Walking the talk....

These days we hear a lot about interest in investing in the hydro power sector.... In past couple of weeks, we have heard NRNs and trade delegation from UK showing their utmost interest ... This enthusiasm from the investment community is quiet encouraging...................................Ignoring all these good news,Gyanendra Lal Pradhan, chairman of the Hydropower Development Committee at Federation of Nepalese Chambers of Commerce and Industry (FNCCI) today has formally asked the Government to "Bailout" 28 hydro power companies.......He has blamed the following reasons for the sorry state of these 28 hydro projects ...

increasing cost of construction materials and increased interest rate are the major factors making hydropower projects costlier.

Over the last two years, the interest rate has increased by 5-7 percent points.Gyanendra Lal Pradhan, said other projects except Khimti, Bhotekoshi, Chilime and Butwal Power Company are in trouble. “The projects that started construction at an interest rate of 8 percent now have to pay as high as 16 percent interest .click here to read more

here is my take on this issues... I am not a hydro expert but I am still going to share what I think...

1. Why should the government bailout these private players?? Ok, I understand that "load shedding” is holding back our nation economic development and these private energy producers are working towards solving this national crisis,but, we need to remember that they will not be distributing free energy to Nepali jantas , we still have to buy it .... What about the moral hazard involve in bailing them out?? ? ( remember some of them have made lots of money in hydro power project license arbitrage and Initial public offering ) .......... my suggestion: Government should not give them free money,soft loans,tax incentives etc ... if private players want public money, Government owned Nepal Hydropower Company will have a equity stake in the projects, and will eventually exit through secondary market offerings .
2. Another thought…. Will it be possible for interested foreign investors and NRN to inject risk capital in these troubled projects through debt , convertibles or equity investments????......... Investing in these half or almost completed projects is less risky and less capital intensive ?? ... Good opportunity for interested investors ??? (Lets walk the talk NRNs and foreign investors)
3. or.....International Finance Corporation, commercial lending arm of the World Bank group, last month declared to invest in an average 25 million dollar per annum in Nepal ... opportunity for them ?