NEA to issue Rs 1.5b power bond Thursday

KATHMANDU, Feb 11 - Nepal Electricity Authority (NEA) is issuing a power bond from Thursday to mobilize Rs 1.5 billion from the market to finance civil works of its 30 MW Chamelia, 14 MW Kulekhani III and other hydropower projects.

The issuance of 1.5 million units of bond with a face value of Rs 1,000 each will start from February 14 and could be closed by February 20 at the earliest, said Arjun Kumar Karki, managing director of the state-owned utilities service provider.

Talking to the press, he elaborated that the bond would mature in 5 years, and the NEA would be providing 7 percent interest rate per annum to the investors. Of the total units, NEA has set aside 150,000 units of bond for public issuance and remaining for individuals and institutions.

"However, we are not rigid on this criterion," said Karki, adding that the issue manager has been authorized to issue as much as 50 percent of bond to the general public depending on the response.

The NEA has appointed Nepal Merchant Banking and Finance as a trustee of the bond.

This is the first initiative in the country to develop hydropower projects through local investment. "The response we get in this attempt will set a trend for us to move ahead with new projects in the future," said Karki.

He elaborated that the issuance was just a small trial of the NEA. If successful, NEA will rely on similar instruments to realize more funds and develop hydropower projects.

Responding to media queries, Karki stated that NEA has secured the investments made in the bond by pledging Rs 5 billion worth of shares of Chilime Hydropower Company Limited as collateral to the trustee bank.

"We will also set aside a reserve cash fund of over Rs 380 million every year to enable repayments," said Uttar Kumar Shrestha, deputy general manager of NEA.

NEA officials said that the Authority was also working out reform measures in close coordination with the Finance Ministry to revamp the structure and revive the institution. NEA, going by a preliminary audit report, incurred a loss of Rs 270 million in the last fiscal year.

"However,the final audit report shows we might actually have earned something in the last fiscal year," said Shrestha.

He elaborated that NEA´s loss accounts largely for depreciation and interests.

"Otherwise, we have sufficient cash flow and reserve at disposal," he said, adding that the Authority has been investing in billions of rupee every year for the development of various hydropower projects.