CARE Nepal assigns BB+ to long term bank facility of Universal Power Company

CARE Ratings Nepal Ltd. (CRNL) has assigned Rating of ‘CARE-NP BB+’ to the long term bank facilities of Universal Power Company Ltd. (UPCL).

 Key Rating Weaknesses

• Significant cost and time overrun leading to high cost of project.
• Project implementation risk and stabilisation risk
• Execution risk of under construction project, in which UPCL has invested and planning to invest
• Exposure to volatile interest rate
• Power evacuation risk
• Hydrology risk associated with run-of-the-river power generation

Key Rating Strengths

• Promoters, directors and management having prior experienced in hydropower sector
• Power purchase agreement with sufficient period coverage
• Financial closure achieved for estimated project cost
• Moderate counter party risk
• Shortage of power in the country
• Government support for the power sector

About the Company

UPCL is a public company, incorporated on December 3, 2002 as private limited company and converted to public limited company on March 30, 2011. It is developing 11 MW run-of-river, Tallo Khare Khola Hydropower Project (TKKHPP) in Dolakha district of Nepal by utilizing available head and flow from Khare Khola (river). 

The project is constructed under BOOT (Build, own, Operate and Transfer) mechanism. As per the Generation License, from Government of Nepal – Ministry of Energy, obtained on July 3, 2012, the project shall be handed, on whatever conditions the project is, to the Government of Nepal after expiry of generation license, which is 35 years. It is promoted by institutional as well as individual promoters from different background. Radhi Bidyut Company Ltd. (2.65%) and CEDB Hydropower Development Company Ltd. (2.26%) are major promoter shareholders of the company.   

Details of the Facilities rated

Source: www.careratingsnepal.com