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Tuesday, June 15, 2021

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A comprehensive analysis on Chilime Hydropower Company

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Chilime Hydropower Company (CHCL), established in 1995 AD today owns and operates a 22.1 MW power plant. The power plant located in Rasuwa district of Nepal started to generate electricity in 2003 AD, and has been selling power to Nepal Electricity Authority (NEA). As per the license agreement with the Ministry of Energy, the ownership of the plant with the company will be until July 2047 AD. The plant will be transferred to the government after expiry of this license agreement. 

CHCL Investment and Subsidiaries 

Chilime HydroPower has invested in 4 other projects other than its main project of 22.1 MW. The subsidiaries are Sanjen Jalavidhyut Company Limited, Madhya Bhotekoshi Jalavidhyut Company Limited, Rasuwagadhi Hydropower Company Limited, Chilime Engineering and Services Co. Ltd. The details of subsidiary companies are given in Table 1. It is seen that the largest company as per capacity (in MW) is Rasugadhi, a Run-of-River (ROR) project, among the subsidiary power generating companies. The project closest to completion is Sanjen (Upper), a Peaking Run-of-River (PROV) project where 88% of the project is completed as per the information provided by the parent company. The completion status of Madhya Bhotekoshi, another ROR project, is only 60% which has been delayed due to heavy floods in July 2020 and the current pandemic situation. It is observed that Chilime has invested more than 2 Arabs Nepalese Rupees, in Madhya Bhotekoshi and Rasuwagadhi Projects. CHCL had equity investment of 1.44 Arabs in the Sanjen project. All of these projects have not been commissioned yet and are not generating revenue, therefore there is Net loss in all the companies. The service subsidiary of Chilime, which is Chilime Engineering and Services Co. Ltd. has provided the consultancy services for all these companies as per the article published in sharesansar.com.   

Table 1 – CHCL subsidiaries details

NameCapacity (MW)Average Annual Energy (Gwh)Project StatusCHCL Investment (in Arab)Net Profit / Loss (Q3, 2077-78 in crores)
Sanjen (Upper)14.882.488%1.44-2.12
Sanjen42.5241.978%
Madhya Bhotekoshi102542.260%2.22-2.24
Rasuwagadhi111613.87578%2.24

The holdings of CHCL in these 4 companies are given on the bar graph in Fig. 1.  It is seen that CHCL has 100% holdings in one of its subsidiary Chilime Engineering and Services Co. Ltd. It has less than 40% holdings in other three subsidiaries. 

Chart

Board of Directors

The table 2 lists the current board of directors of the company. Hitendra Dev Shakya who is also the current Managing Director of NEA, is the chairperson of CHCL. In total there are 11 directors with 5 representatives from NEA, 4 from public shareholders and 2 independent directors. 

Table 2 : Board of Directors of CHCL

NamePositionRepresentative
Hitendra Dev ShakyaChairpersonNEA
Lekhnath KoiralaDirectorNEA
Harraj NeupaneDirectorNEA
Madhav Prasad KoiralaDirectorNEA
Manoj SilwalDirectorNEA
Tulsi Ram DhakalDirectorPublic Shareholder
Ram Prasad RimalDirectorPublic Shareholder
Bhim Prasad TimilsinaDirectorPublic Shareholder
Shanti Laxmi ShakyaDirectorPublic Shareholder
Suman Prasad SharmaDirectorIndependent
Dr. Jagat Kumar ShresthaDirectorIndependent

Financial Performance 

The financial performance of CHCL for the past 6 years is given in Fig. 2. The company has increased its investment over these years. The reserves and surplus is observed to be decreasing after 2018. CHCL has been operating from the profit of the main 22.1 MW company. It is expected that after the commissioning of its subsidiary companies, the company can increase the funds in its reserve account.  

Chart

Fig 3. presents the key performance metrics for the company. It is observed that Earnings Per Share(EPS) has decreased by almost ⅓ in the past 6 years and stands at 10.94 as per third quarter results of the financial year 2077-78. The profit margin is observed to be reducing every year. The Return on Equity stands at only 5.18% as per Q3, 2077-78 which was 12.19% in the financial year 2072-73.

Chart

The company has a history of satisfactory dividend payments over the years. The table 3 summarizes the dividend details and EPS since the date of the commissioning of its main 22.1 MW plant. It is observed that the Earnings per share has been decreasing steeply over the recent years due to shrinkage in profit and increase in paid up capital of the company. Since the project completed 15 years of operation in FY 2075, it has to pay 8% higher royalty payment and increased tax liability. This has caused higher stress in the profit margin of the company.    

Table 3 – Dividend History of CHCL

Financial Year (B.S.)Earnings per share (NPR)Cash Dividend (NPR)Bonus Share
2060-6155.6310
2061-6278.320
2062-6369.5935
2063-6491.4930
2064-6593.1235
2065-66100.7945
2066-67106.5660
2067-68102.123040
2068-6970.342030
2069-7055.231030
2070-7141.361520
2071-7231.311215
2072-7329.851010
2073-7427.181015
2074-7522.92520
2075-7614.93520
2076-7713.061010

To conclude, CHCL has been the leading hydropower company in Nepal. In recent years, the profit margin has been reduced after an increase in royalty payment and tax liability in the main project. However, after commissioning all its subsidiary companies, the total electricity generation will be 292.5 MW that should be improving the profit of the company. Perhaps, the major consideration should also be to the hydropower type being run of river projects, which efficiency might be affected in different seasons based on flow of rivers. 

References :

  1. http://www.chilime.com.np/
  2. https://www.sjcl.com.np/
  3. http://mbjcl.com.np/
  4. http://www.rghpcl.com.np/
  5. https://chesco.com.np/
  6. https://www.sharesansar.com/newsdetail/chilime-hydro-company-analysis-do-not-post-yet-2021-05-23
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