FINANCIAL PERFORMANCE EVALUATION OF HYDRO

POWER COMPANIES

(Comparative Study on Butwal Power Company and Himal Power Company)

Submitted By:

Saraswati Neupane
St. Xavier’s College
TU Regd. No:-7-3-282-638-2007
Roll No: 2820031

A thesis submitted to:

Office of the Dean
Faculty of Management
Tribhuvan University

In partial fulfillment of the requirement for the degree of

Master of Business Studies (M.B.S)
Kathmandu
June, 2011

1
 DECLARATION

I here by declare that the work reported in this thesis entitled FINANCIAL PERFORMANCE

EVALUATION OF HYDRO POWER COMPANIES (Comparative Study on Butwal Power

Company and Himal Power Company) submitted to St. Xavier’s college, Faculty of Management,

Tribhuvan University, is my original work done in the form of partial fulfillment of the

requirement for the Master’s Degree in Business Study (M.B.S.) under the supervision of Prof.

Shankar Thapa, of St. Xavier’s College, Maitighar, Kathmandu.

…………………….

Saraswati Neupane
Researcher

St. Xavier‟s college

Roll NO:-2820031

2
 ACKNOWLEDGEMENT

This thesis entitled FINANCIAL PERFORMANCE EVALUATION OF HYDRO POWER

COMPANIES (Comparative Study on Butwal Power Company and Himal Power Company) has
been prepared for the partial fulfillment of the requirement of Master’s Degree of Business
Studies (MBS) under the Faculty of Management, Tribhuvan University, is based on research
models involving the use of financial performance evaluation of private public sectors hydro
power company.

First of all, I would like to extend my sincere regard and profound gratefulness to work under the
admirable supervision of Mr. Shankar Thapa, Professor of St. Xavier’s college. He always
motivated me and I had his exclusive consideration and guidance all the time.

I would like to thank Mr. Bishnu Prasad Shrestha, Mr Ujjwal Sundas of Butwal Power Company
and Mr. Laxmi Aryal of Himal Power Company for providing me useful data.

Finally, I would like to express my genuine appreciation to the staffs of library of St. Xavier’s
college and Tribhuvan University.

At last but not least, my paramount dedication is to my friends and my family members who have
been uninterrupted source during this work.

Researcher

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 CONTENTS

Recommendation

Viva-voce sheet

Declaration

Acknowledgement

Contents

List of Table

List of Figure

List of Abbreviations

Chapter I

Introduction

1.1 Background of the Study 1

1.1.1 The Potentiality of Nepalese Hydropower Sector 3

1.1.2 History of Electricity production of Nepal 5

1.1.3 Power Purchase Agreement 7

1.1.4 Private Public Participation of Hydropower Development in Nepal 8

1.1.5 Introduction of Sample Companies 11

1.2 Focus of the Study 17

1.3 Statement of the Problem 17

1.4 Objectives of the Study 18

1.5 Significance of the Study 19

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1.6 Limitation of the Study 19

1.7 Organization of the Study 20

Chapter II

Review of Literature

2.1 Conceptual Review 22

2.1.1 Review of Related Acts/Plan 22

2.2 Review of Related Studies 30

2.3 Review of Related Thesis 39

2.4 Research Gap 46

Chapter III

Research Methodology

3.1 Introduction 47

3. 2 Research Design 47

3.3 Population and Sample 47

3.4 Sources of Data 48
3.5 Data Collection Procedure/Techniques 48
3.6 Data Processing 49
3.7 Data Analysis Tools 49
3.7.1 Tools for Secondary Data Analysis 49
3.8 Research Variables 56

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 Chapter IV
Presentation and Analysis of Data
4.1 Presentation and Analysis of Data from Secondary Sources 57

4.1.1 Liquidity Ratio 57

4.1.2 Activity/Efficiency/Assets Management 62

4.1.3 Profitability Ratio 71

4.1.4 Leverage/Capital Structure Ratio 81

4.1.5 Invisibility Ratio 83

4.1.6 Correlation Analysis 89

4.1.7 Least Square Linear Growth Trend Analysis 92

Chapter V

Summary, Conclusion and Recommendation

5.1 Summary 97

5.2 Conclusion 102

5.3 Recommendation 105

Bibliography

Appendix

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 LIST OF TABLE

Table No. Name of the Table Page No.

