Care Ratings assigned Double B rating to Suri Khola Hydropower Limited Rs 76 crore long term loan facility

Wed, Jun 10, 2020 4:52 PM on Credit Rating, Latest,

CARE Ratings Nepal Limited (CRNL) has assigned rating of ‘CARE-NP BB’ to the long-term  bank facilities of Suri Khola Hydropower Limited (SKHPL).

The  ratings assigned  to  the  bank  facilities  of  SKHPL  is  constrained  by  project  implementation  and stabilization  risk  including  the  power  evacuation  risk  and  significant  time  overrun  of  the  project.  The rating is also constrained by SKHPL’s exposure to volatile interest  rates,  exposure  to  regulatory  risk, hydrology  risk  associated  with  run  of  the  river  power  generation  and  negative  impact  of  Covid-19 Pandemic  on  the  project.  The  rating,  however,  derives  strength  from  board  members  and  management having  experience in  hydro  power  sector, strong  institutional  promoter and  moderate  counter  party  risk. The  ratings  also  factor  in  achievement  of  financial  closure  for  full  project  cost,  presence  of  power purchase  agreement  (PPA)  with  sufficient  period  coverage,  demand  supply  gap in  Nepal  coupled  with increasing demand  of power in the  country and  government support for the  power sector. The  ability of SKHPL  to  timely  complete  the  project  without  any  time  or  cost  overrun  and  timely  completion  of transmission infrastructure are the key rating sensitivities.

Key Rating Weaknesses

  • Project implementation risk and stabilisation risk
  • Power evacuation risk 
  • Significant time overrun of the project
  • Exposure to volatile interest rate
  • Hydrology risk associated with run-of-the-river power generation
  • Exposure to regulatory risk
  • Impact of Corona Virus on the Project

Key Rating Strengths

  • Board members and management having experience in hydro power sector
  • Strong Institutional Promoter
  • Financial closure achieved for the full project cost 
  • Power purchase agreement with sufficient period coverage 
  • Moderate counter party risk 
  • Power demand & supply gap coupled with increasing demand of power in the country
  • Government support for the power sector

About the Company

Suri Khola Hydropower Limited  (SKHPL) is a  Public Limited company, incorporated  on December 02, 2008 as a Suri Khola Hydropower Private Limited and changed to public limited on July 02, 2018. It is promoted by individual promoters from different background and institutional investors for setting up of a 6.4 MW  run-of-river,  Suri  Khola  Hydropower  Project  (SKHP)  in  Dolakha  district  of  Nepal. The  major shareholder of the company as on February 23, 2020 are Dolma Impact Fund-I (48.19%) and Mr. Himal Gurung (42.50%).The   project   is   constructed   under   BOOT   (Build,   own,   Operate   and   Transfer) mechanism. As per the Generation License, from Government of Nepal –Ministry of Energy, obtained as on June 07, 2015 the project shall be handed, on whatever conditions the project is, to the Government of Nepal after expiry of Generation License, which is 35 years.

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http://careratingsnepal.com/