Tunnel highway builder focuses on foreigners to finance project

Lal KC, vice chairman of NPBCL, said in Kathmandu on 19 May that they decided to approach multinational investors to finance the project as their effort of mobilizing internal resources to develop the project turned futile.

He further added that NPBCL has submitted a new plan of collecting NPR 26.25bn, or 75 per cent of the total project cost of NPR 35bn, from foreign investors to the Ministry of Physical Infrastructure and Transport (MoPIT).

As per plan, the amount should be injected into the project by the end of December 2016 - the targeted completion date of the 58km long highway.

To meet the annual target for the project, foreign investors should pour in about NPR 7bn annually, which is about 36 per cent of the total FDI commitments made by the foreign investors in the last fiscal year.

Nepal received foreign direct investment commitment worth Rs 19 billion in the last fiscal year.

NPBCL had made a presentation on its fund-raising plan at the MoPIT in mid-May 2014. It, however, has not presented complete financial closure as mentioned in the license document awarded to the NPBCL last year.

KC said they would allocate 5 per cent of shares to Nepali banks and financial institutions.

As per the new plan, NPBCL also proposed to reduce equity contribution from promoters and general public to 20 percent. In the previous plan, equity contribution from promoters and general public had been fixed at 50 percent. This means equity investors, including promoters, will have to invest Rs 7 billion.

Earlier, NPBCL had floated a charismatic plan of developing the project through local investment and by using skills of Nepali engineers and technicians. But private sector cold-shouldered NPBCL´s proposal to make investment in the project. It has so far collected about Rs 300 million in cash and Rs 7 billion in commitments.

However, KC argued that they could not raise 50 per cent equity investments due to the existing legal hurdles.

"Our estimation was a valid one; there is sufficient fund in the market. But people were not much aware of our new product," KC said, explaining the company´s inability to mobilise resources for the project.