Kathmandu. The construction cost of upper Piluwa Khola III hydropower project of Mabilung Energy, a private sector-promoted hydropower company, has increased by 26 percent.
The initial cost of the project was estimated to be Rs 937 million. The cost of the project is estimated to exceed Rs 1.18 billion due to the delay in completion of the project.
According to credit rating agency ICRA Nepal, reconstruction of flood-damaged structures, acquisition of additional land for transmission line, supervision cost of more than the forecast period and interest on loan have increased the construction cost of the project.
The main structure of the Upper Piluwa Khola-3 hydropower project under construction in Sankhuwasabha was damaged due to heavy floods in June 2080. Besides, credit rating agency ICRA Nepal said in the report that the cost has increased due to the delay in the acquisition of additional land and construction work for the construction of the transmission line. Due to the extension of the construction period of the project, the cost of construction supervision and the cost of interest on the bank loan have also increased the construction cost.
The project cost has crossed Rs 239 million per MW against the initial estimate of Rs 189 million per MW.
According to the rating agency, the proposed public offering (IPO) will ease the financial balance as both the debt burden and interest expenses of Mabilung will be reduced after raising 49 percent of the paid-up capital.
The Baneshwor transmission line connecting the energy generated from the Piluwa Khola-3 hydropower project to the national transmission line has already been completed, so the project is free from the risk of wasting electricity generated due to lack of transmission line.
The rating agency pointed out higher project construction costs, limited experience of promoters in the hydropower generation sector, and environmental and geographic risks as key challenges.
Nepal Electricity Authority (NEA) has entered into a purchase agreement for the sale of power generated, the national transmission line located near the project and the Baneshwor substation are free from the risk of delay in the sale.
Mabilung Energy has signed a 30-year agreement with NEA to sell electricity generated from upper Piluwa Khela III project. Under this, rs. 100 per kilowatt hour in the rainy season. 4.8 and in winter Rs. It has been agreed to sell electricity at the rate of Rs 8.4. Apart from this, it has also been agreed to increase the basic selling price at the rate of 3 percent annually from the second year of production for eight consecutive years.
The project has a generation capacity of 4.95 MW.
Re-support rating:
ICRA Nepal has continued its ‘B+’ rating for the issue of public shares. In addition, it has also endorsed ‘LB Plus’ rating for long-term loans of Rs 795 million and ‘A Fo’ rating of short-term loans of Rs 259 million under long-term loan limit.
IPO sales open:
The Securities Board of Nepal has approved the issuance of 48.9998 percent of the issued capital of Rs 385.824 million i.e. Rs 189 million 53 thousand.
The company is selling a total of 1,890,530 units of shares at a face value of Rs 100. In the first phase, the company has opened the IPO sale to local and foreign employed Nepalis of Chainpur and Madi municipalities of Sankhuwasabha.
Life Insurance Company, Asian Life Insurance is the main promoter of this hydropower project. Asian Life owns 32 per cent stake in the company.
