In a bid to strengthen its institutional development, the government owned Nepal Electricity Authority (NEA) has decided to issue 25 per cent (around 31.25 billion) shares to the public through an initial public offering (IPO). If the plan materialises then it will be the largest ever IPO issued by a Nepali company.
Since the IPO amount is huge, the power utility will target corporate houses and business persons in the first phase.
The Nepal Electricity Authority apparently has Rs 125 billion as paid-up capital at present.
Kul Man Ghising, managing director at Nepal Electricity Authority , informed that the government has decided to issue shares of the power utility to the public.
According to Ghising“We plan to improve the financial health of the authority by minimising operational cost, increasing generation capacity of NEA’s projects, minimising electricity leakage and increasing the sale of electricity” .
“When the IPO is launched, it will be the largest ever issued by a domestic firm and in the first phase we have targeted to sell the shares to major corporate houses and business people. When big players buy the shares, it will help attract the general people too,” he added. However, in recent days, shares of hydropower projects are not being sold in the secondary market or also during IPO as the construction cost of the projects has been skyrocketing as compared to their initial project investment cost.
“We have planned to issue the IPO to the public as per the law,” Ghising added.
Earlier, Minister for Energy, Water Resources and Irrigation Barsha Man Pun had said the government will issue shares of the power utility to the public in a similar modality as that of Nepal Telecom.
At the time, Minister Pun had stated that the government also planned to make NEA the most competitive state-owned company among all public enterprises.
In 2015-16, the fiscal year in which Ghising was appointed, the company had recorded a loss of Rs 8.8 billion. In 2016-17, the power utility had booked profit of Rs 1.5 billion, while in fiscal 2017-18, it made profit worth Rs 2.90 billion. In last fiscal year, the power utility was able to book profit worth Rs 7.20 billion, which was a 148.27 per cent increment in comparison to the previous fiscal year.
The power utility has been able to generate profits in recent years as it has been able to end load- shedding, reduce the average price of imported and domestic electricity, control administration and technical expenses, and implement financial reform measures.
Meanwhile, NEA’s cumulative loss accrued over the years has come down by Rs 10 billion to Rs 15.22 billion.
In order to issue IPO, a company needs to be in net profit for the last three fiscal years and should have a positive reserve. Although the former principle has been fulfilled by the company, NEA still has a negative reserve. So, in order to convert the reserve into a positive one, two more years might be required to issue the IPO.