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%).
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