NEA eyes Rs 69 billion from IPO to develop hydropower and transmission infrastructure

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It aims to raise Rs70 billion. The initial public offering proposal has reached the Cabinet for approval.

Nepal Electricity Authority plans to invest the fund collected through the Initial Public Offering in a number of hydropower and transmission line projects.

The state-owned power utility is set to raise nearly Rs70 billion through IPO, a proposal for which has already been forwarded to the Cabinet for approval.

The Ministry of Energy, Water Resources and Irrigation has taken a proposal to the Cabinet, whose endorsement will pave the way for the state-owned power utility to sell up to 10 percent of its shares to the general public.

“We sent the proposal to the Cabinet on Sunday,” said Nabin Singh, the ministry’s spokesperson.

With the NEA getting involved in a number of large hydropower generation and transmission projects, it has a huge investment need, part of which it wants to fulfil by raising money from the general public.

“We need to invest a huge amount of money as equity for the development of hydropower projects including Dudhkoshi, Upper Arun, Arun-4, Budhi Gandaki, and Chainpur Seti, among others, with a combined capacity of around 3000 MW,” said NEA Managing Director Kul Man Ghising. “We also need to invest massively to build 400kV transmission lines from the country’s eastern part to the far-western region including Lamahi-Attariya section and several substations.”

The state-owned power utility has been working to develop the 635MW Dudhkoshi Hydropower Project with the assistance of the Asian Development Bank.

It is also set to develop the proposed 1,061 MW Upper Arun Hydroelectric Project at Bhotekhola, Sankhuwasabha, where the World Bank has been willing to join force as financer.

The NEA is a joint venture partner with India’s SJVN Limited to develop the 490MW Arun 4 Hydropower Project. The power utility is expected to develop the 1,200 MW Budhi Gandaki Hydropower Project and its subsidiary—Chilime Engineering and Services Co. Ltd—is aiming to develop 215 MW Chainpur Seti Hydropower Project.

Ghising said the money raised from the IPO would also be invested in improving the distribution network, but much of the amount will be spent for power generation.

The NEA plans to sell its shares at premium price following the public issuance of shares.

“Current net worth per share of the NEA stands at Rs115,” Singh said. “As per the proposal, the NEA will be allowed to sell its share at Rs230 per share.”

It means, by selling 10 percent of its shares to the public, the NEA would be able to raise as much as Rs69 billion.

Through the IPO, the NEA plans to increase its authorised capital to Rs 300 billion.

According to the Securities Registration and Issue Regulation-2016, an enterprise can be allowed to issue public shares at a premium rate provided the entity has been profitable for the past three consecutive years, and per share net worth is higher than per share paid up capital and the method adopted to determine premium rate is endorsed by the outside experts in their evaluation report.

The NEA has been making profits since 2016-17 with Rs1.5 billion net profit recorded in that year. Earlier, the NEA had received approval from the Finance Ministry to go ahead with issuing the public shares.

ICRA Nepal, a credit rating agency, had earlier evaluated its financial performance, providing it a solid ‘AA+’ rating.

“Issuers with this rating are considered to have a high degree of safety regarding timely servicing of financial obligations,” the rating agency said in October last year. “Such issuers carry very low credit risk.”

The signs of + (plus) or – (minus) appended to the rating symbol indicates the entity’s relative position within the rating categories concerned.

NEA officials expect the full subscription of its shares considering its improved financial performances compared to the era, until a few years back, when it was plagued by prolonged load shedding.

But raising such a large amount of funds from the general public will not be enough to meet the ambitious government plan for power generation and transmission in the next one decade or so.

The government is coming up with a plan to generate over 28,000 MW of electricity by 2035 in the country. As much as $46.5 billion (Rs 6,209 billion) will be required to generate the targeted power and develop transmission and distribution infrastructure, while $40 billion will be needed only for generation, according to the government’s estimate.

However, Ghising said that the NEA would help secure funds from external investors to develop the project once it ensures the counterpart fund to invest as equity. “The NEA needs to have its own fund to invest as equity to develop the planned project,” he said.

 

Source: Kathmandu Post