Three years went by post the April 2015 earthquake. The state has been divided into provinces, budget has been announced and allocated, and a new government has been elected. During and post the earthquake, the slogan "We will rise back again" became a mark of the Gorkhali spirit to the outside world. Three years down the line, we stand among the same world with a one and half storied Dharahara that once used to be our pride. Our monuments and architects in Patan Durbar Square are incarcerated within the wooden bamboos. Most of the victims are still homeless and most of their stories are still hidden. The victims are still mourning with the pain of the lost ones while the foreign aid of $4.1 million has lost its way among the bureaucrats.
Today, April earthquake has not been a reason to rise back again. It has rather been an excuse for why we could not rise back again. Amidst all these, one of the projects that were most challenged by April earthquake decided to go public and established itself as an epitome of the phrase "rising from the ashes".
On this backdrop, a team from ShareSansar (Krishna Khatiwada and Dheerusha Tiwari) visited the corporate office of Upper Tamakoshi at Gyaneshwor to discuss about the company and its IPO.
Nepal’s dream project
Upper Tamakoahi Hydropower Project with 456 MW capacity, situated in Gaurisankhar Conservation Area of Dolakha district, closed its issue to the residents of Dolakha. It will be issuing its primary shares to the general public from 15thKartik, 2075. Back in 1999, an Austrian engineer concluded the capacity of hydro power in Upper Tamakoshi would be 120 MW. Later, the team of NEA as well as the Consultant Norconsult-Lahmeyer Joint Venture further studied and found out the hydro power could produce electricity of 456 MW. Post the finding, an independent autonomous Special Purpose Project Vehicle (SPPV) company, namely, Upper Tamakoshi Hydropower Limited was established by NEA in order to work on the project of Upper Tamakoshi. In the same context, Nepal government announced the project as "Nation's pride project" and prioritized its establishment.
In the SPPV company created by NEA, Mr. Bigyan Prasad Shrestha contributed as the chief of the Company. Bigyan Prasad Shrestha completed his higher studies from Amrit Science Campus and joined Roorkee University for his bachelors in engineering. Mr. Shrestha remembered the old days and said “I had been to Karnali with my university team for a similar project. We could not complete that project. However, as I see Upper Tamakoshi towards the phase of completion, it provides me a sense of achievement.” Mr. Shrestha completed his masters from Pulchowk Engineering College. Today, 30 years of career at NEA has paid him well for his 10 years of career in Upper Tamakoshi Hydropower Project. On being asked, how does it feel to lead a project recognized by the nation, he said “I am not the one man army of the project. It is a team work. I provide the credibility to each stakeholder who has been with us. I am grateful to the entire team such as our employees, consultant engineer, workers who have worked day and night in this project, the contractors who did not leave us despite the April earthquake, the locals who stood by us in the project and all the stakeholders who believed in us.”
Post the issuance of IPO, 41% of the shares will be held by Nepal Electricity Authority, 6% by Rastriya Beema Sanstha and 2% by Citizen Investment Trust and NTC. The company segregated 10% of the capital i.e. 1,05,90,000 units shares to the locals of Dolakaha district. Mr. Shrestha said, “The response to IPO issuance is overwhelming from the residents of Dolakha. As per our survey, 95% of residents have participated in the IPO. This shows that Upper Tamakoshi is built with the support of locals. We are optimistic to the IPO issuance to general public”. Further, Mr. Shrestha assured that the allocation of IPO for Dolakha residents will be done within 14th Kartik. The issued units have been oversubscribed by more than 3.5 times. The application of Rs 3.75 billion has been received for an issue worth of Rs 1.5 billion.
Nepal’s dream project and execution of the dream
Upper Tamakoshi segregated its overall construction into four lots namely Lot 1: Civil Construction Work, Lot 2: Hydro Mechanical, Lot 3: Electro mechanical and Lot 4: Transmission line construction. Each of the lot’s works has been provided to international contractors. For instance, Lot 1 is being handled by a Chinese company named Sinohydro, Lot 2 by an Indian company named Texmaco Rail and Engineering, Lot 3 by an Austrian company named Andritz Hydro and Lot 4 by India’s KEC International Limited. The issued public shares worth Rs 2.64 billion will be allocated to the construction work of each of the lot.
