Hydroelectricity Investment and Development Company is lending commercial banks a long-term wholesale loan and refinancing facility to invest in hydropower projects.
Launching the Onlending/Refinancing Policy today, the company’s chief executive officer Deepak Rauniyar said that the new move is aimed at facilitating commercial banks to invest in hydropower projects with 10MW to 15MW capacities.
A single bank can borrow up to Rs 400 million for a single project and Rs 1 billion for more than one projects, according to the policy that has stated that the commercial banks can receive the refinancing facility for three to five years. Apart from maintaining three per cent spread on the loan they take from the company, they also have to meet the criterion to get the wholesale lending facility.
The criterion are largely based on central bank’s criterion like they have to maintain Non Performing Assets (NPA) at less than five per cent, maintain 60:40 ratio of institutional and public deposits, capital fund should not be less than 10 per cent, CD ratio should not exceed 80 per cent, and the balance sheet should show net profit for at least three previous years.
Also, the banks should not have been punished by the central bank.
“This is a long-term loan for banks since they do not get timely returns on such investments,” Rauniyar said, adding that the hydropower sector that requires long-term investments can get benefit from the move. “Since commercial banks have short-term deposits and the company is not mandated to promote small hydel projects like 10 MW and 15MW capacities, it is facilitating the banks with the wholesale lending.”
The loan can also be extended for a period of two years after the completion of the period, based on demand, he added. “But the banks will be solely responsible for the evaluation of the risk in the projects.”
Hydroelectricity Investment and Development Company is a government entity established to generate resources and invest on hydropower development.
The company is mandated to work along with consortium partners in projects of 15MW to 25MW capacities and lead in projects of more than 25MW capacity.
The company has agreements with four hydropower projects – 42-MW Mristi Khola, 30-MW Khani Khola, 27-MW Dordi Khola and 23.5-MW Solu Khola – to provide them consortium loans of over Rs 2 billion.