ICRA Nepal assigns LBB- and A4 rating to the long term and short term loans of Dordi Khola Jal Bidyut Company

ICRA Nepal has assigned a long-term rating of [ICRANP] LBB- (pronounced ICRA NP L double B minus) to Dordi Khola Jal Bidyut Company Limited’s (DKJBCL) long-term loans and a short-term rating of [ICRANP] A4 (pronounced ICRA NP A four) to the short-term loans.

Credit strengths

• Rich experience of promoters in hydropower sector
• Low funding risk; Group strength to cover any unseen contingencies
• Low tariff and offtake risks amid long-term PPA at predetermined tariffs and escalations

Credit challenges

• Relatively high capex and delayed execution could expose company to penalties, weakening the financial profile and stretching the coverage ratio
• Evacuation risk
• High hydrology risk amid lack of deemed generation clause in PPA; however, snow-fed source remains a comfort

About the company   

Dordi Khola Jal Bidyut Company Limited (DKJBCL), incorporated on February 26, 2010 as a public limited company, is an associate company under CEDB Hydropower Development Co. Ltd (CHDCL). CHDCL and its Group companies hold an equity stake of ~27% in DKJBCL. The paid-up capital of the company as of mid-October 2019 was ~NPR 759 million, fully held by the promoters. As of mid-October 2019, the major promoters included Radhi Bidyut Co. Ltd. (21.67%), Lamjung Energy Development Co. Ltd. (4.86%), Mr. Arun Gautam (2.06%) and Mr. Pashupati Shamser Ja. Ba. Ra. (1.32%).   

While the promoters hold 100% of DKJBCL at present, the company is yet to launch an initial public offering (IPO; IPO worth ~NPR 550 million by ICRA Nepal at IPO 4 in May 2019), post which the promoters’ shareholding would dilute to 58%, assuming full subscription. The company is developing the 12-MW Dordi-1 HEP in Lamjung District, Gandaki Province of Nepal. The project is a run-of-the-river (R-o-R) type and is being developed at 40% probability of exceedance (Q40) with an annual production capacity of ~65 GWh of energy at a dry energy mix of ~16%.

 Instrument details 

 Source: ICRA Nepal Ratings