Api Power determined to issue 1:2 Right Share; Projects to be completed timely

Mon, Mar 21, 2016 5:24 PM on Dividend, Bonus & Rights, Interview,
ShareSansar talked to Sanjeev Neupane, Managing Director of Api Power Company Limited to know about the vision and plans of Api Hydro power. Sanjeev Neupane joined API Power Company in the year 2012. Earlier he had contributed as the Executive Chairman of  Madhya Paschimanchal Gramin Bikash Bank. He holds a B.S degree in Business Administration from Binghamton University,USA. He is currently pursuing his EMBA from Kathmandu University. Api Power Company Limited was established in Ashad 5, 2060 with the objective to generate electricity through utilization of water resources available in the country. The hydropower is located at Darchula district. Guru Prasad Neupane is the Chairman of the company. Q.1. Tell us  in brief about the projects of Api Power Company Limited. We have recently constructed 8.5 MW Naugharg Gad hydropower project in Darchula which is 950 Km far from Kathmandu city. It is the first private sector project in Far Western Development Region of the country connected to the national electricity grid. We are developing 8 MW Upper Naugharh Gad hydropower project in the same river which is 6  kilometer away from the previous project. The project is in the last stage of PPA process. The company has already got the Survey License from the Ministry of Energy and has recently signed the Grid Connection Agreement with the Grid Operation Department, NEA. Also we are involved in Siddhakali Hydropower project of which business tycoon Binod Chaudhary was the major promoter. This project of Galchi ,Trishuli is the nearest projected from Kathmandu valley. Api Power Company has purchased 80 percent share of Siddhakali project from Chaudhary Group leaving 10 percent of the share to locals and remaining to the existing shareholders of Siddhakali Company Limited. Q.2.The previous quarterly report of the company shows  dismal performance. Then how far do you see the possibility of accomplishment of company’s upcoming projects? We have called on 1:2 right share focusing the 75 MW Siddhakali Hydropower project and 8 Upper Naugarh Gad hydropower project. It costs approximately 18-20 crores to generate one MW Electricity. The total cost of this 75 MW project is Rs 13.2 arba. We have separated 70:30 debt equity ratio. Of that 70 percent investment will be done by different BFIs and 30 percent share will be given to common shareholders. Laxmi Bank is taking the lead for this project so the 70 percent debt issue has almost been settled. We have paid up capital of Rs 100 crore. After the 1:2 Right Call,our paid up capital will be Rs 300 crore. Next year we shall again make call for Right Share and in this way the money collected will be used for accomplishment of our projects. Q.3 Are promoters ready for 1:2 right share? Of course. We have called on Special General Meeting for the same purpose. As I mentioned earlier about the lock-in period, the day count has started already. We have shown confidence to our promoters that they won’t have to face the loss. They are investing in the safe place and have to hold their shares for 1 to 2 years. If we can finish Naugarh Gad project in 17 months, then we are assured to finish Upper Naugad projects within 16 months. We have road accessibility, skilled manpower and technical expertise for the project area. Also, this is not a new thing for us as we have already finished four projects and stepping into the fifth one.We are motivating locals of Darchula to finish the project as soon as possible.  The upper Naugad will commence soon, but Siddhakali project will take time around 3 to 4 years as it’s a 4 year project.  The company is also planning to do some solar projects. These projects can be finished within a period of 6 months which can also yield a good return to our shareholders. We are in a good position for dividend distribution from this year so there is no question why shareholders will not invest in the right shares? In addition, the investors don’t have to worry about their investments, the case of Arun Valley Hydropower wont be repeated. Q.4.The issue of promoters of Api Power Company exiting from market is at peak now. What do you say about it? Promoter shares have three years lock-in period in hydropower. The share is divided in 70:30 Debt Equity Ratio. Of the total amount, Rs 70 crores is in the lock-in period, which will remain up to 2075 BS. A major portion of the shareholders has been held by the Board members. There has been wrong message flow among the investors that our company is increasing the market for no reason and also there is a huge rumor of our company exiting from the market. Since the lock-in period is till Bhadra 2075 BS we cannot sell our promoter share.Rs 30 crore shares of Api power company is currently trading in Nepal stock exchange. The company has no control over the public share. The demand and supply factor is responsible for the hike in the price of the shares of the company. Q.5. Investors are finding company’s performance less credible. Is the company itself lacks in some aspect? We could not do publicity of our work. We made 3 MW Arun Hydro power project during the Maoist Insurgency period, which is the first private sector built hydropower company. Afterward, we remained stagnant for around 7 consecutive years. The no. of shareholders increased duly with dividend distribution regardless of the small size of Arun Hydropower. Investors have shaped their mentality in a way that neither our company will go bankrupt nor it will provide handsome dividends. But our company is in the verge of changing the investors’ concept.  With the introduction of new young management team we are being the most aggressive hydropower developing company in Nepal. We invest keeping in mind that the project has to be finished in time and it should be a profitable venture for the investors. Our aim is to become the largest private sector hydropower company in the days to come. We urge all our shareholders to believe us and have faith. Hydropower projects do not yield immediate return. But once it is completed the cash flow is confirmed and is assured by the NEA. We strongly believe that in the days to come we can give more and more benefits to our shareholders. Its the matter of trust and our financials are getting stronger and stronger every quarter. You can find it in our Chaitra End 2072 financials which shall be published soon. We are also in a comfortable position in distributing dividends from this year.  Since we were the first private sector hydropower developer, we made the quickest project (Naugarh Gad 8.5 MW) in 17 months. So now we are trying to do something big (Trishuli-Galchi 75 MW). The whole concept is we want to make our company dynamic and the strongest but keeping in view the risk factors associated as well. Q.6. In your opinion, what are strong points for investors to invest in your company? We are trying to make our company more dynamic. Api Power Company will be developed as an umbrella foundation and under it we shall develop many more projects. Any projects can sustain only up to 30 years. After that, the project will be taken by Nepal Government. Investors need some reasons to hold the leftover shares of Api power Company. If the scheme of ‘One Company One Project’exists then there is no certainty of the company and the shares itself. We also have the best experts in this industry. We have our own hydro mechanical and civil company which is our biggest assets as well. Q.7 What are the main sources of income for the company to establish itself as an umbrella foundation? We are creating a strong base for making our company economically stable. The main sources of income of our company are the ongoing project and another is Api Hydro Mechanical Factory located in Hetauda. Api Power Company has 100% ownership on the hydro mechanical company which further has hydropower work of penstock, pipe and gate.That company’s profit will be duly transferred to API. As we have investment in ArunKabeli, we will surely earn from ArunKabeli too. We have diversified our investment portfolio for earning profit.Nepal Government in the Budget speech of FY 2014/15 has stated that Rs 55 lakh rupees will be provided per megawatt hydropower project construction.We are eligible for that money too.  Proposal has been sent toFinance Minister if it is accepted then that would be another source of fund. The money will be added for dividend this year. I assure the shareholders that from this year Api Power shall definately distribute dividends to its shareholders. Q.8  What are the future projects of your company? The company is aiming to develop more hydropower projects in the near future. Along with that after the announcement of Energy Crisis in Nepal, the company is also taking solar and wind energy generation as alternative energy generations into consideration in the near future.