Shabda Gyawali's Blog

In my personal opinion the mechanism introduced by SEBON  will bring some cheer and some confusion. Although this is a good step towards Fair Market valuation, there are too many discretionary variables. In the coming days, if not already, SEBON might need to setup an Investment Committee or Panel of Expert to approve the assumptions being consider for  FPO valuation.   For example:  Discount rate needed to calculate Discounted Cash Flow will depends  on the risk adjusted return of the individual company. Discount rate will also differ from company to company even in the same industry .  Similarly, on the Terminal Growth Rate-  Terminal Value of a company that owns a limited life asset (Hydro), should and will differ from perpetual nature type business (Commercial Banks/ Insurance) .   For 180 days average trading  price method- I think it would be  better if the liquidity factor of the share traded is also considered, ...

I SSUES  42 GW  Hydro Potential ( Most of the project are ROR )  Only 700 - 800 MW harnessed  Investment of about $7 to 8 billion each year Limited capacity of Local Banks to finance all the capital required  Non recourse project financing still not being tried by Local Banks  Possible Solution Similar to Indian Masala Bonds  Rupees Denominate  offshore issue bond  For example: Comps like GMR issues INR Bond in offshore (London, New york), proceed use to finance hydro project in Nepal. PPA in NPR. Less foreign exchange risk   Backstop by DFIs including IFC and ADB RISK No sovereign Credit rating of Nepal  Local Law limits Interest rate charged for foreign Debt - LIBOR + 5.5  Counter party risk  Dropping Energy prices in India..