State-owned Hydroelectricity Investment and Development Company Limited (HIDCL) is mulling over launching an ‘equity fund’ to pool money from retail and institutional investors for the purpose of buying stakes in various hydroelectricity projects.
The fund, according to HIDCL CEO Deepak Rauniyar, will operate in a similar manner as a mutual fund, meaning investors will have to share profits and losses equally based on performance of the hydro project.
“Initially, we are planning to pool around $50 million (approximately Rs five billion) from institutional investors, both domestic and foreign. Once this is successful, we will allow the public to participate in the scheme,” said Rauniyar, adding, “The purpose behind targeting only institutional investors in the first phase is to build our reputation in the market and instil confidence in the public so that they can trust us with their money.”
The money collected via this means will be used to become equity partners in various hydropower projects. “We hope the investment vehicle will also serve the purpose of retirement schemes for people as a return of around 20 per cent can be expected from hydro projects once they clear off the debt,” Rauniyar said, without revealing when the fund would be launched.
The ambitious plan of HIDCL — a special purpose vehicle created to extend credit to hydroelectricity project and power transmission line developers — comes at a time when it has not been able to utilise several billion rupees of funds collected from its shareholders.
The company had raised Rs five billion from the government and Rs one billion each from Employees Provident Fund, Rastriya Beema Sansthan and Citizen Investment Trust at the time of its establishment in July, 2011.
Of this amount, close to Rs one billion is being extended as loan to 42-megawatt Mistri Khola hydroelectric project being developed by Robust Energy, and another Rs 500 million in credit is being given to 27MW Dordi Khola hydroelectric project being developed by Himalayan Power Partner Private Limited.
Recently, HIDCL has also entered into agreement with the International Development Association (IDA) of the World Bank Group, the government and Kabeli Energy Limited to channel $40 million being extended by the IDA to build 37.6MW Kabeli ‘A’ hydroelectric project through it.
Also, HIDCL has agreed on extending a loan of Rs 200 million to 23.5 MW Solu Khola hydroelectric project and another loan of Rs 400 million to 30MW Khani Khola hydroelectric project.
“With all these commitments, we are close to extending a credit of around Rs two billion to various hydro projects,” said Rauniyar, who took the reins of HIDCL around 15 months ago.
This means HIDCL still has an idle fund of around Rs six billion.
“We hope this fund will be utilised in the coming days as the investment climate is expected to improve,” said Rauniyar, justifying the need to raise additional money through the ‘equity fund’.
Source : The Himalayan Times