Table 4.1 Calculation of Current Ratio 58

Table 4.2 Calculation of Quick Ratio 60

Table 4.3 Calculation of Fixed Assets Turnover Ratio 62

Table 4.4 Calculation of Total Assets Turnover Ratio 64

Table 4.5 Calculation of Debtors Turnover Ratio 66

Table 4.6 Calculation of Average Collection Period 68

Table 4.7 Calculation of Capital Employed Turnover Ratio 70

Table 4.8 Calculation of Net Profit Margin 72

Table 4.9 Calculation of Operating Profit Ratio 74

Table 4.10 Calculation of Operating Expenses Ratio 76

Table 4.11 Calculation of Return on Total Assets 78

Table 4.12 Calculation of Return on Shareholder's Equity 80

Table 4.13 Calculation of Leverage Ratio 81

Table 4.14 Calculation of Earnings Per share 84

Table 4.15 Calculation of Dividend Per share 86

Table 4.16 Calculation of Dividend Payout Ratio 88

Table 4.17 Performance Evaluation Through Ratio Analysis 90

Table 4.18 ROE as a Measure Performance 91

Table 4.19 Total Sales are used in Proper Way to Maximize the Profit 92

Table 4.20 Comparison of the Present Return and Expectation of Investors 93

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Table 4.21 Role of Operating Expenses in the Performance of the Companies 94

Table 4.22 Comparison of Financial Performance Between Private and Public

Companies 96

Table 5.1 SWOT Analysis 104

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 LIST OF FIGURE

Figure No. Name of the Figure Page

No.

Figure 1.1 Share Status of BPC 14

Figure 1.2 Share Status of HPL 16

Figure 4.1 Graphical Presentation of Current Ratios 59

Figue 4.2 Graphical Presentation of Quick Ratios 60

Figure 4.3 Graphical Presentation of Fixed Assets Turnover Ratio 63

Figure 4.4 Graphical Presentation of Total Assets Turnover Ratio 65

Figure 4.5 Graphical Presentation of Debtors Turnover Ratio 67

Figure 4.6 Graphical Presentation of Average Collection Period 69

Figure 4.7 Graphical Presentation of Capital Employed Turnover Ratio 71

Figure 4.8 Graphical Presentation of Net Profit Margin Ratio 73

Figure 4.9 Graphical Presentation of Operating Profit Ratio 75

Figure 4.10 Graphical Presentation of Operating Expenses Ratio 77

Figure 4.11 Graphical Presentation of Return on Total Assets 79

Figure 4.12 Graphical Presentation of Return on Shareholder's Equity 81

Figure 4.13 Graphical Presentation of Leverage Ratio 83

Figure 4.14 Graphical Presentation of Earning Per Share 85

Figure 4.15 Graphical Presentation of Dividend Per Share 87

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Figure 4.16 Graphical Presentation of Dividend Payout Ratio 89

Figure 4.17 Graphical Presentation of Correlation Between Total Sales and Total
Assets

Figure 4.18 Graphical Presentation of Correlation Between Total Sales and Net Profit
After Tax 91

Figure 4.19 Graphical Presentation of Correlation Between Total Assets and Net Profit
After Tax 92

Figure 4.20 Graphical Presentation of Least Square Trend Analysis of Total Sales
Growth 93

Figure 4.21 Graphical Presentation of Least Square Trend Analysis of Net Profit After
Tax Growth 94

Figure 4.22 Graphical Presentation of Least Square Trend Analysis of EPS Growth 96

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 CHAPTER I

INTRODUCTION

1.1. Background of the Study

Nepal is rich in natural endowments like hydro potential, natural beauties, diverse
flora, fauna and many different tribes and ethnic group. Hydropower generation is
one of the four main economic growth sectors. Hydropower is a vital input needed to
fuel the engine of economic growth and to fulfill the basic needs of the entire
population of a country. Nepal is well endowed with enormous hydro-power
resources. In fact, the perennial nature of Nepali rivers and the steep gradient of the
country's topography provide ideal conditions for the development of some of the
world's largest hydroelectric projects in Nepal. Current estimates are that Nepal has
approximately 83,000 MW of economically feasible hydropower potential. However,
the present situation is that Nepal has generated only approximately 600 MW of
hydropower. Although bestowed with tremendous hydropower resources, only about
40% of Nepal's population has access to electricity. Most of the power plants in Nepal
are run-of-river type with energy available in excess of the in-country demand during
the monsoon season and deficit during the dry season.

