nepal electricity authority ipo? [ nea ipo]
The authority has planned to invest in large hydropower and transmission projects through IPO
A target of raising 70 billion has been set. The preliminary public proposal has reached the Cabinet for approval.
The authority has planned to invest in large hydropower and transmission projects through IPO
The government has planned to produce more than 28,000 megawatts of electricity in the country by 2035. Post a file photo
The Ministry of Finance has approved the proposal submitted by the Nepal Electricity Authority to issue shares at a premium price to the general public. After the financial approval, the Ministry of Energy, Water Resources and Irrigation will submit the necessary proposals to the Council of Ministers for approval.
Executive Director Kulman Ghising, who led the proposal, expressed his enthusiasm for the approved plan, which allocated up to 10 percent of the authorized capital to public shares. As the authorized capital of Electricity Authority is Rs 3 trillion, the way to increase public participation will be opened.
As mentioned in the proposal, the book value of each share is around Rs. 125, with additional premium applicable. This means that a potential investor has to invest Rs.250 for each share he wants to acquire.
In the financial year 2078/79, the share capital was Rs.1.75 trillion and Rs. There is a reserve fund of 27 billion, so that a net worth of Rs. 2.02 billion has been set aside for this share issue.
Ikra Nepal has reaffirmed the credit rating of AA+ for the IPO issue of Nepal Electricity Authority (NEA). Issuers with this rating are considered to have a high level of security in terms of timely servicing of financial obligations, such issuers carry very little credit risk.
Prithviman Shrestha
Published on: January 18, 2024 Updated on: January 18, 2024 06:51 Kathmandu
The Nepal Electricity Authority has planned to invest the funds collected through the initial public offering in several hydropower and transmission line projects.
The government-owned electricity authority has prepared to issue nearly 70 billion rupees through IPO, the proposal of which has been sent to the Cabinet for approval.
The Ministry of Energy, Water Resources and Irrigation has brought a proposal to the Council of Ministers, the approval of which has opened the way for the government-owned Electricity Authority to sell up to 10 percent of its shares to the general public.
"We have sent the proposal to the Cabinet on Sunday," said Naveen Singh, spokesperson of the ministry.
As the authority is involved in several large hydroelectric power generation and transmission projects, it needs a large investment, part of which it wants to complete by raising money from the general public.
"For the development of Dudhkoshi, Upper Arun, Arun-4, Budhigandaki, Chainpur Seti and other hydropower projects, a large amount of equity has to be invested," the authority said. . Managing Director Kulman Ghising. A huge investment should also be made to build a 400 kV transmission line and some substations from the eastern part of the country to the far western region including the Lamhi-Attaria section.
The government-owned electricity authority is working to build the 635 megawatt Dudhkoshi hydropower project with the help of the Asian Development Bank.
The World Bank is also willing to invest in the development of the proposed 1,061 MW Upper Arun hydropower project at Bhotekhola in Sankhuwasabha.
NEA IPO biggest ipo in nepal '
NEA is a joint venture partner with India's SJVN Limited to develop the 490 MW Arun 4 hydroelectric project. The power utility aims to build the Budhigandaki hydropower project with a capacity of 1,200 MW and its subsidiary Chilime Engineering and Services Company Limited to build the Chainpur Seti hydropower project with a capacity of 215 MW.
Ghising said that the money raised from the IPO will also be spent on improving the distribution network, but said that most of the money will be spent on power generation.
The authority has planned to sell shares at a premium price after issuing public shares.
"The current net worth per share of NEA is Rs 115," said Singh. According to the proposal, the authority will be allowed to sell shares at Rs 230 per share.
This means that the authority will be able to raise up to 69 billion rupees by selling its 10 percent shares to the general public.
Through the IPO, the authority has planned to raise its authorized capital to Rs 300 billion.
According to Securities Registration and Issuance Regulations-2016, if the organization has earned profit for three consecutive years and the net worth per share is more than the paid-up capital, it is allowed to issue public shares at a premium rate. And the methodology adopted to determine the premium rate has been supported by external experts in their valuation reports.
The authority has been making profit since 2016-17 and earned a net profit of 1.5 billion in that year. Earlier, the Authority had taken approval from the Ministry of Finance to issue public shares.
Credit rating agency Icra Nepal had earlier assessed its financial performance and awarded it a solid 'AA+' rating.
"Issuers with this rating are considered to have a high level of security in terms of timely servicing of financial obligations," the rating agency said in October last year. "Such issuers carry very little credit risk."
+ (plus) or – (minus) signs appended to the rating symbol indicate the organization's relative position in the respective rating categories.
Authority officials expect full subscription of its shares, given its improved financial performance compared to a few years ago when it was in the grip of prolonged load-shedding.
However, raising such a large amount of money from the general public is not enough to fulfill the government's ambitious plan for power generation and transmission in the next decade.
The government has planned to produce more than 28,000 megawatts of electricity in the country by 2035. The government estimates that 46.5 billion dollars (6,209 billion) will be needed to develop the targeted power generation and transmission and distribution infrastructure, while 40 billion dollars will be needed for production alone.
However, Ghising said that after the authority ensures that the counterpart fund will be invested as equity, the authority will assist in securing funds from external investors for the development of the project. "For the development of planned projects, the authority should have its own funds to invest as equity," he said.
Prithviman Shrestha
Prithviman Shrestha is the Political Correspondent of The Kathmandu Post covering topics related to good governance including corruption and irregularities in the government machinery. Before joining The Kathmandu Post in 2009, he worked for nepalnews.com and Rising Nepal for three years, mainly covering political and economic affairs.
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