Sunday, April 27, 2008

Can Chilime add premium in its shares

Chilime Hydropower Company Ltd — the model hydropower project that opened the vista for Nepali investment deemed impossible one decade ago in hydropower sector — is planning to issue 23.04 million unit shares to public after repeated pressure by the regulatory authority of the capital market. Chilime should have floated its shares for the public long before but the regulation then was not clear on floating the shares to public before being traded at the Nepse floor.
Started in August 28, 2005, Chilime Hydropower's 7,296,000-unit shares were listed at a price of Rs 100 per unit at the Nepse on April 4, 2006 and started trading on Nepse floor from April second week without going to the public, as the Share Allotment Regulation - 2051 had not stopped the trading then.
However, according to the amendment — on September 21, 2006 — of the Share Allotment Regulation - 2051 Article (12), a company cannot trade its shares distributed to the staff before going to the public.
Chilime has asked the permission on April 4, from the Securities Board of Nepal (Sebon), the regulatory authority of capital market, to issue its shares separated for the public with Rs 500 premium in the base price of Rs 100 per unit making per unit share Rs 600.
"But it cannot add premium and has to float shares for public at Rs 100," says Rabindra Bhattarai, a share analyst. According to the Company Law, any company that has posted profits and distributed cash dividend continuously for three years can issue its shares to public adding premium. Both the rules must be fulfilled to float the share with premium. Though, there is no rule on how much premium a company can add at present, the new regulation 'Securities Registration and Issue Regulation' that the Sebon is bringing has clearly stated a rule on how to calculate the premium.
However, Chilime Hydro power has not fulfilled one of the conditions stated in the Company Law. "It has fulfilled only one condition that is it has posted profits continuously for last three years," Bhattarai says, adding that the second condition that is distribution of cash dividend for three years continuously could not be fulfilled as the Sebon ordered Chilime not to distribute cash dividend this year before going to public.

In the letter of January 27 to the Sebon the company has also clearly stated that it is, for the time being not distributing cash dividend and putting the decision on holdm, respecting the regulatory authority.
On February 10, Chilime held its 11th AGM where it has only proposed 30 per cent but has not distributed it obeying the regulator's order.
"We have applied for the shares to be issued with premium, if Sebon thinks that we can not add premium, we will obey," says Lila Nath Bhattarai, manager of the Chilime Hydropower Company Ltd.
The other interesting fact is that, in the AGM, the company has, again decided to give 10,000-unit of shares to the best staff from the public's share. It is allocating five per cent shares to Mutual Fund, 500-unit shares to Parbatikunda Secondary School and 1,80,000-unit shares for three VDCs, where the project site is located apart from 10,000-unit to the best staff. Reducing these allocations, the public will now get only 19,98,300-unit from a total separated of 23,04,000-unit separated for them.
"The staff were already given the shares but the company has again separated shares for them, which is not fair to the public," protested one investor.

Equity share structure
For public 24 per cent (23,04,000-unit) - yet to be floated
NEA 51 per cent
Staff 25 per cent (23,74050-unit)
Total shares 100 per cent (72,95,655-unit)

Fiscal year -- cash dividend
2060-61 -- Rs 10 per dividend per share
2061-62 -- Rs 20 per dividend per share
2062-63 -- Rs 35 per dividend per share
2063-64 -- 30 per cent cash dividend and 25 per cent bonus shares proposed. (But the cash dividend is cancelled due to Sebon's prohibition.)

What's in store
Apart from the present Chilime Hydropower project of 22.1 MW that is in operation, the company has planned three projects:
1. Sajen Hydroelectric Project (35 MW)
2. Sajen (Upper) Hydroelectric Project (11 MW)

3. Middle Bhotekoshi Hydroelectic Project (80 MW)
4. Rasuwagadi Hydropower Project (75 MW) – in the process of obtaining licence

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