China pleges Rs 9.75 b grant to Nepal

Chinese Premier Wen Jiabao during his 5-hour visit signed eight agreements on Saturday, including economic and technical assistance agreement, committing Nepal among other things, a grant assistance of 750 million Yuan (Rs 9.75 billion) for the next three years. Under the agreements, China agreed to provide annual grant assistance of 200 million yuan (about Rs 2.60 billion) to Nepal, raising the assistance volume by a third over what it was providing so far. “Though this will total the grant amount for the next three years to 600 million yuan, China also committed to provide additional 150 million yuan during that period -- making the total grant assistance package at 750 million yuan,” said a highly placed source at the Ministry of Finance. The grant assistance will be used for the development of mutually agreed projects. Wen also pledged special grant assistance of US$ 20 million (over Rs 1.65 billion) to the government to support the peace process. “This is a budgetary support and will be used particularly for financing rehabilitation of Maoist combatants,” said the source. During the bilateral talks, Nepal had tried to secure Chinese premier´s commitment for soft loans through Exim Bank for the development of large scale projects. But instead of making any commitment on credit line, China promised to do away with problems and complexities that Nepal faced in securing soft loans from China. “A Loans Operationalization Agreement, hence, has been signed to ensure easy access to Exim Bank loans,” said Deputy Prime and Foreign Minister Narayankaji Shrestha. China pledged financial and technical assistance worth 10 million yuan (about Rs 130 million) to enhance capability of Nepal Police. Another technical assistance package of 400,000 yuan (about Rs 5.2 million) too was signed for strengthening the Armed Police Force (APF). “Fundamentally, this technical assistance will go toward conducting study for the establishment of an APF college,” Shrestha stated. The two sides also agreed to construct and manage dry ports along the six Nepal-China border points in a bid to facilitate bilateral trade and people´s movement. Under this, the two governments have agreed to develop international-standard dry ports and cargo terminals in Yari-Pulam, Rasuwa-Jilong and Kodari (Tatopani)-Zangmu (Khasha) customs. Dry ports at Kimanthanka-Dingri, Olangchungola-Riwu and Mustang-Ligzi, however, will be of bilateral standard. China further agreed to expedite the implementation of Tatopani Dry Port and upgrading and expansion of the existing Ring Road in the Kathmandu Valley. In yet another agreement, China agreed to allow Nepalis residing within 30 km of the international border to use the pasture and graze their livestock on the other side of the border. During the bilateral talks, Nepali Prime Minister Bhattarai requested for additional grant and loans assistance from China for the development of hydropower and north-south highways. “We are seriously positive about it,” Minister Shrestha at a press meet quoted Wen as saying. Bhattarai also requested China to extend railway line that it was building up to the bordering areas to Kathmandu and also up to Lumbini. The Chinese premier said such an extension was highly possible and China was positive about it. Wen also assured to enhance cooperation to ensure that the construction of Upper Trishuli 3A Hydropower Project, being developed with Chinese concessional loan, will proceed smoothly. He also positively acknowledged China´s participation in the construction of Pokhara International Airport. In this connection, the two sides agreed to make full use of existing mechanisms like Nepal-China Joint Economic and Trade Committee and also decided to form a new Consultation Mechanism at foreign minister level. Wen promised to encourage competent and well-established Chinese companies to invest and start joint ventures in Nepal. The two sides also agreed to continue discussions regarding signing of Bilateral Investment Protection and Promotion Agreement (BIPPA). During the luncheon meeting, when Wen met with senior political leaders including Pushpa Kamal Dahal, Sushil Koirala, Jhalanath Khanal and Mahantha Thakur, he committed to further intensify cooperation for socio-economic development, promotion of trade and tourism, hydropower and transportation infrastructure development, among others. Source: Republica

BEL gets IRs 6.63bn for hydel project in Nepal

Bhilwara Energy Ltd (BEL) — the flagship entity of LNJ Bhilwara Group in Indian power sector business — announced that its 120 MW Likhu IV Hydro Electric Project has received thumbs up from a consortium of Indian and Nepali banks that have pledged IRs 6.63 billion. IDBI Bank Ltd is the lead bank with other — Oriental Bank of Commerce, Punjab and Sind Bank, Exim Bank, PTC Financial Services and Everest Bank — members of the consortium. The 120 MW Likhu IV Hydro Electric Project is being developed by a SPV of Bhilwara Energy Ltd. The SPV is registered in Nepal and is a joint venture Company with Triveni Energy. “It would be the Group’s first overseas venture in Hydro Electric space,” BEL managing director Riju Jhunjhunwala said, adding that the company is proud to be first amongst Indian power developers to have taken up steps for development of Hydro Power potential of Nepal and also to export power from Nepal to India. It would not only help Nepal in harnessing of its hydro power potential and address its own growing needs of power but also help India in terms of supply of much needed power,” he said, adding that the SPV Company has already acquired over 90 percent of the required project land and started preconstruction activities. The LNJ Bhilwara Group , having financial capacity as well as technical expertise, is fully geared up to take up the project construction in full swing very soon and quite hopeful to commission it within given time schedule. The total capital out lay for the project is IRs 10.2 billion,” BEL CEO O P Ajmera, said, adding that IDBI Bank was mandated for syndication of loans. According to Nepal-India Cooperation on Hydropower (NICOH), current estimates are that Nepal has an approximately 42,000 MW of economically feasible hydropower potential. However, the present situation is that Nepal has developed only approximately 600 MW of hydropower. “A bulk of the economically feasible generation has not been realised yet,” Jhunjhunwala added. LNJ Bhilwara Group is among the pioneers of hydro power generation in India and had established the first hydro-power project financed by World Bank’s lending arm International Finance Corporation (IFC). Between its two Group companies in Malana Power Company Ltd and AD Hydro Power Ltd, it has an installed capacity of about 300 MW. “While work on another 800-MW hydro power project in Tawang of Arunachal Pradesh is already underway,” said the Group that is also venturing into wind power generation with modest beginning to set up 50 MW wind farm in Satara district of Maharastra state. “It is likely to be commissioned by March.” The company currently has two Hydro Power Projects in operation; one 86 MW and another 192 MW. BEL holds 51 per cent equity stake in Malana Power Company Ltd (Kullu), a joint venture with S N Power, Norway. It holds 44.9 per cent holding of AD Hydro Power Ltd (Manali) indirectly, since MPCL holds a 88 per cent stake in AD Hydro Power Ltd and remaining 12 per cent equity is with IFC, Washington. Source: THT