Hydropower projects in Nepal have been deemed to be expensive primarily because

of the fact that cost of access roads and power evacuation transmission lines are
added on to the hydropower projects cost. As we all know, most of the better
hydropower projects sites are in remote mountainous locations requiring construction
of access roads prior to projects construction. This along with the high voltage power
evacuation system renders power from these projects comparatively expensive. This
can lead to hydropower projects losing their competitive advantage with respect to
other sources in the energy market. It is in this context that government of Nepal,
donor agencies and multilateral lending agencies should change their focus towards

11
development of trunk highways in the major river valleys of Nepal. Similarly, high
voltage trunk transmission lines should also be developed in these river valleys. This
will lead to opening up these river valleys for private power producer companies to
develop power projects around these rivers and their tributaries resulting in less
expensive power and adding to the competitive advantage that this clean from of
energy has. The hydropower system in Nepal is dominated by run-of –river projects.
There is only one seasonal storage project in the system. There is shortage of power
during winter and spill during wet season. The load factor is quite low as the majority
of the consumption is dominated by household use. This imbalance has clearly shown
the need for storage projects, and hence, cooperation between the two neighbouring
countries is essential for the best use of the hydro resource for mutual benefit. The
system loss is one of the major issues to be addressed to improve the power system
which accounts to be 25% including technical and non-technical losses like pilferage.
An ideal way to develop the medium to larger scale projects in Nepal would be
through private- public partnership. Since this scale of projects involves larger risks
with more expensive risk- mitigating measure, sharing of risks, capital investment
and benefits would be the preferred way to develop these projects.
The private sector is taking greater strides towards economic activities such as power
project development and believes that it should have a greater role in the decision-
making process of the government when it comes to national economic issues and
also in bilateral and multilateral issues which have a direct impact on this industry.
Nepal's electricity generation is dominated by hydropower, though in the entire
scenario of energy use of the country, the electricity is a tiny fraction, only 1% energy
need is fulfilled by electricity. The bulk of the energy need is dominated by fuel wood
(68%), agricultural waste (15%), animal dung (8%) and imported fossil fuel (8%).
The other fact is that only about 40% of Nepal's population has access to electricity.
With this scenario and having immense potential of hydropower development, it is
important for Nepal to increase its energy dependency on electricity with hydropower
development. Not only this, the development of hydropower will help to achieve the
millennium development goals with protecting environment, increasing literacy,

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 improving health of children and women with better energy. Growing environmental
degradation adds a sense of urgency.
Source: www.ippan.org.np

1.1.1. The Potentiality of Nepalese Hydropower Sector

Nepal has tremendous potential for hydropower development. It is estimated that
Nepal has the capacity to generate 83,000 MW of electricity from hydropower of
which about 45,000 MW is considered to be economically feasible. At present, the
installed capacity of hydropower is about 600 MW, less than 2 percent of the total
economically feasible capacity. Taking advantage of government’s new policy of
welcoming private foreign investment, two joint-business companies involving
important foreign investors have been generating and selling hydro power on the
build-operate- transfer basis for some years now. Several private-public sectors
projects are under construction.
There are about six thousand big and small rivers in three major basins namely Koshi,
Gandaki and Karnali including some southern rivers, and two border rivers, Mechi
and Mahakali in Nepal. The basin wise potential for power generation is in the table
below:

Basin wise Hydropower potential

Table 1.1

River Basin Capacity on Capacity on Gross Economic

small river Major River Total potential
courses Courses (GW) (GW)
Sapta Koshi 3.6 18.75 22.35 10.86
Sapta Gandaki 2.7 17.95 20.65 5.27
Karnali and Mahakali 3.5 32.68 36.18 25.1
Southern Rivers 1.04 3.07 4.11 .88
Total 10.84 72.45 83.29 42.14

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There are many projects which have been identified for development. Some of those
identified promising projects for development are in the following table:

Identified potential Hydropower Projects

Table 1.2

S.N. Project Capacity (MW)

1 West Seti 750
2 Arun III 402
3 Budhi Gandaki 600
4 Kali Gandaki II 660
5 Lower Arun 308
6 Upper Arun 335
7 Karnali Chisapani 10800
8 Upper Karnali 300
9 Chamelia 30
10 Pancheswor 6480
11 Thulodhunga 25
12 Tamor/ Mewa 100
13 Dudh Koshi 300
14 Budhi Ganga 20
15 Rahughat Khola 27
16 Likhu 4 51
17 Kabeli A 30
18 Upper Marshyangdi A 121
19 Kulekhani III 45
20 Andhikhola (Storage) 180
21 Khimti II 27
22 Upper Modi A 42
23 Langtang Khola (Storage) 218
24 Madi Ishaneswor (Storage) 86

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25 Upper Seti (Storage) 122
26 Kankai (Storage) 60
27 Upper Tamakoshi 250
Source:www.ippan.org.np

On the other hand, there are excellent prospects for power exports of significant volume
of electricity from Nepal to India. The time is right to explore the possibilities and invest
in it. Moving in this direction would be in line with the increasing trade and economic
cooperation between Nepal and India. There will also be significant markets for domestic
consumption of electricity with economic growth and business and industrial expansion.

