CARE Nepal Ratings assigns Grade 4 to IPO of Greenlife Hydropower; Ratings indicate below-average fundamentals

CARE Nepal...

CARE Nepal has assigned grading of ‘CARE-NP IPO Grade 4’ to the proposed Initial Public Offer (IPO) of Greenlife

Hydropower Ltd (GLH). ‘CARE-NP IPO Grade 4’ indicates Below Average Fundamentals. CRNL assigns IPO grades on a scale of Grade 1 to Grade 5, with Grade 1 indicating strong fundamentals and Grade 5 indicating poor fundamentals. CRNL’s IPO grading is an opinion on the fundamentals of the issuer. The grade assigned to any individual issue represents a relative assessment of the ‘fundamentals’ of the issuer. GLH proposes to issue 3.4964

 Key Grading Weaknesses

  • Significant cost and time overrun in the project
  • Project implementation and stabilization risk
  • Decrease in project life and low tariff rate for major part of contracted energy leading to low return from the project
  • Promoter group having limited experience in hydropower sector
  • Exposure to fluctuation in foreign currency exchange rates and volatile interest rate
  • Hydrology risk associated with run-of-the-river power generation
  • Power evacuation risk

Key Grading Strengths

  • Power purchase agreement with sufficient period coverage
  • Moderate counter party risk
  • Financial closure achieved for major portion of debt component
  • Government support for the power sector

About the Company

Greenlife Hydropower Ltd. (GLH) is a public company, incorporated as on September 20, 2009 as a Greenlife Energy Pvt. Ltd. later on June 23, 2017 it was changed to GLH. It is promoted by institutional promoters and individual promoters from different background for setting up of 40 MW run-of-river, Khani Khola 1 Hydropower Project (KK1HPP) in Dolakha district of Nepal. The power project is proposed to be constructed in two phases. In the first phase, the generation capacity will be 25 MW by utilizing discharge from Khani Khola which will be upgraded to 40 MW in the second phase by adding discharge from Hanapu Khola and Napke Khola. 

Share capital of the company will be distributed among promoters and public shareholder in the ratio of 80:20. After issue of proposed IPO its total capital is expected to be Rs 1,800 Mn. The project is constructed under BOOT (Build, own, Operate and Transfer) mechanism.

Source: CARE Nepal Rating