Have you applied for the IPO of Himal Dolakha Hydropower? If not, here are things you ought to know before investing

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Company profile

Himal Dolkha Hydropower Company Limited was incorporated on Ashad 11, 2065 as a private limited company but was later converted into public limited company on Kartik 27, 2074. The company's registered head office is located at Kalopul - 07, Kathmandu and the Hydroelectric Projects (HEP) are located at Illam district's Illam Nagarpalika (ward number 9 and 10) and Mai Nagarpalika (ward number 9).

The company currently has two projects running, they are Mai Khola Small HEP with capacity of 4.5 MW and Mai Khola Cascade HEP with capacity of 8 MW. Both the projects are run-off-the-river projects. The projects are constructed under BOOT (Build, Own, Operate and Transfer) mechanism.

The COD of Project -I was achieved during February 2011. The power was connected to the National Grid at the NEA substation at Tilkeni, Ilam Bazar through 3.5 km long 33kV transmission line. Project- I was completed with total cost of Rs 725 Mn (Rs 161 Mn per MW) which was funded through Debt: Equity of 75.13: 24.87.

Project –II achieved COD during April 2018. The power was connected to the NEA substation located at Godak (Ilam) through 3.5 km long 33kV transmission line. Project-II was completed with total cost of Rs 1425 Mn (Rs 178 Mn per MW) which was funded through Debt: Equity of 62.82: 37.18. 

Objective of the issue

About the issue

Himal Dolkha Hydropower Company Limited is issuing 76,72,210 units (including 14,72,210 units unsubscribed by locals) IPO shares to the general public from (Ashad 25, 2076). The early closing date of this IPO issue is Ashad 29, 2076 and if the issue is not subscribed till Ashad 29 then this issue can be extended upto Shrawan 24, 2076.

Out of the offered 76,72,210 units; 1,53,444 units have been reserved for the employees of the company and  25,000 units have been allotted to mutual funds. The remaining 74,93,766 units are for the general public.

The paid up capital of the company after the IPO will be Rs 1.60 arba. After the issuance of IPO, the promoter shareholders will be holding 51.25% while the project affected locals will hold 0.79% and the ordinary shareholders will hold 47.96% stake.

Applications can be place for minimum 10 units and maximum 1,00,000 units. Global IME Capital is appointed as the issue manager for the IPO issuance.

Care Ratings Nepal Limited (CRNL) has assigned grading of ‘CARE-NP IPO Grade 4’ indicating Below Average Fundamentals.

About the projects

*The months from Poush to Chaitra is considered as Winter.

*The PPA (Power Purchase Agreement) will increase by 3% per year for the first five years.

Capital structure

Shareholding structure

Primary shareholders

Board of Directors

*The remaining Director will be elected after the IPO at the company's Annual General Meeting (AGM).

Management Team

*There are 70 employees in total.

CARE Rating

CARE Rating Nepal has assigned grading of ‘CARE-NP IPO Grade 4’ to the proposed Initial Public Offer  (IPO) of Himal Dolakha Hydropower Company Limited (HDHCL). ‘CARE-NP IPO Grade 4’ indicates Below Average Fundamentals.

Strengths and opportunities

  • Experienced board members and management team having experience in other hydropower project and financial support from directors.
  • Power purchase agreement with sufficient period coverage, improvement in the plant load factor (PLF) levels, supported by shortage of power in the country and government support for the power sector.

Weaknesses and threats

  • Low operational plant load factor (PLF) of the projects and recent penalties levied by NEA leading to cash-flow mismatches.
  • Weak financial performance during Q1 FY19, weak debt service coverage indicators including high short term debt obligations.
  • Execution risk associated with under construction project in which the company has invested. However, high return is expected from the project due to low cost of the project, hydrology risk associated with run-of-the river power generation, and moderate counter party risk.
  • Hydrology risk associated with run-of-the-river power generation
  • Moderate counter party payment risks

Source: CARE Rating report (https://careratingsnepal.com/rating-list/)

Assets in current price

Insurance status

Bank loans and their status

Financials

Source: Company prospectus and CARE Rating report