A large number of well studied projects of various scales and size are ready for
investment. The government of Nepal is ready to invite private- domestic and foreign to
invest in hydropower. The last decades saw important beginning of a real change. There
was proper legislation and policy framework, implementation of numbers of small
hydropower projects with private sector investment has contributed in the development of
hydropower in Nepal.

1.1.2 History of Electricity Production of Nepal

The history of electricity production in Nepal started in 1911 A.D by the ambitious Rana
Prime Minister Chandra Smasher Rana to light the Singh Durbar as a copy of European
Style. He made initiation to develop Pharping hydropower station with a running capacity
of 500 KW. The hydro electricity at the time was called Chandra Jyoti and it was used in
the Kathmandu valley only for the aristocrats. The first pioneering project of Pharping
was established and built in 1911 A.D whose capacity was 500 KW. Secondly,
Sundarijal power project was established in 1935 AD with the capacity of 1350 KW.
Until the time, several industries were established in Terai region of Nepal. The Morang
Hydropower Company was established in 1940 AD and then Birgung Electric Supply Co
was established to contribute for hydropower development in Nepal. By the end of
1997/98 hydro power generation reached 261.918 MW in the country. In order to meet

15
increasing demand of power, steps will be taken to consolidate and strengthen existing
generating facilities with a view to increase efficiency in production and distribution of
energy. Medium size hydro-power projects such as Khimti (60MW), Indrawati (5MW),
and Upper Bhotekoshi (36MW) have already been taken up by the private sector. Other
major projects on which preliminary studies have been undertaken which includes
(Chisapani) 10800 MW, Upper Arun 335 MW, PAncheshwor 6480 MW, Lower Arun
308 MW, and Upper Karnali 300 MW hydro electric projects. Another major project
West Seti Hydel project (750 MW), is being taken up by a private sector (SMEC West
Seti Hydroelectric Corporation). This project is developed as an export oriented project.

Nepal Electricity Authority (NEA)

Nepal Electricity Authority (NEA) was created on August 16, 1985 under the Electricity
Authority Act 1984, through the merger of the Department of Electricity of Ministry of
Water resources, Nepal Electricity Corporation and related development Boards. To
remedy the inherent weakness associated with these fragmented electricity organizations
with overlapping and duplication of works, mergers of these individual organizations
became necessary to achieve efficiency and reliable service.
It is the leading organization in power generation, transmission and distribution.
The primary objective of NEA is to generate transmit and distribute adequate, reliable
and affordable power by planning, constructing operating and maintaining all generation,
transmission and distribution facilities in Nepal’s power system both interconnected and
isolated.
In addition to achieving above objective, NEA has following major responsibilities:
 To recommend to Nepal Government, long term and short-term plans and
policies in the power sector;
 To recommended, determine and realize tariff structure for electricity
consumption with prior approval of Nepal Government;
 To arrange for training and study so as to produce skilled manpower in
generation, transmission, distribution and other Sectors.

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(Source: www.nea.org.np)
The Development of electricity in Nepal has been mainly based on the development
of hydropower. The development of infrastructure has been essentially carried out by
the government, but the contributed a lot and set qualitatively important footing in
this sector.

1.1.3 Power Purchase Agreements

A power purchase agreements (PPA) is a long term agreement to buy power from a
company that produce electricity. It is a contract between power producer and NEA
for buy & sale electricity in Nepal.

A power purchase agreement is also “behind” almost every power plant. A PPA is a
contract involving the generation and sales of electricity, which is normally
developed between the owner of a power plant generating the electricity and the
buyer of the electricity. PPA can be quite lengthy agreements that may exceed 100
pages in length and take several months to even years to finalize (Renewable Energy
Technologies). The basic information contained in a Power Purchase Agreement
includes the following items:

i. Definitions
ii. Purchase and sale of contracted capacity and energy( such as steam, hot
water and/ or chilled water in the case of cogeneration and tri generation
plans)
iii. Operation of the power plant
iv. Financing of the power plant
v. Guarantees of performance
vi. Penalties
vii. Payments
viii. Force Majeure
ix. Default and early termination
x. Miscellaneous
xi. T& C’s

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 xii. (Source: www.powerpurchaseagreements.com)

Among various documents, mandatory to help resolve the ensuing confusion between
power producers and purchasers, the power purchase agreement (PPA) is the heart of any
private –public power projects. It guarantees market for power produced by the Private-
Public power projects and the tariff at which it would be sold to the purchaser. The PPA
creates legal obligation on both the parties to perform the previously accepted tasks in a
predetermined manner.

