NEA to issue bonds to raise fund
Nepal Electricity Authority (NEA) is going to issue power bonds at the first time in a bid to promote people to invest in hydro-electricity sector.
The NEA has signed a Memorandum of Understanding (MoU) on Thursday with the Nepal Merchant Banking and Finance Limited (NMBFL) in this connection. After signing of the MoU, NMBFL will hold the authority to distribute bonds worth Rs. 3 billion for NEA and collect domestic investment in various power projects.
NEA, on the same day, has appointed the chief executive officer of Nepal Merchant Banking and Finance Ltd as manager for the issue of power bonds. Power bond is expected to reduce the project cost that has been higher due to foreign interference so far.
NEA's managing director Arjun Kumar Karki said the bonds would be issued exclusively to institutional lenders and individuals in Nepal stating that foreign loans, which come with lender's conditions made hydropower projects in the country very costly.
According to him, strings attached to foreign loans including limited bidding, appointment of contractors of donor's choice and donor interference in projects has made the project costs higher which makes the electricity cost also higher.
So far, hydropower projects in the country have been built in two ways- being with total financing from private investors and with equity participation by the government and NEA and loans from donors.
According to Upendra Poudyal, CEO of NMBFL, currently there is liquidity of about Rs. 15 billion in the country's financial system, and selling power bonds worth Rs. 3 billion should not be a problem.
According to NEA's managing director Karki, the power bond issue manager will float the bonds in a few weeks after the bond prospectus is approved by the Security Board. The money generated from the bonds will be used to finance the 30 megawatt Chameliagadh project and 14 megawatt Kulekhani III and to meet the financing gap faced by the under-construction 70 megawatt Middle Marsyangdi.
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