-Bibek Raj Pangeni
The first thing that comes to mind as an investor is what will happen to my shares of that company. In order to understand the concept, lets introspect a term i.e. BOOT
B – Build
O – Own
O – Operate
T – Transfer
In the first Phase, when an investor sees opportunity in any hydropower project, they build it on their own by raising capital through debt and equity.
The investor own the project till the end of generation license (35 Years) or 30 Years from Commercial Operation Date (COD) whichever comes first. This is a timeframe up to which the company can own and benefit from it. After the deadline, the assets of Hydropower that generate electricity are to be transferred to the Government. It is similar to taking a property for lease until the contract is over.
It will generate and distribute its electricity and earn revenue until the contract is over (Maximum 35 Years)
After the end of the Contract the respective company should hand over its assets that produce electricity to the government. They can’t take a single penny from that hydropower because that doesn’t belong to them anymore. The new owner who gets benefited without investing any money would be the government of Nepal
Still the answer to the question isn’t explained. What will happen to my shares after Transfer?
Yeah, it hurts as an investor that I won’t be the owner of that asset which generates huge revenue and makes me rich. But as an investor, I must know that I will just be losing the assets that produce electricity. There might still be the question what will be left to me as a shareholder if I will be losing the assets that generate electricity. Let’s Dig into it now, Suppose You have shares of the hydropower company named Butwal Power Company Limited (BPCL). It is currently building a Hydropower named Nyadi. The hydropower is built on the model of Special Purpose Vehicle (SPV) which treats Nyadi Hydropower Pvt. Ltd. as a separate entity whose sole purpose is to build that Dam and infrastructure.
Figure 1. Flowchart of Investment Structure in Hydropower Project
Nyadi Hydropower will build the dam and generate electricity and sell it to NEA and the revenue generated will be used to pay back debt including interest and the profit earned will be shared to its shareholder (both public and promoter) in the form of dividend. The remaining earnings will be retained for further purposes to invest in other new hydropower projects or other new investments. When the contract with the Government is over Nyadi will only be losing the dam and the assets related to producing electricity but all other cash and investment remains intact to the company. So, the shareholder will lose the dam and the assets related to producing electricity but they will still be owning the shares of Nyadi Hydropower Pvt. Ltd. which owns other investment and other assets beside it. So, simply Hydropower companies build dams on lease and earn from it and give it back to the government and again build another dam and give it back and invest in other projects and so on…