Himal Power to issue US dollar debenture

The domestic bond market will be witnessing the issue of US dollar denominated debentures.
Himal Power Company (HPL) is issuing $60 million debentures in the market. Ace Capital, the merchant banking subsidiary of Ace Development Bank, will manage the issue and the development bank will act as the issue advisor for the Himal Power.
"It is the first of its kind of innovative financial instrument in the Nepali financial market," CEO of Ace Development Bank Siddhant Raj Pandey said, adding that it is a pilot project that will inspire others too.
"The current fiscal year’s Monetary Policy has also provided legal framework for the issue,” he added.
The debenture will yield six per cent as coupon rate per annum and will mature in five years period with a roll over option that will be declared in 2013. It will be offered for private placement to the commercial banks and development banks, according to the issue manager.
The debenture — planned to be traded through Over-The-Counter (OTC) market — will be fully secured by cash flow of Himal Power that is in US dollars earned by selling electricity to Nepal Electricity Authority (NEA).
The banks and financial institutions hold about $78 million as foreign reserve that are invested in foreign treasuries that only yield about two per cent. "The instrument will be providing six per cent thus financial institutions are excited due to its higher return," he added.
The debenture is supposed to be instrumental in developing Nepali bond market that is still in theoretical existence. "We are still in initial stage as regulator’s approval is yet to obtain," managing director of Ace Capital Pramod Pandaya said, adding that the issue will be put through once Securities Board of Nepal (Sebon) and Nepal Rastra Bank (NRB) grant the approval.
"Both the regulators are preparing required directives to give the green signal to the project," he added.
Ace Capital is also preparing a platform that will simplify the trading and price determination of this debenture that will provide in-house matching services to debenture holding financial institutions, provided regulator approves.
"HPL has been taking loans from foreign banks at 10-12 per cent interest, it will get fund at lesser cost to build infrastructure for Nepal through foreign reserves earned by Nepali,” informed general manager of HPL Carl Faannensson. "The funds raised through the debenture will be used for other power projects," he added.
Along with Khimti that has already started the distribution of electricity, HPL will be undertaking power projects that will generate about 700 MW of electricity requiring huge capital.