Two Days Into the Issue, IPO to Locals of Madhya Bhotekoshi Jalavidhyut Company Subscribed 9.8%

Madhya Bhotekoshi Jalavidhyut Company Limited has issued 60,00,000 shares as IPO to the Locals of Sindhupalchowk from Baisakh 21. The shares are issued at the par value of Rs. 100 per share to raise a capital worth Rs. 60.00 crores.

Global IME Capital Limited has been appointed as the issue manager. In the two days of the issue, 3,369 applicants have applied for a total of 5,88,360 units.

The earliest closing date is Jestha-02, 2078. If the issue is not subscribed till the earliest closing date then the issue will be extended till Jestha-20, 2077.

Madhya Bhotekoshi Jalavidhyut Company Limited is a public limited company incorporated on July 29, 2010. The company is promoted by Nepal Electricity Authority (NEA) (A GoN Corporation) and Chilime Hydropower Company Limited (CHCL, 51% subsidiary of NEA) for setting up 102 MW run-of-river, Middle Bhotekoshi Hydroelectric Project in the Shindhupalchowk district of Nepal. The project is constructed under the BOOT (Build, Own, Operate, and Transfer) mechanism. As per the Generation License, from GoN- Ministry of Energy, dated December 03, 2013, the project shall be handed, on whatever conditions the project is, to the Government of Nepal after the expiry of the generation License, which is 35 years.

CARE Rating:

CARE Rating Nepal has assigned 'CARE-NP IPO Grade 4+' to the proposed Initial Public Offering (IPO) of Madhya Bhotekoshi Jalavidhyut Company Limited (MBKJCL). The grade assigned to any individual issue represents a relative assessment of the 'fundamentals of the issuer.

Key Grading Weakness:

• Project implementation risk- delay in execution of project and cost overrun
• Decrease in project life leads to low return from the project
• Exposure to fluctuation in the foreign currency exchange rates for the unhedged contractual liabilities
• Hydrology risk associated with run-of-river projects
• Financial closure not achieved for revised project cost and exposure to volatile interest rates
• Power evacuation risk
• Exposure to regulatory risk

Key Grading Strengths:

• Strong Promoter Group and management expertise in operating hydropower projects
• Power purchase agreement with sufficient period coverage
• Moderate counter party risk
• Fixed priced Civil & Hydromechanical, Electromechanical and Transmission Line Contracts
• Shortage of power in the country
• Government support for the power sector