Care Ratings Nepal assigned B+ ratings to Rs 1.32 billion loan of River Falls Power

Mon, Jun 29, 2020 2:18 PM on Credit Rating, Latest,

CARE Ratings Nepal Limited (CRNL) has assigned rating of „CARE-NP  B+‟ to the long-term  bank facilities of River Falls Power Limited (RFPL). 

The  ratings  assigned  to  the  bank  facilities  of  RFPL  is  constrained  by  project  implementation  and stabilization risk given its initial stage of construction followed by the power evacuation risk and pending Generation  License  and  Power  Purchase  Agreement (PPA) for  additional  0.8  MW.  The  rating  is  also constrained by RFPL‟s exposure to volatile interest rates, 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 promoters,  directors  and  management  having  prior  experience  in  hydropower  sector  and moderate  counter  party  risk.  The  ratings  also  factor  in  financial  closure  achieved  for part  of  debt component  with  letter  of  intent  received  for  balance  amount,  presence  of  power  purchase  agreement (PPA) with sufficient period coverage for 9.50 MW, shortage of power at present coupled with increasing demand  of  power  in  the  country  and  government  support  for  the  power  sector.  The  ability  of  RFPL  to timely  complete  the  project  without  any  time and cost  overrun,timely  completion  of  transmission infrastructure and approval of revised Generation License and Power Purchase Agreement for additional power of 0.8 MW are the key rating sensitivities.

Key Rating Weaknesses

  • Project implementation and stabilisation risk, given its initial stage of construction
  • Power evacuation risk
  • Pending Generation License and PPA for additional 0.80 MW
  • Exposure to volatile interest rate
  • Hydrology risk associated with run-of-the-river power generation
  • Impact of Covid-19 on the Project

Key Rating Strengths

  • Promoters, directors and management having prior experience in hydropower sector
  • Moderate counter party risk
  • Financial closure achieved for part of debt component with letter of intent received for balance amount
  • Power  purchase  agreement  with sufficient period  coverage  for  9.5 MW, however same  under process for additional 0.8 MW
  • Shortage of Power at present coupled with increasing demand of power in the country
  • Government support for the power sector

About the Company

River  Falls  Power Ltd (RFPL)  is  a  Public limited company,  incorporated  on  October 5,  2004 as  private limited company, later on converted to public limited company in October, 2015. The company has been set up to build, own and operate 10.30 MW run-of-river, Down Piluwa Khola Small Hydropower Project in Sankhuwasabha district of Nepal, for sale of entire power within Nepal.The power project is proposed to utilize available head and flow from Piluwa Khola (river). It is promoted by individual promoters from different  background  and  institutional  investors.The  major  shareholder  of  the  company  as  on July16, 2019 are Mr.  Mitralal  Shrestha  (holding  8.63%),  Mr.  Subash  Amatya  (holding  6.45%) and Sunrise Holdings Pvt Ltd. (holding 26.79%).

For detailed rating, click here