1.1.4. Private-Public Participation of Hydropower Development in Nepal

After 1990 the government initiated the process of economic liberalization and declared
its sincere belief in private Ltd. Growth limiting the role of the government only to the
creation of conductive atmosphere for market regulated economic decision making.
Hydropower development was the most important sector opened for private public
participation which until then was under the exclusive domain of NEA. The Private –
Public Partnership involves both Local and international participation.

The following guiding policies have been promulgated for encouraging private-public
sector participation especially in hydropower sectors.

 Hydro power development Policy 1992

 Water resource act 1992
 Electricity act 1992
 Electricity regulation 1993
 Water resource regulation 1993

The existing hydropower Companies/ Plants operated by private public Sectors are listed
below:

1. Butwal Power Company owns 5,100 KW Andhikhola hydropower plant and

12,000 KW Jhimruk Power plant.
2. Himal power limited owns 60,000 KW khimtikhola power plants.
3. Bhotekoshi Power Company owns 36,000 KW, Bhotekoshi power plant.
4. Chilime Power Company owns 20,000 KW, Chilime power plant.

18
 5. National hydropower Company Owns 7,500 KW, Indrawati (iii).
6. Khudi Hydropower Company owns 3,450 KW, Khudi hydropower plant.
7. Arun Valley hydropower Company (AVHP) owns 3,000 KW, pilluwa khola
hydropower plant.
8. Sanima hydropower owns 2,500KW, sunkoshi Small hydropower plant.
9. Thoppakhola hydropower owns 1,650 KW, Thoppakhola power plant.
10. APCO Owns 1,500 KW, Chakukhola power plant.
11. Unique Hydel owns 980 KW, Baramchi hydropower plant.
12. Khoranga hydropower owns 995 KW, Phemekhola plant.
13. Gautam Buddha hydropower company owns 750 KW, Sisnekhola plant
14. Rairang hydropower development (RHPD) owns 500 KW, Rairang hydropower
plant.
15. Kathmandu small hydropower owns 232 KW, Salinadhi plant.
16. Sange bidyut Company owns 183 KW, Sangekhola power plant.

Total installed capacity of private public sector plants is 156,340 KW in Nepal and 6
private plants are under constructions which are:

1. Mardikhola (Gandaki HP) -3,100 KW

2. Lower Indrawati -4500 KW
3. Ridikhola (Ridhikhola) - 2400 KW
4. Patikhola (Unified HP) - 996 KW
5. Upper Hadikhola (CPDS) - 991 KW
6. Seti II (Task HP) - 979 KW

Total 12,996 KW

More than 14 plants of total capacity of 15, 15,079 KW are planned and proposed from
private Sector.

Similarly, the projects under initial stages of implementation are listed below:

1. Hetauda –Dhalkebar-Duhabi400KV Transmission line

2. Koshi 220 KV Tranmission Corridor

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 3. Marshyandi 132 KV Transmission Corridor

4. Sunkoshi Dolakha Transmission Corridor

5. Kaligandaki( Dana –Kusma- New Modi-New Butwal –Bardghat) 220/132 Kv

Transmission Corridor)

6. Middle Marshyandi- Manag 132 KV Transmission Line

7. Kaski- Bhurjung –Parbat-Kusma 132 Kv Transmission Line

8. Gulmi- Arghakhanchi-Chinauta 132 kV transmission Line

9. Modi –Lekhnath 220kV Transmission Line

10. Lekhnath –Damauli 220 V Transmission line

11. Samumdratat- Naubise 220v Transmission Line

12. Ramechap- Garjyang- Khimti132 kV Transmission Line

13. Marshyangdi – Kathmandu 220 kV Transmission Line

14. Koshalpur- Surkhet 132 kV Transmission Line

15. Koshi Corridor (Basantaput-kusaha) 220 kV Transmisison Line.

Source: Annual Report of NEA (Fiscal Year 2009/10)

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1.1.5. Introduction of Sample Companies

1.1.5.1. Butwal Power Company (BPC) Limited

Butwal Power Company (BPC) is one of the leading companies in Nepal’s power sector
with generation and distribution as its core business areas. Incorporated in 1966 as private
company and converted into Public Limited Company in 1993, BPC has a track record of
pioneering multi faceted capacity building initiatives in hydropower development.

Pursuing the privatization process, in 2003, the Government of Nepal handed over
majority ownership and management control to private investors on public-private
partnership model. BPC is registered with the Securities Board of Nepal and listed in
Nepal Stock Exchange Limited. Starting off with electrification plan of a small city in the
south central Nepal, BPC is the only enterprise which can look back to a four decade long
history of success, sustained growth and capacity building in the country.

