Nepal’s Electricity Giant Goes Public: NEA to Issue Rs 60 Billion IPO

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KATHMANDU, Jan 15: The Nepal Electricity Authority (NEA) has geared up to become a public limited company, with the authority stepping up to issue its initial public offerings  (IPOs) worth Rs 60 billion.

According to the NEA, it is going to restructure its financial framework for this purpose. The state-owned public utility is issuing the shares to the general public in accordance with the Nepal Electricity Authority Act 1984.

After it issues its IPOs to the public, the NEA will be the biggest government entity in terms of capital base. The Ministry of Finance (MoF) is said to have given the go ahead to the public enterprise to float its shares to the general public.

A meeting of the Board of Directors of the NEA held on December 11 decided to restructure the government entity as a public enterprise. The NEA board has decided to receive approval to maintain the authorized capital of Rs 3 billion from the MoF and then to take forward the proposal to the Council of Ministers through the Ministry of Energy, Water Resources and Irrigation (MoEWRI) to receive final approval.

The Securities Registration and Issue Regulation, 2016 talks on allowing issuing general shares of public enterprise at a premium price of up to 10 percent of the currently proposed authorized capital, maintaining the price per share up to twice the net worth. The NEA Managing Director Kulman Ghising is said to have forwarded the NEA’s board decision to the MoEWRI on January 4.

According to the MoEWRI, the drive to convert the NEA to a public limited company is a part of the government’s move for divestment of the shares of the state-owned entity.  Earlier, the government had sold the shares of Nepal Telecom to the public. Minister for Energy, Water Resources, and Irrigation, Shakti Bahadur Basnet, who also serves as the Chairman of the NEA board, said this share has been issued to make the public institution more powerful.

The NEA has been granted a ‘Double A Plus’ credit rating by ICRA Nepal. For this purpose, ICRA Nepal had conducted a comprehensive analysis of the NEA, examining its financial standing, assets, commercial and financial risks, managerial proficiency, as well as internal and external factors influencing operational efficiency.

Entities holding a double A-plus rating demonstrate a strong capacity to fulfill their financial obligations promptly. Engaging in financial transactions with such entities poses a very low risk of loan repayment.

The NEA earned profits of Rs 12.33 billion in the last fiscal year, down from Rs 13.37 billion in the previous fiscal year. The decline in the profit amount in 2022/23 was attributed to a surge in expense to import electricity from India.

Currently, the NEA has stepped up its efforts to improve the distribution system through installation of necessary transmission lines and related infrastructure, targeting to sustain the demand of 11 cities until 2050. According to the NEA, more than 95 percent of the country’s households have now received electrification.

 

Source : Republica