Universal Power looking to obtain bank facilities worth Rs.130 Million; Care Ratings grades the issue

CARE Ratings Nepal Ltd. (CRNL) has assigned rating of ‘CARE-NP BB+’ to the long term bank facilities of Universal Power Company Ltd. (UPCL) worth Rs.1300 Million.

The ratings assigned to the bank facilities of UPCL is constrained by significant cost and time overrun leading to high project cost, residual project implementation and stabilization risk. The rating also noted the execution risk related to under construction projects where UPCL has already invested and planning to invest. The rating is also constrained by exposure to volatile interest rate, power evacuation risk and hydrology risk associated with run of the river power generation.

The ratings, however, derives strength from promoters, directors and management having prior experience in hydropower projects, power purchase agreement (PPA) with sufficient period coverage and financial closure achieved for estimated project cost. The rating also factors in moderate counter party risk, shortage of power in the country and government support for the power sector.

The ability of the company to timely execution of the project avoiding further time or cost overrun, timely completion of Singati to Lamosangu transmission line by NEA to evacuate power generated from the project and sufficient hydrology and timely receipt of the payments from NEA are the key rating sensitivities.

UPCL is a public company, incorporated on December 3, 2002 as private limited company and converted to public limited company on March30, 2011. It is developing 11MW run-of-river, Tallo Khare Khola Hydropower Project (TKKHPP) in Dolakha district of Nepal by utilizing available head and flow from Khare Khola (river).

Source: Care Ratings Nepal