Through its subsidiary companies, BPC is engaged in operation & maintenance of power
plants, consulting engineering of hydropower and infrastructure projects, manufacturing
and repair of hydro-mechanical and electro-mechanical equipment for power plants BPC
is committed to operational excellence and believes in good governance, corporate
citizenship and creating value for stakeholders.

History of Butwal Power Company:

Butwal Power Company was established by a visionary Norweign engineer Mr. ODD
Hoftun. Mr. Hoftun, who led the construction of Tinau hydropower plant, had a vision for
educating young Nepal in development of technical skills for harnessing the hydropower
potentials of Nepal’s rivers to create opportunities for small businesses. He managed to
raise support from his home country, and brought tons of equipment from Norway to

21
Butwal in 1964. BPC was established with an aim to enhance capacity development in
the hydropower sector. BPC pioneered various concepts for developing self competency
in various facets of the hydropower industry like engineering, construction, operation,
maintenance and manufacturing of hydroelectric equipment.

An agreement was reached between United Mission to Nepal (UMN) and Government of
Nepal to set up an Institute of Technology and Industrial Development in Butwal – very
commonly known as BTI. BPC provided opportunities for the skilled human resources
from Butwal Technical Institute. Butwal Power Company (BPC) limited is a leading
hydropower company in hydropower development of Nepal. Similarly, it played an
instrumental role in establishing Himal Hydro and General Construction Company and
Nepal Hydro and Electric Ltd with a target to develop Nepal’s indigenous capacity in
hydropower construction. Hydrolab Private Limited was BPC’s initiative in the field of
hydraulic research projects. BPC Hydroconsult is engineering and consultancy wing of
BPC which is known as best in the country for its high quality and professional service in
hydropower project consultancy and other engineering services. BPC Services Limited
(BPCSL) was established in 2063/64 to provide operation and maintenance services to
hydropower plants. Currently BPCSL provides Operation and Maintenance to Khudi
Hydropower Project.

The following are the important milestones in BPC’s history;

 Commissioning of Tinau Hydro Power Project (1MW)

 Commissioning of Andhikhola Hydro Power Project (5.1MW)
 Commissioning of Jhimruk Hydro Electric and Rural Electrification Project
(12MW)
 Commissioning of Khimti Hydropower Project (60MW)
 Commissioning of Khudi Hydropower Project (4.2MW)

BPC Privatization

 October 2001: GoN invited offers for the purchase of its 75% shares in BPC.

22
  December 2001: Bid submitted by Interkraft Nepal of Norway in partnership with
Shangrila Energy of Nepal.
 3 January 2003: Sale and Purchase Agreement of 75% shares of GoN in BPC
signed by MoF Secretary Mr. Bhanu P. Acharya and IKN Representative Mr.
Balaram Pradhan.

The main shareholders of BPC are:

Name Ownership (%)

Shangri-La Energy Limited 68.95
General Public / Individuals 10.00
Government of Nepal 9.09
Interkraft Nepal AS 6.05
United Mission to Nepal 2.79
Employees 2.00
Nepal Electricity Authority 1.06
Nepal Industrial Development Corporation 0.06
Total 100

Table No. 1.3

23
Figure 1.1 : Share Status of BPC

Share Status of BPC

1%
2%0.06%
3% Sangrila Energy
6%
Public
9%
Government of Nepal
Intercraft Nepal As
10%
United Mission to Nepal
69% Employees
NEA
NIDC

(Source: website of BPC, www.bpc.com.np)

BPC is the first hydropower company in Nepal to have been certified for an Integrated
Management System. BPC is certified for ISO 9001:2008 Quality Management System
and 14001:2004 Environmental Management Systems by Det Norske Veritas (DNV)
effective from 2005-05-24 for Generation, Transmission and Distribution of Hydropower
and Engineering Consultancy including Design and Management of Hydropower and
Water Resource Projects

BPC has the vision to provide quality and competitive service to its customers. Similarly
the mission of the company is to supply electricity within its distribution areas in Nepal
and expand its distribution to feasible areas. It will plan, build, acquire, own and operate
electric power plans as well as purchase electricity to meet its electricity needs; make
strategic investments to support its interests; supply affordable electricity; and render
professional services in its areas of expertise.

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1.1.5.2. Himal Power Limited (HPL)

The Khimti I hydropower project is the first private sector power project in Nepal, based
on a Build-Own-Operate-Transfer (BOOT) structure. The power plant is owned and
operated through the Company; Himal Power limited (HPL).

