Beni Hydropower Project Gears Up for Public IPO Issuance from September 7

Beni Hydropower Project Limited is set to launch the public issuance of its Initial Public Offering (IPO) starting September 7, 2024 (Bhadra 22, 2081 BS). This highly anticipated offering follows the successful allotment of shares to project-affected local residents and Nepalis employed abroad, marking the final phase of its capital mobilization strategy.

The company had received approval to issue 20% of its total authorized capital of NPR 1.04 billion, amounting to 2.08 million ordinary shares, each with a face value of NPR 100. Of this total, 1.04 million shares were previously allocated to locals residing in the project-affected areas, while 104,000 shares were reserved for Nepalis working overseas. Additionally, 20,800 shares were set aside for company employees, and 52,000 shares were allotted to collective investment funds (mutual funds). With these allocations complete, Beni Hydropower Project is now offering the remaining 863,200 shares to the general public.

Prospective investors can apply for a minimum of 10 shares and a maximum of 10,000 shares. The IPO application window will close on September 10, 2024 (Bhadra 25, 2081 BS) at the earliest, and on September 21, 2024 (Ashoj 5, 2081 BS) at the latest, depending on the level of subscription. This structured approach ensures broad participation while managing demand effectively.

ICRA Nepal, a reputable credit rating agency, has assigned Beni Hydropower Project an "ICRA NP Issuer Rating Double B Plus (BB+)." This rating signifies an average level of risk associated with the company's ability to meet its financial obligations. For investors, a BB+ rating suggests that while the company's fundamentals are generally sound, there might be moderate susceptibility to adverse changes in economic conditions or specific industry factors. It underscores the importance of thorough due diligence before making an investment decision.

Beni Hydropower Project operates the 19.8-megawatt Upper Solu Khola Hydropower Project. The total estimated cost for this project stands at NPR 3.855 billion, translating to a cost of NPR 194.70 million per megawatt. The project holds an electricity generation license valid for another 24 years, providing a substantial operational horizon. Financial projections indicate a simple payback period of 5.78 years and a discounted payback period of 8.15 years. These figures suggest a relatively quick return on investment, which can be attractive to long-term investors.

The hydropower sector in Nepal has shown robust performance recently. According to financial statements from the fourth quarter of the last fiscal year, the net profit of hydropower companies surged by an average of over 471%. Out of 111 hydropower companies, 91 reported net profits, while 20 were still operating at a loss. This overall positive trend in the sector provides a favorable backdrop for Beni Hydropower's IPO, indicating a potentially healthy operating environment. However, investors should also be mindful of the inherent risks in the hydropower sector, including regulatory changes, environmental factors, potential project delays, and the cyclical nature of energy demand.

NMB Capital Limited has been appointed as the issue manager for this IPO. Investors can conveniently apply for the shares through the C-ASBA system via banks and financial institutions authorized by the Nepal Securities Board, or by using the Meroshare online platform provided by CDS and Clearing Limited. This streamlined application process aims to make participation accessible to a wide range of investors across the country.

This IPO presents an opportunity for investors to participate in Nepal's growing energy sector. While the company's project fundamentals and the broader sector's performance appear promising, potential investors are strongly advised to review the company's prospectus, understand the associated risks, and align their investment decisions with their personal financial goals and risk tolerance.