ICRA Nepal assigns LBB- and A4 to long term and short term funds of Myagdi Hydropower; Hydropower's capacity at 14 MW with an annual production of 80 GWh

Fri, Feb 14, 2020 12:24 PM on Credit Rating, Latest,
ICRA Nepal...

ICRA Nepal has assigned a long-term rating of [ICRANP] LBB- (pronounced ICRA NP L double B minus) to Myagdi Hydropower Limited’s (MHL) long-term loans and a short-term rating of [ICRANP] A4 (pronounced ICRA NP A four) to its short-term loans.

Credit strengths

  • Prior experience of promoters in hydropower sector
  • Low funding risk; any cost escalations to remain supported by short-term loans
  • Low tariff risk, given long-term PPA at predetermined tariffs and escalations

Credit challenges

  • Inherent risk of project execution
  • High evacuation risk, given non-completion of NEA’s evacuation structures and transmission lines connecting them
  • Risk of delay in commissioning the project could weaken the financial profile and stretch the coverage ratio despite the relatively low estimated project cost
  • Penalty to be invoked if MHL fails to meet 30% of dry energy supply target
  • Low offtake risk; however, provision of 10% reserve margin for 5.7-MW project can impact revenue profile
  • High hydrology risk, given lack of deemed generation clause in PPA

About the company   

Myagdi Hydropower Limited (MHL), incorporated on April 18, 2017 as a public limited company, is developing the 14-MW Ghar Khola HPP in Myagdi district, Gandaki province (Nepal) at a budgeted cost of NPR 2,416 million at a D:E ratio of 70:30. So far, all the equity requirement has been injected and the debt component has been fully tied up with a consortium of four banks led by NMB Bank Limited. The company’s paid-up capital, including advances, as of mid-January 2020 was ~NPR 726 million, which is 100% promoter held. The major promoters include M/s Nagarik Urja Butwal Ltd. (99.99%) and six other individual shareholders with aggregate holding of a nominal 0.01% share. The project is a run-of-the-river (R-o-R) type and is being developed at a 40% probability of exceedance (Q40). The project was initially designed for 8.3MW and was later upgraded to 14MW with an addition of 5.7MW and has two PPAs (one PPA for each capacity). The annual production capacity of the project is ~80 GWh of energy with an overall dry energy mix of ~23%.

 Instrument details 

Instrument *

Rated Amount 

(NPR Million)

Rating Action

Term Loan (long term; fund based) 

1,690

[ICRANP] LBB-; Assigned

Bridge Gap Loan within Term Loans (short term; fund based)

(200)

[ICRANP] A4; Assigned

Letter of Credit within Term Loans (short term; non-fund based)

(838)

[ICRANP] A4; Assigned

Bank Guarantee within Term Loans (short term; non-fund based)

(~8)

[ICRANP] A4; Assigned

Total 

1,690

 

 Source: https://www.icranepal.com/

Read full report at: here