GuarantCo provides $28.2m guarantee for Essel Clean Solu
December 2014

 

GuarantCo has provided a NPR 2,785m ($28.2m equivalent) guarantee for Essel Clean Solu Hydropower Private Limited, (‘ECS’), to support the financing of the Lower Solu project in the Solukhumbu district in Nepal. The project comprises an 82 MW run-of-river hydroelectric power plant that will provide electricity to an estimated 3-4 million people and will help to alleviate the current power shortages in the country. It is the largest private sector energy project in Nepal, the first Independent Power Producer in the country financed by both international and domestic financiers, and the first project financing involving an independent financial guarantor. Construction works at the project site are expected to start in March 2015, and the project is expected to be operational in 2019.


With one of the largest untapped hydropower resources in the world (estimated at >80,000 MW), Nepal has the means to become a significant exporter of electricity, but currently imports power and has one of the world’s lowest per capita electricity generation and consumption rates. The development of Nepal’s hydropower sector has been held back by, among other factors, a lack of financing. ECS’s success in tying up financing, particularly from local banks with GuarantCo’s guarantee, is expected to pave the way for others to follow.


ECS is sponsored by a consortium of Nepalese and Indian investors, led by Essel Infraprojects Ltd, India and Clean Developers Pvt Ltd, Nepal, who were awarded the right to develop the Lower Solu project in a competitive bidding process. Due to the favourable geographical conditions of the project location, the project is able to operate without the need for a large dam or long tunnel, resulting in a relatively small environmental footprint. The project is forecast to create over 1,000 jobs during construction and operations and will result in significant development of the project area. A skills training program will be undertaken to maximise local employment.


The debt financing to ECS is being provided by a consortium of international and Nepalese lenders, led by Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden (FMO). The consortium includes Prime Commercial Bank Ltd (as lead bank for the local debt tranche), DEG – Deutsche Investitions- und Entwicklungsgesellschaft mbH, OPEC Fund for International Development, Belgian Investment Company for Developing Countries SA/NV, Triodos Groenfonds N.V., Nepal SBI Bank Ltd, Jalvidhyut Lagani Tatha Bikas Company Ltd, Prabhu Bank Limited and Siddhartha Bank Ltd. 90% of the debt being provided by the Nepalese banks benefits from a credit guarantee from GuarantCo Ltd.


Chetan Sharma (President, Finance & Strategy of Essel Infraprojects Ltd) said:  ‘We are pleased to have our first infrastructure project in Nepal, our closest neighbouring country. The project finance structure is very unique, where for the first time international lenders have joined hands with Nepalese Banks. We look forward for further investments in Nepal.’


Ashish Garg (Executive Director of Clean Developer P Ltd) said: ’This financing is unprecedented and shall benchmark the next era of private sector led hydropower development in Nepal. With majority Nepalese equity, energy for domestic consumption and involvement of such a large team of foreign investors, it is historic for Nepal.’


 Andrew Bainbridge, Chairman of GuarantCo said “GuarantCo has partnered with local Nepalese banks to deliver a Nepalese Rupee debt solution that matches the currency profile of ECS’s revenues, thus contributing to the overall financing requirement of the project and reducing risks stemming from currency devaluation. Furthermore, by partnering with local institutions, GuarantCo builds greater capacity in local markets and helps countries transition away from undue reliance on foreign currency finance and development institutions. We are excited to have our first project in Nepal, and look forward to supporting further infrastructure development in the country.”

 

INFORMATION ON LEAD LOCAL DEBT ARRANGERS AND GUARANTCO:
 
ABOUT GUARANTCO
GuarantCo is an infrastructure fund, established by the governments of UK, Netherlands, Switzerland and Sweden through the Private Infrastructure Development Group to encourage infrastructure development in low and lower middle income countries. GuarantCo provides guarantees to enable infrastructure projects to access long tenor financing. GuarantCo’s guarantees are denominated in local currencies, except in fragile/ post conflict states, where it also provides hard currency guarantees. GuarantCo is the largest local currency infrastructure guarantor in the world and has expanded rapidly since receiving ratings of AA- Fitch and A1 Moody’s in 2014.

 

ABOUT PRIME COMMERCIAL BANK LIMITED (PCBL)
PCBL is ‘A’ category licensed commercial bank in Nepal. It has established itself as an emerging player in financial sector of Nepal and ranks among leading banks. Established by prominent business personnel and professionals from diversified areas, it has the prime objective of providing 'Banking Services to Everyone' and to play a pivotal role in new industries and projects in the country where still large number of population are deprived of Banking Services. Apart from other development projects, PCBL has financed 10 hydropower projects in Nepal, including Lower Solu Hydropower Project, with commitments of USD 38.8 million. The Bank’s shares are listed and actively traded on the Nepal Stock Exchange (NEPSE).

 

INFORMATION ON EQUITY SPONSORS
ABOUT ESSEL INFRAPROJECTS Essel Infraprojects Limited is a subsidiary of Essel Group, one of India’s biggest business houses with investments in infrastructure & integrated utilities, media, publishing, packaging, technology enabled services, wellness services and education. Essel Group has been in existence since 1926 through its first venture in commodity trading and exports. Over the years, the group has metamorphosed into a conglomerate and several of its companies are listed. The group operates across the globe with a total employee strength of 12,000 people.


ABOUT CLEAN DEVELOPERS Clean Developers Private Limited is a Nepalese infrastructure company with a primary objective of carrying out various infrastructure development activities. It develops urban infrastructure projects in both residential and commercial segments. With diverse investments, its promoters have interests in cement, foods, packaging, banking, trading and more.

 

OTHER FINANCIAL INSTITUTIONS PARTICIPATING IN THE DEBT FINANCING:
Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden (FMO)     •      Belgian Investment Company for Developing Countries SA/NV   •   DEG – Deutsche Investitions- und Entwicklungsgesellschaft mbH • Jalvidhyut Lagani Tatha Bikas Company Limited      •      Nepal SBI Bank Ltd.     •     The OPEC Fund for International Development (OFID) • Prabhu Bank Limited   •   Siddhartha Bank Limited    •     Triodos Groenfonds N.V.

 

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