NPBCL fails to achieve financial closure for tunnel highway
KATHMANDU, May 24:
Nepal Purbadhar Bikash Company Limited (NPBCL) has failed to collect fund from Nepali and foreign investors for the Kathmandu-Hetauda Tunnel Highway project for the financial closure.
Construction license for the 58-km long tunnel highway was issued a year ago with the conditional clauses of collecting needful fund amount of Rs 35 billion for the development of the national-pride project by May 16 or within a year from its issuance date.
But according to the reports submitted to the Ministry of Physical Infrastructure and Transport (MoPIT) by NPBCL, it has only collected Rs 251.9 million in cash but has not signed any loan agreement with the financial institutions, besides commitment letters which are not financial assurances.
For the financial closure, the NPBCL had to collect either cash or seal the loan agreements or both as the preparation of the project to tie up with the construction activity.
However, the NPBCL, in its report, says that it has collected commitments worth of Rs 1.67 billion from Nepali promoters, institutional investors and Non-Resident Nepalis.
According to the share restructure proposal forwarded by NPBCL, it is yet to confirm the fund of Rs 1.84 billion to make Rs 2.1 billion at par with the equity to be contributed by Nepali promoters, institutional investors and Non-Resident Nepalis.
Talking to Republica, Dinkar Sharma, retired joint- secretary of the MoPIT, said that the project is yet to carry out Detailed Project Report (DPR) and no foreign investors or financial institutions would sign loan agreement with the project until DPR is completed.
“Therefore commitment papers collected from whosoever are not financial closure and they are merely letter of intent,” added Sharma.
The construction license issued on May 16, 2013 also states that such financial closure must be ensured keeping in mind of the nature of the project and required cash flow.
Talking to Republica on Wednesday Secretary at the MoPIT Tulasi Prasad Sitaula said that they have formed a technical committee led by Joint-secretary Indu Sharma Dhakal to study reports submitted by NPBCL on May 15 on the financial closure.
“We will decide on the project only after technical committee submits its report,” added Sitaula.
Asked whether the company has submitted all the documents that meet the mandatory financial closure, Secretary Sitauala declined to answer and only maintained that all the documents are being studied.
The reports include a number of commitment letters from several banks and financial companies not only from the domestic ones but also from the foreign ones suggesting that they have got more than they need, said Subarna Lal Bajracharya, CEO of NPBCL. A CEO of a Nepali bank, seeking anonymity, said that they will only loan fund for the project in consortium when the equity investment is assured in cash or any other reliable means.
However, Bajracharya described the documents of the commitments as financial closure insisting that the loan agreements are not essential for the financial closure.
Bajracharya also added that they also have got a single commitment worth Rs 28 billion from a Canadian financial institution - but he declined disclose the name of the firm.
He also expressed hope that the government will extend the license being based on their work progress, including the commitments for the investment amount.
But officials with the MoPIT say that the clauses in the license also provided enough discretionary grounds for the decision makers that the license is likely to be extended even without essential documents of the financial closure.
Some sources said that the leading persons of the NPBCL are already lobbying to extend the license, which was also issued in the previous year in the same way though the technicians had raised the question regarding financial capability the developer company.
According to the clauses of the license document, the license can be extended on rational ground even in case of failure to have financial closure. However, MoPIT can scrap the license giving the developer enough time to clarify the reasons.
In its report submitted to the MoPIT, NPBCL also has proposed to downsize 50 percent equity portion to 20 percent and make 80 and 20 percent for debt and equity ratio respectively, stating that the legal hurdles and the unawareness of the public with the new product could not draw much Nepalis investment in the project.
MoPIT sources say that such deviation in share structure was not expected while awarding the license to the project.
Source: Republica
