Himal International Energy Pvt. Limited (HIEPL) has acquired majority shares in the Bhote Koshi Power Company (BKPC) Pvt. Ltd.—a leading Independent Power Producer (IPP) of the country.

BKPC operates the 36 MW Bhote Koshi hydropower plant located in Sindhupalchok district.

HIEPL now holds the shares of Panda of Nepal, owned by Panda Global Holdings, a Dallas based Energy Company and MCNIC, owned by DTE Energy. Both companies are divesting as per their strategy of exiting out of all global businesses and concentrating on the US domestic energy markets, said a statement issued by the Company.

HIEPL now owns 85 percent of the equity in the BKPC—up from just 10 percent earlier. IFC continues to hold 10 percent stakes in the company while Harza Engineering Corp.—a US based company—continues to retain its 5 percent equity.

Addressing a press meet organised in Lalitpur on Monday, Siddhartha Rana, new chairman of BKPC, said, “This has been a project close to my heart.” “Nepal’s potential in energy sector has been greatly talked about in the past. This is a major step towards our future endeavors in energy business.”

Responding to a query, Rana said foreign investment is a key benchmark of a country’s investment environment. “The safe and hassle free exist of one of the largest investments in Nepal exemplifies that Nepal is a very safe place for foreign investment,” he added.

Former chairman of the Hotel Soaltee Ltd., Mr. Rana said HIEPL had plans to own 51 percent of the stake in BKPC in future and float remaining shares with it to the general public. “We are utilizing national resource (water) and utilizing land (both govt. and public owned). So, it is not only the matter of corporate responsibility, but also a social contract to engage common people in our endeavours,” said Rana.

He further said that HIEPL will set up a Trust to help development activities in ten VDCs of Sindhupalchowk district. “A year ago, we had completely Nepalised the operations. Today, the entire plant and all operations are run most efficiently by the Nepalis,” he added. Mr. Rana said 25 other Nepali investors had also joined in the project now.

Sujeev Shakya, newly appointed President of the company, said it was wrong to say that hydropower plants constructed by the IPPs were costly. “Private sector developers have to pay the interest, insurance, legal and contracting costs which a government entity doesn’t have to. So, it is the question of whether we should have (relatively) costly power or no power at all,” he added.

Mr. Shakya informed that share transactions worth USD 22 million had taken place while purchasing equity from the US investors by the HIEPL. He said the BKPC had entered into the Power Purchase Agreement (PPA) with the state-owned Nepal Electricity Authority (NEA) in US currency and that its debt also was in US dollars and Euro.

According to Shakya, total project cost of the Bhote Koshi hydro power project stood at 98 million dollars out of which 29 million USD was in the form of equity while the rest was in the form of debt. As per the agreement, the developers will hand over the plant to the government after 25 years.

General Manager of the BKPC, Dr. Sandip Shah, said the state-owned Nepal Electricity Authority (NEA) still owed nearly 5.3 million dollars to BKPC in dues. He said Nepal had to face load-shedding since there was no sustained investment in the hydro-power sector in the country.

Speaking on the occasion, John Zamlen, authorized representative of the outgoing foreign partners Panda and MCNIC said, “This share transfer nicely fits the future business strategies of all the parties involved. It is truly a “win –win” milestone that had always been envisioned and that now has become a reality.”

Himal Xia of International Finance Corporation (IFC) said, “The transfer of majority ownership of BKPC from the original foreign partners to the local partner is a positive and timely development for Nepal. IFC is pleased to be associated with this project and strongly supports this transaction.” IFC and DEG-German Investment and Development Company, are the lead lenders.

Sujit Mundul, CEO of Standard Chartered Bank Nepal, said it was the beginning of a new era of acquisition finance in Nepal. Standard Chartered were Financial advisors and lead arrangers of acquisition finance on this deal.