The Nepal Electricity Authority (NEA), one of the most profitable state-owned enterprises, has been established as a highly secure institution with a high level of financial capacity.
While most of the state-owned enterprises are facing a financial crisis, NEA has been achieving continuous success. NEA has given an example that even an organization that is in financial crisis due to the support of the political leadership and the sincere efforts of the leadership of the organization can turn a profit.
NEA has also received an AA+ credit rating. ICRA Nepal Limited has given a credit rating of ‘ICRA NP AA+’ level to the credit rating of NEA. Achieving an AA+ rating means that the organization has a high ability to carry out its financial and financial obligations on time.
Debt repayment risk is very low in financial transactions with an institution that has an AA+ rating. Credit ratings are used to evaluate the quality of credit of an individual or an organization and to express opinions.
It provides opinions on the institution's ability to repay debt obligations as a simple and understandable indicator of the inherent risks. ICRA Nepal had analyzed the financial condition of NEA, assets, business and financial risks, managerial capacity, internal and external environmental factors affecting operational effectiveness.
NEA's credit rating is based on the same analysis. NEA Executive Director Kulman Ghising said that the NEA has an AA+ credit rating among the public bodies, which shows a high level of safe capacity to bear financial obligations.
NEA is currently borrowing on government guarantees from multilateral development partner bodies such as the World Bank and the Asian Development Bank; As the credit rating shows that the transaction with NEA is secure in all respects, NEA can now seek and take loans directly from such bodies on its institutional guarantee.
A long-term power purchase agreement (PPA) has been signed with the hydropower project to be constructed by domestic and foreign investors. The credit rating results show that there is no investment risk as NEA has a high level of financial capacity to pay for such projects. This will make investors feel safe and will also promote investment in the hydropower sector.
While the government was implementing the new project through the budget of the current fiscal year, it was announced that NEA would develop the capacity to mobilize resources on the corporate guarantee.
ICRA Nepal is wholly owned by the Authority, has a monopoly on transmission, distribution, and purchase of electricity from within and outside the country, and is a strategic entity of the government.
With annual revenue growth of about 12 percent in the last four years, Upper Tamakoshi's 456 MW, which accounts for about 25 percent of the country's total installed capacity, has a cheaper power purchase rate than other private sector projects.
Due to the efficient management of electricity demand and supply to the consumers, continuous power supply, achievement in power leakage control, declining quantity of electricity imported from India, high-level management efficiency, etc., the financial responsibility of NEA is said to be highly secure.
Executive Director Ghising said that discussions are underway to issue shares to the public as per the provisions of the NEA Act with the approval of the government.
"In the past, NEA was in annual deficit and accumulated losses. Now, all the financial indices have improved significantly. Investment in NEA has been analyzed from credit rating as safe in all respects.
The Act stipulates that the share capital of NEA will be determined by the Government of Nepal. Of the shares issued by NEA, only the remaining shares purchased by the Government of Nepal will be sold to the general public. The government has already agreed to issue shares under NEA's second financial restructuring.
After the retreat of ICRA, the way has now been paved for the sale of ordinary shares of NEA. NEA has made a profit of Rs. 12 billion in the first six months of the current fiscal year.