Himal Power Limited was established in 1993 when Butwal Power Company together
with Norwegian Companies Statkraft SF, ABB Energy a.s (now ABB Kraft); Kvaerner
Energy a.s. (now GE Hydro) registered a company under the company Act 2021 BS of
Nepal. In addition to the investors, the International Finance Corporation (IFC), the Asian
Development Bank (ADB), EKsportfinans a.s the Norweigian Agency for Development
Cooperation (NORAD) and the Nordic Development Fund (NDF) has contributed to the
financing of HPL. The Khimti I Hydropower Project reached financial closing in June
1996 and commercial Operation of the plant took place 4 years later, in July 2000. The
total cost of constructing the power plant is approximately USD 140 million.

The Khimti I hydropower plant was constructed during the period 1996-2000 by a
consortium of statkraft anlegg AS and Himal Hydro. The electro-mechanical works were
done by a consortium of ABB Energy AS and Kvaerner Energy a.s. The Khimti I
Hydropower Project began to the Commercial Production on July 11 th 2000. Himal
power limited has been granted a fifty Year licence by Government of Nepal. As part of
the power purchase agreement (PPA- valid for 20 Years), NEA will receive for free 50
percent Share in the plant after the end of the PPA.

HPL’s primary task is to attend and further develop assets and interests in Nepal,
especially with regard to production, maintenance and the administration of properties
owned by the Company. This shall be done in both a short and long term perspective. The
strict environment criteria as set out by the lenders (IFC, Norfund, NDF) make it crucial
for HPL to set a high Priority on environmental issues as this pertains to the production
and operation of the Khimti I hydropower Plant.

25
As HPL’s Shareholders in Norway have strictly defined frameworks for all their activities
abroad, HPL will strive to make such frameworks operational in a Nepalese foreign
context. HPL will accordingly be careful not to come into conflict with the values and
realization of goals as put forward by our institutional stakeholders.

In addition to the investors, the international finance corporation (IFC). The Asian
Development Bank (ADB), Eksportfinans a.s. the Norwegian agency for development
cooperation (NORAD) and the Nordic Development Fund (NDF) have contributed to the
financing of HPL.

Share Status of Himal Power Limited Are:

Figure No. 1.2

(Source: website of HPL, www.hpl.com.np)

26
1.2. Focus of the Study

The financial performance evaluation of hydropower sector is still lacking. The main
focus of this study is concerned with the financial performance evaluation of Butwal
Power Company and Himal Power Company. Most of the hydropower sectors lack
monitoring and evaluation on financial performance. This study is concerned with the
evaluation of the financial matters. Various data are used to know how effectively to
identify their work performance. This study adds a new and meaningful idea in the
hydropower sector. It would also be helpful to the researchers as well as to the private
and public sector for making policies and plans in the related field.

1.3. Statement of the Problem

Nepal has enormous hydropower potential. The prospects of becoming a prosperous

country can be realized provided this energy source could be tapped prudently and
efficiently at the earliest. As a leader of the countries power sector, NEA has the prime
responsibility of taking necessary steps towards achieving this goal.

To get the private sector sustained it needs enough income for its shareholders and
employee. By keeping other factors constant, income can be increased by better
performance which increases efficiency and effectiveness of human and non human
production factors. BPC and HPL also have their own capital mix, management,
employees and assets. This study tries to seek overall performance of the companies.

Finance is one of the most important functional areas of a business. It is concerned with
generation, transmission, distribution and other function of any business including
independent power products. This study’s directed is to identify and analyze the financial
strengths and weakness of hydropower companies of Nepal

27
1.4 Research Questions

The study attempts to seek answer of the following questions.

 What is the financial positions and performance of the companies?

 Do the financial ratios best describe the performance of these hydropower
companies?
 What types of contemporary steps are essential for performance improvement
of Nepalese hydropower companies?
 What level of satisfaction is provided to the stakeholders by these private-
public sectors hydropower companies?
 Which company is more effective and efficient in terms of financial
performance?
 Do the private and public power producer companies feel secure to invest in
the Nepalese hydropower sectors?

Financial Evaluation may not provide exact answer to these questions but it does indicate
what can be expected in the future.

1.5 Objectives of the Study

The study basically aims to evaluate the financial performance of Butwal Power
Company Limited (BPC) and Himal Power Limited (HPL) and to suggest
recommendation based upon it, the specific objectives of the study are:

i) To study and analyze the financial performance of BPC and HPL and draw
comparative conclusions through financial evaluation taking relevant
variables.
ii) To identify major strengths and weaknesses of BPC and HPL.
iii) To study and examine the present trends of financial performance of Private –
Public participations in Hydropower Sectors.
iv) To provide necessary suggestions on the basis of study findings.