Among the four lots, the progress of second lot slowed down due to its poor performance. However, the other three lots are performing smoothly and are in the stage of completion. Mr. Shrestha added, “We are planning to do the test run of the power plant in Asadh, 2076. If the test run goes as per plan, the hydropower will come into commercial operation from Kartik, 2076.” There are six units in the 456 MW Upper Tamakoshi. Even if one unit will undertake fifteen days for test run, it will take 90 days to complete the test run of all the six units. Therefore, it is likely that the commercial operation of the hydro project will initiate from Kartik, 2076.
Nepal’s dream project: from allegation to accomplishment
The team of Upper Tamakoshi came across several allegations due to the inflated cost of the hydro project. These critics raised questions even to the ethics of bureaucrats. CEO Bigyan Prasad Shrestha states, “There are two major reasons for the inflated cost: time over run and the foreign exchange deficit.”
Although the initial cost estimate without interest during construction (IDC) was Rs 35.29 billion, the updated estimate as of now will be approx. Rs 49.29 Billion. Therefore, per megawatt cost of the project will be approximately Rs 110 million. In general, hydropower construction has a disadvantage due to the large capital loan that the power plant acquires. The interest will be capitalized with the delay in the project. Besides the interest rate, Upper Tamakoshi had to face the challenge of fluctuating foreign exchange rate. Mr. Shrestha says “To be honest, we made an optimistic forecast for the foreign exchange rate. We predicted it to be around Rs 80. Today, if we see the average foreign exchange rate, it is above Rs100. Such fluctuations further added to the escalated cost of the project.”
Mr. Shrestha also addressed “Until and unless, the hydropower projects are prioritized with a mechanism of consistent interest rate, the companies in this sector will face inconsistency in constructing the project within the predicted budget.”
Nepal’s dream project and earthquake as its nightmare
Despite the accusations held against Nepal’s dream project, the issue of IPO has brought in hope that this dream will be a reality in the near future. Moreover, in the process of executing this dream, the April earthquake stood as a nightmare. Previously, although allegations had been charged to Upper Tamakoshi for the increased cost, we somehow failed to understand their perspective in regard to the fight with April earthquake.
On inquiry, Mr. Shrestha said, “During the earthquake, I was concerned about the safety of myself, my team and my workers. Post the earthquake, I was concerned about the retention of the contractors. In hydropower projects, if the force majeure prolonged more than 84 days, there is high possibility that the contractors could leave or terminate the contract. Just when we were about to restart, the Nepal-Indian blockade started. I believe, one of the major achievements of Upper Tamakoshi is that we could create an environment to retain our contractors despite the tremendous earthquake. One more achievement is that despite such a big casualty, we did not lose even a single manpower on spot. Do I call this a fate or luck?”
Indeed, the earthquake limited number of foreign tourists in the country for a year or two yet Upper Tamakoshi could retain the foreign contractors within the country. The April earthquake that killed a population of more than 9,000 yet not a single dead body had to be carried from the site. Allegations, charges, accusations and criticisms are very easy to bring on the table but being in the shoe of a person and understanding the perspective is a difficult job. Upper Tamakoshi has been said enough for the increased cost but little has been done to praise the achievements during and post-earthquake. The insurance of Lot 3 caused by the damage worth approximately 8 MUSD has been accomplished whereas the insurance related to Lot 1 is still pending.
