Large Hydro

NMB Bank, with its vision to establish itself as a leader in banking sector by providing a range of financial services, has always prioritized financing in sectors/ projects of national interest. Pursuing its vision and giving high priority to the development of hydropower sector, NMB bank has established separate LARGE HYDRO department only to cater to the financing requirements of Hydro Power Projects.
 
Nepal, known for its largest inland water resources with high runoff and steep terrain, offers high potential for hydropower development. Efforts from the Government and private sectors for the development of the sector have witnessed dramatic change in last one decade. The prospects of development and its financing pattern have also significantly changed with the increasing involvement independent power producer.  Such involvement of independent power producers and being capital intensive in nature, hydropower power projects requires specialized financial partner who not only provides financial support but also provides technical and other expertise during construction as well as in post construction phase.
 
NMB Bank, a bank with large capital base, has capability to finance hydropower projects either solely or under consortium arrangement as a lead debt arranger. In order to provide technical support from the inception of hydro projects and at different level of construction up to the finalization, bank is equipped with specialized Energy Team comprising of technical manpower. The team supports projects in their due diligence, finalization of contract papers, construction monitoring and assessment of overall projects. In a nutshell, NMB Bank provides full-fledged hydro power financing services.
 
Due the fact, bank is currently managing number of projects, most of them under consortium financing arrangement as a lead debt arranger. Capitalizing over its current experience and with the support of specialized technical team, bank sets to become leading hydropower financing partner in Nepal. 

NMB Bank Ltd with its focus in Energy Sector Development is one of the pioneer banks promoting renewable energy in the country, catering best financial services to meet capital expenditure and other financial requirements of the customer. Currently the Bank has financed 32 different hydropower projects, which are in various stages and is hence contributing to the national agenda of “Ujyalo Nepal” (Lightened Nepal).The Bank has strategic intent to increase its exposure in Energy sector in future as well primarily targeting to develop hydropower projects with an installed capacity more than 10 MW.
 
In order to facilitate the prospective customers we have drafted basic checklist of documents that the developer/customer needs to submit at the Bank (Energy Sector Department, Head Office, Babarmahal, Kathmandu). The checklist is associated with the developers’ requests at various stages of the Project developments. The standard lists may not be exhaustive and hence be project specific. This shall be well notified by the Bank during the course of the financing procedure.

 
  1. Requirement One (Letter of Intent – LOI)
LOI is requested by the developer/customer as per the requirement of Nepal Electricity Authority (NEA) for the initial processing of; Connection Agreement and/or Power Purchase Agreement (PPA) and/or Generation License. The general validity of the LOI issued by the Bank is 1 year (from the date of issue) and the Bank shall charge standard fees (related to the size of the Project) which shall be duly notified.
 
The decision to finance the project shall be aligned with; satisfactory project review (satisfactory outcome of Due Diligence Report), adherence to the NRB’s policies and NMB Bank’s internal policies and approval from the Bank’s competent authority.
 
  1. Checklist:
SN Description of Document
1 LOI request letter (mentioning the purpose)
2 Maintenance of current account (non interest bearing) at NMB under the company’s name for settlement of LOI fee
3 Salient feature of the project/Executive Summary of the feasibility study
4 List/Name of the project promoters/Share Lagat
 
 
 
  1. Requirement Two (Performance/Bank Guarantee – BG)
BG is requested by the developer/customer as per the requirement of NEA for the execution of PPA. NEA may claim the guarantee as per the clauses in PPA which generally cover: (NEA may include additional clauses as well).
  1. Failing to meet at least 50% progress status of the project at the Required Commercial Operation Date (RCOD) as mutually agreed by the NEA and the developer.
  2. Failing to secur the required debt arrangement (financial closure) for the project within the agreed timeline defined in the PPA.
  3. Failing to keep the project developing company functioning in order to develop the project.
 
  1. Checklist:
SN Description of Document
1 Bank Guarantee request application (Bank’s standard form)
2 Project Company’s Board Minutes (with decision authorizing the company representative to execute relevant documents of Bank)
3 Feasibility Study Report
4 List/Name of the project promoters& Board of Directors (BoDs)/Share Lagat
5 Company Registration Certificate
6 PAN
7 MOA and AOA
8 Citizenship certificates of BODs, CV, KYC with net worth & brief profile of them along with 3 generation details; Board Structure
9 Survey License
10 Connection Agreement
11 Draft PPA/Energy Table
12 Brief Status of project development till date (equity injected, land acquired, access road, infrastructural development and others)
13 Total Project Cost/Cost breakdown details
14 Financial Projection of the Project
15 Guarantee format provided by NEA
16 Letter issued by NEA for submission of Bank Guarantee
 
  1. Requirement Three (Processing and Finalization of Project Loan)
Upon receiving the mandate from the developer/customer, the Bank shall proceed to arrange the required debt finance for the project as the Lead Arranger or Sole Financer. The procedure requires the Bank to thoroughly analyze the following documents:
  1. Checklist:
SN Description of Document
1 Loan request letter (with proposed Debt/Equity Mix)
2 AGM minutes for the debt facilitation (including OD loan) through consortium led by NMB Bank and board minutes with decision of authorized person to sign bank documents
3 Feasibility Study Report (Entire Volume including the annexes with drawings) inclusive of Detailed Bill of Quantity (BoQ), unit rate estimation, project cost breakdown and investigation/ test reports (if any)
4 List/Name of the project promoters& Board of Directors (BoDs)/Share Lagat
5 Company Registration Certificate
6 PAN
7 MOA and AOA
8 Citizenship certificates of BODs, CV (with details on any past experience on hydropower project development), KYC with net worth & brief profile of them along with 3 generation details; Multiple Borrowing Declaration, Board Structure
9 Survey License
10 Connection Agreement
11 PPA
12 Brief Status of project development till date (equity injected, land acquired, access road, infrastructural development and others)
13 EIA/IEE (as applicable) – Environment study reports
14 Financial Projection of the Project
15 Tax Clearance Certificate-latest
16 Audited Financials of FY- latest (last 2 years if applicable)
17 Generation License
18 Transmission survey license
19 Management Structure of the Project Company
20 Details on past experience (hydropower project development)
21 Equity Injection Plan and brief information on the source
22 Document detailing construction methodology & planned contractual arrangement
23 Project Implementation/ Construction Plan and Schedule in line with commitments in the PPA
24 Detail Project/Design Report and/or Due Diligence Report (as and when applicable)
25 Technical (Design/Supervision) Consultant’s profile
26 Contract Documents (HM/EM/civil/TL/Project supervision) – as and when applicable
B Documents of major shareholding company (stake more than 5%)
1 Company Registration Certificate
2 PAN Certificate
3 MOA, AOA
4 Share Lagat and Sanchalaklagat with brief detail on major promoters
5 Audited Financials of FY- (last 2 years)
6 Tax Clearance Certificate-latest
7 AGM minutes or Special Resolution Minutes (bisesh sadharan sabha) to provide corporate guarantee for the proposed loan from consortium led by NMB Bank
 
 
*NMB Bank shall proceed with analysis of the project with deficit documents. The proposed developer shall arrange to submit entire set of above mentioned documents before the final approval of the debt.