State-owned Hydroelectricity Investment and Development Company (HIDCL) will make equity investments in projects being executed by private developers too, departing from its earlier policy of investing in public projects only.
The board of directors of HIDCL approved a working procedure that will allow the company to be an equity partner in hydropower projects owned by independent power producers.
Established in 2011 to mobilise funds for the development of hydropower projects in both the public and private sectors, the company has been investing in public projects only so far. Seven years after its establishment, HIDCL came up with the plan to make investments in private projects too as mandated by the government.
The company was set up with share investments from the Finance, Energy and Law ministries and other government agencies including the Employment Provident Fund, Citizens Investment Trust and Rastriya Beema Sansthan.
“We have made equity investments in many public projects. Since investments in private projects is a risky affair, we took some time to enable our organisation to take such risks,” said Mukti Bodh Neupane, deputy general manager of HIDCL. “Now our organisation is mature enough to take such risks, and we will start making equity investments in private projects.”
Project developers seeking equity investment from HIDCL have to pass a financial, legal and institutional assessment conducted by the company to be eligible to receive funding, according to the working procedure. HIDCL will also collect credit information about the project’s primary promoters before making an equity investment decision.
According to Neupane, HIDCL is currently evaluating the proposals of several hopeful privately-owned mid-sized hydropower projects. It is considering funding applications for the 42 MW Nyasim Hydropower Project and 57 MW Nupche Likhu Hydroelectric Project, among others.
“Once the evaluation is complete, we will make an equity investment in these projects,” said Neupane. Apart from making equity investments in private hydropower projects, HIDCL has prepared a modality to allow public participation in the development of key hydropower projects in the government’s basket. It has submitted the modality to the Ministry of Energy Water Resources and Irrigation.
As per the modality, the general public can purchase shares in an initial public offering (IPO) by paying 10 percent of the face value. They have to pay another 50 percent of the face value after 80 percent of the construction is completed. The remaining 40 percent of the face value needs to be paid after the construction of the project is close to completion.
For example, one can purchase a share with a face value of Rs100 by paying Rs10 initially, and then pay Rs50 after 80 percent of the construction of the project is completed. The remaining Rs40 has to be paid when the project is about to be completed.
Source : The Kathmandu Post