Nepal’s dream project and the cost associated with the dream
Upper Tamakoshi has acquired a total loan of approx. Rs 37.38 billion as loan. The loan payback time of the hydropower will depend upon its revenue. Moreover, Mr. Shrestha said “We are analyzing the cashflow requirements of Upper Tamakohi. Normally, the loan payback time will be 10 years. However, we are still analyzing the cash flow as we need to bring in Rolwaling project also. In the first two years, company will be in deficit as there won’t be any revenue generated. Once we come in to commercial operation, we will be in profit. So, the next year after that, we will be in position to provide certain dividend to our shareholders. That can be accomplished by scrutinizing interest rate and increasing revenue through Rowaling”
The company is also confident enough that the loss of Upper Tamakoshi will be covered from Rolwaling hydropower. Rolwaling’s preliminary tender has started so, within four years of commercial operation of Upper Tamakoshi, Rolwaling hydropower will also come into operation.
Upper Tamakoshi Hydropower is still sort by a capital of Rs7.66 billion. Mr. Shrestha says “We have already managed a debt of around Rs 20 billion so; the debt of Rs 7 billion will not be a difficult case to deal from the same debtors.”
Nepal’s dream project and Nepalese part in the dream
So far, Upper Tamakoshi’s IPO issuance has been done in three phases. In the first phase, 24% of IPO was issued and allocated to depositors of provident fund, lending institutes and staffs of Upper Tamakoshi and NEA. In the second phase, 10% of IPO issued to residents of Dolakha has been closed whose allocation is yet to be done. Finally, in the third phase, 15% of the IPO will be issued to general public from 15th Kartik onwards. The allocation of IPO of Dolakha residents is to be done within 14th Kartik. Post this, after closing the issue to the general public, the allocation is estimated to be done within 14-15 days. Once the locals and general public are allocated with their shares, the listing of all the three phases’ issues (24%, 10% and 15%) will be done.
There is a provision to allocate 5% of the total issue to the mutual funds. Upper Tamakoshi has also received subscription of most of mutual funds jointly. “Upper Tamakoshi will also allot shares of 5% or so to the mutual funds” says Mr. Shrestha. “All these are being looked into by our trusted issue managers Citizens Investment Trust and Sunrise Capital”.
Nepal’s dream projects’ upcoming dreams
Upper Tamakoshi is expected to create a significant impact in the economic development of the country. As per Mr. Shrestha, “Upper Tamakoshi is a peaking run off river (PROR) project for the winter season. So, it will play a major role during the peak hours in morning and evening of the winter season. It will be able to meet the peak demand of energy. In wet season, we will be in surplus in regards to energy generation. So, we can export the surplus energy. As of now, the unmet demand is met with the import from India. However, once Upper Tamakoshi is brought into operation, it will replace major part of the import.”
Upper Tamakoshi has still a lot to do. However, the company plans to bring in Rolwaling hydropower project after the completion of Upper Tamakoshi. Rolwaling will be of 22MW capacity. Similarly, Upper Tamakoshi is also looking forward to partner with NEA for Tamkoshi-V which is of 99 MW capacity. The additional water resource of Rolwaling Hydropower is expected to increase the energy of Upper Tamakoshi in dry season by 169 Gigawatt. The other hydropower projects post Rolwaling and Tamakoshi-V will depend upon the financial status of the company.
The construction of Upper Tamakoshi has brought a lot of changes in the project affected area i.e Lambagar of Dolakha. The infrastructure construction such as roads, schools and training to project affected locals have further added value to the project. Upper Tamakoshi has been set as an example of one of the largest project to be established with the Nepalese funded capital along with the skills and proficiency of Nepalese human resources. Therefore, it would not be wrong to say that despite the topographies, demographics, casualties, Nepal is capable of bringing in hydropower projects through its own funds.
Mr. Bigyan Prasad Shrestha along with his team has played a remarking role to bring Nepal’s dream project into reality. ShareSansar wishes all the luck to the team in order to mark the successful completion of the project and establish Upper Tamakoshi as the Nepal’s pride project.
Disclaimer: Please note the statements quoted within inverted commas “” are the only statements made by Mr. Bigyan Prasad Shrestha. The other views are the viewpoints of the author.
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