Power Transfer

Major American investor exits from Bhote Koshi power company

By SANJAYA DHAKAL

In a first-ever instance of big finance acquisition in the country, a Nepali partner of a prominent foreign-invested power company has bought out the majority shares held by American investor.

Himal International Energy Private Limited (HIEPL) has announced the acquisition of majority shares in Bhote Koshi Power Company Private Limited. The deal was completed on March 24, according to a press release issued by BKPC.

The BKPC was a flagship foreign investment company in Nepal with investments from major US power companies like Panda. In the last few years, the company had run into troubles regarding what they called ‘short-payment’ by the Nepal Electricity Authority (NEA). The domestic turmoil in the country, too, were having adverse impact on investment and security situation.

Although they took great pains to explain that the exit of the major American power company Panda and MCNIC from Bhotekoshi Power Company is not due to the domestic situation of Nepal , the timing cannot be overlooked.

“The HIEPL now holds the shares of Panda of Nepal, owned by Panda Global Holdings, a Dallas-based Energy Company and MCNIC, owned by DTE Energy. Both companies are divesting as per their strategy of exiting out of all global businesses and concentrating on the US domestic energy markets,” states the press release of the BKPC.

Panda and MCNIC, which owned 75 percent of the shares, have sold their entire holdings to the HIEPL. Now the HIEPL holds 85 percent of the BKPC shares with International Finance Corporation (IFC) continuing to hold 10 percent and Harza company of US continuing to hold 5 percent.

“Panda is leaving because they have chosen to remain in domestic US market particularly in ethanol and bio-diesel. The board of DTE that bought MCNIC, too, had instructed to sell all foreign equities. Therefore, their exit does not signify anything to do with Nepal situation,” said Siddhartha Rana, new chairman of BKPC. Rana also said that their experience in closing the deal of this volume has shown that Nepal is not a ‘failed state as is discussed in cocktail parties.’ “We still believe that located as it is between India and China , Nepal represents an invaluable piece of real estate,” Rana said, adding, “And this deal has also further highlighted the case for attracting FDI in the country. There is always two sides to the coin of FDI - the ease with which one can enter and the ease with which one can exit. This deal has shown foreign investors the ease with which they can exit – a crucial point for attracting them in the first place.”

John Zamlen, representative of Panda of Nepal, “We are leaving with a bit of sadness as BKPC was one of the best examples of foreign investment with most successful five years of operation. Our exit fits with our strategic decision.”

Highlighting why the HIEPL bought out the shares, Rana said, “ Nepal ’s potential in energy sector has been greatly talked about in the past. This is a major step towards our future endeavors in energy business.” Sujeev Shakya was named as the President of the Company. Dr. Sandip Shah continues to be the General Manager of the Company.

Haiman Xia of International Finance Corporation (IFC) said, “The transfer of majority ownership of BKPC from the original foreign partners to the local partner is a positive and timely development for Nepal .”

The deal marked the beginning of acquisition finance in Nepal . Sujit Mundul, CEO of Standard Chartered Bank, Nepal – which was the financial advisor and lead arranger of the acquisition finance of this deal - expressed his “joy over beginning of a new era of acquisition finance in the country.”

According to Sujeev Shakya, president of BKPC, the deal involved the transaction of share values of $22 million. The BKPC has the total investment of $98 million - $29 million in equity and $69 million in debt.

After the acquisition, the BKPC now plans to go for Initial Public Offering (IPO). “It is our intention to go public so that a large number of Nepalese will own this company,” said Rana, adding that the company also intends to enter into a social contract with local stakeholders. “We intend to gift certain quantity of share to 10 VDCs of Sindhupalchowk where the project is located so that the people there will also have ownership,” he said. The company plans to go for IPO within a year at the earliest.