Nepal Electricity Authority (NEA) which is in advanced preparation to issue a historically large Rs 60 billion Initial Public Offering (IPO) has received a “Double A Plus” (AA+) credit rating. ICRA Nepal, Nepal’s prominent rating agency, has assigned a highly commendable rating to the government enterprise for its operations.
A “Double A Plus” rating signifies a company’s ability to fulfill its financial obligations and liabilities in time. It means that engaging in financial activities with companies with the said rating carries a minimal risk of loan repayment.
NEA currently has submitted a proposal to the Finance Ministry to initiate the issuance of the company’s shares to the general public in compliance with the Nepal Electricity Authority Act, 1984, after completing its third financial restructuring.
Also read: NEA launches a mobile app for meter reading, payment, and complaints
NEA will issue a record Rs 60 billion IPO | Per share to cost Rs 300
NEA is preparing for a Rs 60 billion (60 arab) IPO. The company’s paid capital stands at Rs 300 billion (3 kharab). At the same time, it has proposed to raise 10% of resources from the public including premium shares. It’s one of the largest IPO issuances to date in Nepal.
According to the authority, it’s proposing the book value of its shares at around Rs 125 and adding the same amount of premium to issue the shares.
NEA Managing Director Kulman Ghising said that the authority got a strong rating which shows its financial capacity among the public enterprises. “The company’s financial health has shown to be good with the rating,” he said.
“The replacement of electricity imports in the upcoming winter months to meet internal demand is happening quickly and at the same time the increase in electricity exports, internal electricity consumption, and the success achieved in controlling the leakage of the system will increase the profit of the organization,” he added.
Check out: Nepal Telecom to provide 1.5 lakh eSIM to NEA for Smart Meters
Rating and PPAs will likely draw IPO interests
The authority is entering into a long-term power purchase agreement (PPA) with hydropower projects constructed by domestic and foreign investors. The result of the credit rating shows that there is less investment risk as the authority possesses a high financial capacity to pay for such projects. Likewise, the strong credit rating and the PPAs’ status will heighten the public’s interest in its IPO.
The authority has widened its operational activities and has struck a long-term power purchase agreement (PPA) with hydropower projects constructed by domestic and foreign investors. Ghising claimed no investment risk as it has a high level of financial capacity to pay for such projects.
Do check: How to pay NEA electricity bill online?
Positive signs
Over recent years, NEA has turned into a profiting enterprise leaving behind times of its dismal financial state. The company is now exporting electricity to India worth billions of rupees. There are also discussions positive discussions for transactions of power with Bangladesh. The authority will invest the resources obtained from the IPO in transmission lines and other energy infrastructures.
NEA has also actively worked on electric vehicle charging stations. Collaborating with the Asian Development Bank, the authority has established 62 charging stations across Nepal so far. Additionally, it has also started its only data center to date in Kathmandu.
The authority projected a profit of Rs 12 billion 33 crores in 2079/80. Ghising said that it has earned a total of Rs 82 billion in profit since his tenure began in 2073 BS. Its total worth now stands at Rs 6.32 billion, according to its long-serving MD Ghishing.
How do you see Kulman Ghising-led NEA performing an IPO? Will it prove to be a major object of investment for you? Do leave your opinion in the comment section below.
