Kathmandu. Nepal Solar Farm Limited, the promoter of the 4-megawatt Som Radha Krishna Solar Farm in Machhapuchhre Rural Municipality of Kaski district, is facing a serious financial crisis. ICRA Nepal has not upgraded the company’s rating and its credit profile has remained in the risky category.
The biggest blow for the company is the loss of the Viability Gap funding facility. As per the agreement with Nepal Electricity Authority (NEA), the company will now get Rs 6=60 per unit as per the government’s additional subsidy of Rs 10 per unit. Due to the lack of grants, there is a huge gap in the cash flow of the company, which has created a situation where the promoters will have to invest more individually to repay the loan.
The total cost of the company has reached Rs 54.20 crore at the rate of Rs 13.60 crore per megawatt. This cost is comparatively high for solar power projects.
As per the power purchase agreement, the company has to generate electricity at 18 percent of its capacity. But, 2081. As the production is less than 17 percent in 82 of the project, the company has to pay a fine to NEA for supplying less electricity than the agreement.
The company has a debt-to-capital ratio of 62:38. Since the repayment schedule of the loan is based on the balloon model, there is a huge amount of installment to be paid in the last four years. According to ICRA Nepal’s analysis, fluctuations in the interest rate in the market may further affect the company’s profit.
Fall 2082. In the first five months of ’83, 98 percent of contracted energy was produced, which is better than last year. A class A construction companies like Sharma & Co. have a 51 percent stake in the company, which has been supporting the company during the financial crisis.
The company has applied to the Securities Board of Nepal (SEBON) for issuance of 19,28,572 units of ordinary shares worth Rs 19.25 crore. If the issue is successful, the amount collected will help reduce debt and improve its financial condition.
The future of Nepal Solar Farm now depends on its production capacity and the success of the upcoming primary share issuance. In the absence of grants, it will be very difficult for these solar farms based on a single project to make a profit without being protected from weather risks and technical declines.