IPO lines up. Seven BFIs gear up for IPOs

The domestic capital market will be witnessing another round of initial public offering (IPO)s, with seven banks and financial institutions (BFIs) gearing up for the fund raising. However, amid bearish stock market and investors’ confidence reaching lower ebb, success of the IPOs is uncertain. This is the first time in seven months that BFIs are issuing IPOs after Bhargav Bikas Bank. Bagmati Development Bank and Manjushree Financial Institution recently received approval from the Securities Board of Nepal (Sebon) for IPO issuance. Bagmati has been approved to issue ordinary shares worth Rs 40 million, while Manjushree will issue those worth Rs 23.5 million. Other five— Janata Bank Nepal, Kanchan Development Bank, Nepal Consumer Development Bank, Summit Micro Finance Development Bank and Lotus Investment Finance— are awaiting the regulator’s approval. Sebon officials said they will be granted the approval within the next month. These BFIs, excluding Lotus, will be raising Rs 731.30 million. Given the huge amount, stock market experts are doubtful whether the public will subscribe all the shares. Their scepticism is valid as even established banks failed to get all of their rights shares subscribed in the recent past. Analyst Rabindra Bhattarai said a majority of financial institutions will struggle to get all of their shares subscribed and it is most likely that a large portion of their shares will be kept by underwriters. An underwriter is a company or other entity that guarantees the purchase of a full issue of stocks. It buys shares from the issuer and sells them to investors via its distribution network. “Slowdown in secondary market affects the primary,” said Bhattarai “Investors confidence is very low at the moment.” Similar is the view of stockbroker Nanda Kishore Mundara. Public may subscribe commercial banks’ shares, but development banks and finance companies will struggle, he said. Public confidence in development banks and finance companies has dropped significantly after some of them landed in trouble a few months ago. However, Janata Bank CEO Bajay Pant is confident about the full subscription of the shares. “Commercial banks are still the first choice of investors, as it is the most transparent industry with good corporate governance,” he said. “Also, their share prices have rarely gone below the face value.” Upcoming IPOs BFIs Value Bagmati Development Bank Rs 23.50 million Manjushree Financial Institution Rs 40 million Janata Bank Nepal Rs 600 million Nepal Consumer Development Bank Rs 60 million Summit Micro Finance Development Bank Rs 7.50 million Kanchan Development Bank Rs 300,000 Lotus Investment Finance — NA Total Rs 731.30 million Source: Kantipur

Revenue of life insurers goes up 25%

Life insurance companies have reported over 25 percent growth in business in the first quarter of the current fiscal year as number of agents selling their policies and awareness among people about the importance of life insurance coverage grew throughout the country, mainly rural areas. In the first quarter to mid-October 2011, nine life insurance companies generated revenue of Rs 2.67 billion by either selling new policies or renewing old ones, according to latest statistics provided by the Insurance Board (IB), the insurance sector regulator. This is an increment of 25.6 percent over last fiscal year´s Rs 10.44 billion earned by these companies. “The earnings of life insurers grew largely because life insurance companies added more agents to their companies to expand businesses,” Rameshwor Shrestha, chief finance officer of Nepal Life Insurance Company, the country´s largest life insurance company in terms of premium collection, told Republica. His company, which generated revenue of Rs 637.43 million in the first quarter, for instance, added around 4,000 agents to the company this fiscal year alone. “Most of these agents are working from rural areas from where we are getting largest chunk of customers,” Shrestha said, informing the company generates almost 50 percent of business from rural areas. Arjun Khadka, assistant manager of National Life Insurance, the country´s third largest life insurance company in terms of premium collection, had earlier told Republica that rural areas in districts like Lamjung, Gorkha, Makwanpur, Jumla and Okhaldhunga have started generating “good business” for insurance companies, as these places consist of families with members employed abroad. “These families, which have significant chunk of disposable income, have seen or heard of other policyholders getting bonuses at regular intervals and huge chunk of money after the policy matures,” he said, citing these attractions as one of the biggest pulling factors. The data provided by the IB shows that indemnity policies are still the most favored insurance policy among policyholders. In the first quarter this fiscal year, insurance companies generated income of Rs 1.28 billion by selling new or renewing old indemnity policies. Of the companies that sold these policies, Nepal Life Insurance topped the list generating a premium of Rs 378.85 million in the first quarter while the state-owned Rastriya Beema Sansthan became second largest seller of these policies accumulating income of Rs 190 million. Likewise, National Life Insurance became the third largest seller of these policies collecting a premium of Rs 187.77 million in the first quarter. Despite growing awareness about insurance products, less than 1.6 million people have been insured in the country so far, which is around six percent of the country´s total population of 26.62 million. Top 5 life insurers in terms of premium collection in Q1 1. Nepal Life Insurance - Rs 637.43 million 2. Life Insurance Corporation (Nepal) - Rs 499.62 million 3. National Life Insurance - Rs 428.61 million 4. MetLife Alico - Rs 331.59 million 5. Beema Sansthan - Rs 300 million Source: Republica