CEDB Hydropower Development Company to issue IPO worth Rs.25.18 Crore; Care Ratings assign below average grade

CRNL has assigned ‘CARE-NP IPO Grade 4 [IPO Grade Four]’ grading to the proposed Initial Public Offering (IPO) of CEDB Hydropower Development Company Limited (CHDC). ‘CARE-NP IPO Grade 4’ indicates Below Average Fundamentals. CHDC has proposed to come out with IPO of 2.51823 Million equity shares having face value of Rs.100 each at par aggregating Rs.251.823 Million.

The grading assigned to CHDC is constrained by concentrated investment in hydropower sector, equity commitments with long gestation period of its investments, limited experience in executing large scale projects and high & increasing collection period. The grading also factors in project implementation risk related to various under construction projects and hydrology risk associated with run-of-the-river power generation affecting profitability of the company.

The grading, however, derives strength from experienced directors & management expertise, track record in operating hydro power projects with healthy plant load factor, comfortable financial risk profile & strong debt service indicators and diversified stream of revenue profile. The grading also considers shortage of power in the country, government support for the power sector and generation license obtained & power purchase agreement concluded for the plants.

CEDB Hydropower Development Company Limited (CHDC) is public limited company, incorporated on November 30, 2009 as CEDB Hydro Fund Limited, later the name was changed to CEDB Hydropower Development Company Limited with effective from July 11, 2018. CHDC was promoted by the then Clean Energy Development Bank Limited (now merged with NMB Bank Limited) with the purpose of investment in hydropower projects. The main purpose of CHDC is to invest in hydropower companies and providing project management services to those companies.

Paid up capital of CHDC was Rs.587.59 Million as on July 16, 2018 (Provisional), held by promoter shareholders. After the issuance of Rs.251.82 Million proposed IPO, promoter-public shareholding is expected to be in the ratio of 70:30.

Source: Care Ratings Nepal