laxmi Bank is the leader of the consortium and it will provide 13.03 percent of the total lending while HIDCL will have a 6.51 percent stake. The project is being built in Solukhumbu district.

    As far as Kabeli is concerned, the World Bank is providing US$ 40 million through HIDCL where it will have the responsibility of lending the money, managing the funds and reporting the project’s progress.

    “We are not charging any fee for managing the funds, but a certain percentage of the cost of human resources will be made available,” said Rauniyar. As Kabeli will be getting the loan in US dollars at the labour rate of 2 percent (the interest rate fixed in the London money market by the London Bankers’ Association and which works as the global standard), it will have to bear the risk of fluctuations in exchange rates.

    Rauniyar said that HIDCL had been asked informally to invest 1 percent of the local component, but negotiations on the matter have not taken place. The project is located in the border region of Panchthar and Taplejung.

    Besides investing in hydropower projects, the company also plans to finance transmission lines if viable proposals are submitted. Rauniyar said that the company was working to bring international investors into the hydropower sector by creating private equity firms.

    Source : Ekantipur