Liberty Energy issuing 15 lakh units as IPO to project affected locals; Find all necessary information before applying

Company profile

Liberty Energy Company Limited (LECL) was incorporated in December 2009 as a private limited company and was converted to public limited company on March 2016 to facilitate public participation. The company is promoted by 402 promoters with ~9% holding each by Mr. Kush Kumar Joshi and Dr. Atmaram Ghimire, ~6% holding by Mr. Ram Bahadur Pandey, ~5% holding by Mr. Kumar Keshar Bista & ~3% holding by Mr.

Sushil Thapa, among others. The company is developing the 25 MW Upper Dordi ‘A’ HEP (Required Commercial Operation Date-RCOD: 31st August 2019) in Faleni and Dhodeni VDC, Lamjung district of western Nepal. Till mid-Jan 2019, the project has achieved ~60% financial progress (based on the estimated project cost of ~NPR 4,600 million).

The 25 MW Upper Dordi ‘A’ HEP (earlier 21.6 MW) is a run-of-river (RoR) project located in the Lamjung district of western Nepal. The project draws its hydrology from Dordi river, a major tributary to the Marshyangdi river. The 25 MW project has a catchment area of ~192 sq. km which along with the snow fed nature of the river is expected to support the design discharge of 9.30 cumecs at 40% exceedance flow with a gross head of ~325 meters. The power generated is to be evacuated through less than 500 meters, 132-kV transmission line to the proposed Kirtipur Besi substation of NEA in the Dordi corridor. NEA is currently developing a connecting ~10 km, 132 KV transmission line between Udipur Hub and Kirtipur Besi substation. The line is in early stages of development and its timely completion will be important in the project meeting the targeted commissioning deadline. The 25 MW project has obtained energy generation license from the Ministry of Energy in April 2014, valid for 35 years. The project is being developed on a build-own-operate-transfer (BOOT) basis.

Objective of the issue

About the issue

Liberty Energy Company Limited will be issuing 15,00,000 units worth Rs 15 crore as Initial Public Offering for the locals of project affected area of Lamjung district from (Falgun 27, 2076). The early closing date of this issue is on Chaitra 11 and if the issue is not fully subscribed till Chaitra 11, then it can be extended upto Chaitra 26, 2076.

NIBL Ace Capital has been appointed as the issue manager for the IPO issuance. Applications can be placed for minimum 10 units and maximum 10,000 units.

After the issuance of 15 lakh units IPO shares for the locals i.e 10% of total capital. The hydropower company will be issuing a total of 22.50 lakhs units IPO shares i.e 15% of total capital to the general public which will together raise its paid-up capital to Rs 1.50 arba in second phase.

ICRA Nepal Limited has assigned a [ICRANP] IPO Grade 4 to the Rs.37.50 Initial Public Offer of Liberty Energy Company Limited. Instruments with this grading are considered to have below-average fundamentals.

The company is developing the 25 MW Upper Dordi ‘A’ HEP in Faleni and Dhodeni VDC, Lamjung district of western Nepal. The per megawatt cost of the project (including IDC) is Rs 18.54 crore and its payback period is 9.20 years.

Click here for IPO offer Letter:

About the project

Capital structure

Shareholding structure

Primary shareholders

Board of Directors

Management Team

*There are 49 employees in total.

ICRA Rating Nepal

ICRA Nepal has assigned [ICRANP] IPO Grade 4 to the proposed initial public offering (IPO) of Liberty Energy Company Limited (LECL), indicating below-average fundamentals. LECL has proposed to come out with an IPO of 3,750,000 equity shares with a face value NPR 100 each, at par. The proceeds from the proposed equity is proposed to be used in the development of 25 MW Upper Dordi

‘A’ hydroelectric project (HEP). 

Weaknesses

• Moderate return potential of the 25-MW Upper Dordi ‘A’ HEP being developed by LECL; given the relatively higher estimated capital cost (~NPR 185-190 million per MW) on a fixed tariff regime and a low contract plant load factor (PLF) of ~62%.
• Evacuation also remains a concern since NEA’s transmission line from Udipur to Kirtipur-besi Substation is in early stage of development and therefore the likelihood of delay in the same is high.
• Grading concerns also emanate from hydrological risks in absence of a deemed generation clause in the power purchase agreement (PPA), despite the historical recorded flow of Dordi river being adequate vis-à-vis design requirement.
• The gradings are also constrained by counterparty credit exposure to Nepal Electricity Authority (NEA) which has a moderate financial profile; although partly mitigated by the sovereign support of the Government of Nepal (GoN) to the NEA and NEA’s past track record of timely payments to independent power producers (IPPs).
• Given the moderate return potential of the project, volatile interest rates on bank borrowings could also have an impact on the return to the equity holders; which has been factored into the grading assigned.
• Cost escalations on the project has also given rise to funding gap; although partly mitigated by in-principle commitment from the lender banks for enhanced credit limit and adequate equity raising plans of LECL visà-vis project equity requirements.
• With required commercial operation date (RCOD, 31^st August 2019) approaching close, any further unexpected cost overruns or timeline delays would have a major impact on the interest capitalisation and hence the overall project metrics.

Strength

• Significant construction progress achieved in the project (more than 80% physical progress corresponding to ~60% financial progress till mid-January 2019), reducing execution risks to a large extent.
• With a firm PPA in place, pre-determined tariff rates and a positive demand outlook owing to supply-demand gap in the power sector, the tariff and offtake risks for the project are minimal.
• Going forward, LECL’s ability to commission the project within current cost and timeline estimates and project’s ability to achieve its design operating parameters will be the key driver for the project returns.

Source: https://www.icranepal.com/

Assets in the current price

Insurance status

Financials

Source: Company prospectus and ICRA Rating report