Hydropower Companies In IPO Rush
Once seen as a depressed sector, the Nepali energy industry is now becoming the centre of attraction among investors. The flocking of hydropower companies for share market listing is indicative of this. In recent months, Nepali hydropower companies have been rushing for initial public offerings (IPOs). Five hydropower developers have filed for IPO in the Securities Board of Nepal (SEBON). Some among them are said to have been permitted for issuing all kinds of shares, while IPO requests of some companies are under process.
Sanimamai Hydropower Ltd has closed the first round of IPO process which was carried on from September 20-24. Under this, the company sold shares allocated to the project-afftected areas. In the next round, shares will be sold to the general public. Meanwhile, Ridi Hydropower Development Comapany, Upper Tamakoshi Hydropower Ltd, Varun Hydropower Company and Arun Valley Development Company Ltd are preparing for share issuance.
Sanimamai Hydropower’s IPO saw an astounding demand of company’s shares. The company which received IPO permit from SEBON on September 4 received share applications worth Rs 2.53 billion, 25 times more than demanded. “We have estimated the application to be 10 times more than the offered,” informed Tuk Prasad Paudel, CEO of Sanimamai Hydropower. The company which is developing the 22 MW Mai hydropower project in Ilam district is also constructing the 7 MW Mai Cascade Hydro project. “Shareholders will receive 5 per cent dividends in the second year after the projects start generating electricity,”said Paudel. According to Paudel, the company plans to raise the dividends to 10 per cent and 15 percent in 3rd and 4th year respectively.
Similarly, Ridi Hydropower issued shares worth Rs 30 million to the local residents of the project area on 28th September. Varun Hydropower is issuing shares worth Rs 24.3 million to the local residents in the project site. Likewise, Upper Tamakoshi is set to issue primary shares worth Rs 25.416 million whereas Arun Valley Hydropower is preparing for the issuance of rights shares worth Rs 350 million.
There are only four hydropower developers listed in the Nepal Stock Exchange (NEPSE) till date. Butwal Power Company Ltd, Chilime Hydropower Company Ltd, Arun Valley Hydropower Company Ltd and National Hydropower Company Ltd are the developers maintaining their presence in the share market thus far. According to data released by NEPSE, the total number of listed shares of the four developers reached 44.525 million (worth Rs 4.45 billion on face value). The share transaction of the companies also saw a staggering growth of 79 per cent in the fiscal year 2012-13 compared to the previous fiscal year.
Share market experts see the IPO rush of hydropower companies as a good investment opportunity. “The risks are less and the returns are larger in hydropower companies compared to other sectors,” says stock market analyst Rabindra Bhattarai. “Currently, there is less competition in the hydropower sector with certainty of return.” Bhattarai terms the IPO rush of power developers as the ‘next market boom.’ He also points out to the IPOs as a medium of fund raising for new hydropower projects. “This will definitely help build new projects and generate more electricity,” he adds.
Share investor Uddab Shiwakoti also agrees with Bhattarai’s view. “Initial capital investment in power companies is high, though the operating cost is low,” he says. “According to cost-benefit analyses, we can clearly see that the investment flow is tending towards the hydropower sector.”