28
1.6 Significance of the Study

Analysis of financial position and statement is a crucial part of financial decision

making process of a business enterprise. Poor financial management affects adversely on
liquidity, turnover and profitability. It is required to measure the financial position of the
business big or small. HPL is one of the promising names in the sector of power
generation business and the first private sector of hydropower.

Nepal as a developing country needs more and more new energy success to meet the
ever increasing demand for socio-economic development and industrialization of the
country. In this back drop, hydropower is the only resource available abundantly in all
hilly and mountainous parts of the country. Access to electricity promotes new
economic activities, empowers women by reducing domestic drudgery in firewood
collection, improves health and education service and provides a cleaner and healthier
home environment.

This study attempts to provide information and draw the attention of private and non
governmental agencies that are willing to invest in hydropower projects in Nepal.

This study also expects to provide some appropriate measures to solve financial
problems of Nepalese private public sector hydropower companies if any researchers
who are interested in the study of the financial performance of similar hydropower
business may find this study of use.

1.6 Limitations of the Study

The main purpose of this study is assessing on the financial performance evaluation of
private public hydropower sector for the partial fulfillment of Masters of Business
Studies degree. However, this study possesses some limitations that are mentioned as
follows:

 The study covers a period 10 years from the first fiscal year 2001/2 to the recent
fiscal year 2009/10 of BPC and HPL. But HPL hasn’t published annual report for

29
 the year 2009/10, therefore comparative study have been done only up to the
fiscal year 2008. .
 The secondary data is basic input of the study and thus accuracy of conclusions
derived from them highly depends upon the reliability of these data.
 Since the study is mainly concerned with BPC and HPL out of various
hydropower companies in operation, the conclusion drawn from the study, and
suggestions offered may not be applicable to any other private or public
hydropower companies.
 Time and resources constraint may limit the area covered by the study.
 This study may not be precise as it is to fulfill the partial requirement of the MBS
Program.

1.8 Organization of the Study

The aim of the dissertation is to explain the financial position of Nepalese private or
public hydropower companies. Two companies Butwal Power Company and Himal
Power Company are studied thoroughly. The study has been divided into five chapters.
The major chapters of the study are as follows:

Chapter One: Introduction

This chapter deals with the initial propose of the thesis incorporated with a view to
explain in detail the aspect of hydropower development and a brief overview of private or
public hydropower companies. It includes brief introduction of selected two hydropower
companies. In this chapter background of the study, focus of the study, statement of the
problems, objectives of the study, limitation of the study and organization of the study are
included.

Chapter Two: Review of literature

The chapter of conceptual framework and review of literature mainly includes related
study on the same topics. Various available literatures regarding findings and

30
recommendation of previous research work in respect of NEA and any private public
hydropower company/ plant are incorporated. .

Chapter Three: Research Methodology

The third chapter consists of Research Methodology which includes research design,
population and sample, sources of data, Data collection Techniques, Data analysis tools
and Research Variables.

Chapter Four: Data presentation and Analysis

This chapter presents the analysis, interpretation and findings of results of financial
performance of the selected samples companies.

Chapter Five: Summary, Conclusion and Recommendations

The last chapter of the study covers summary, conclusions of the study and
recommendations and suggestions for the further improvement.

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 CHAPTER-II

REVIEW OF LITERATURE

2.1. Conceptual Review

This Chapter consists of the Review of various books, research studies. Generally review
of literature is done in order to make clear about the concept of performance analysis as
well as to recall the theories and studies made by the various researchers. This chapter
reviews the available literature relating to hydropower sector and various expressed by
various scholars and researchers on the financial performance of private and public
enterprises.

2.1.1 Review of Related Acts/Plans

2.1.1.2 Hydropower Development Policy, 1992

Regarding different models of investors’ participation for the hydropower development in

Nepal, the Government of Nepal has formulated the hydropower development policy,
1992. In this policy, the GON has declared as –investment may be made for the projects
relating to generation, transmission and distribution of hydroelectricity as follows.

 Sole or joint venture of one or more private national investors.

 Joint investors.
 Joint venture of the government and one or more national or foreign investors.
 Hundred percent investments of one or more than one foreign investors.
 Joint venture of the national or foreign investors.

Hydropower development policy, 1992 has made a provision of exemption of income tax
to the newly established hydropower companies for certain years to inspire and facilitate

32
them in the field of hydropower generation. In this regard, the provisions made by the
hydropower Development policy, 1992 are as follows:

i. An exemption of income tax shall be given to the projects of private sector

generating and distributing electricity from the hydroelectric project up to the
capacity of 1,000 KW.
ii. Hydroelectric project, constructed under to investment of private sector,
producing more than 1000 KW shall be granted exemption from income tax for a
period of fifteen years starting from the date of its commercial production.
iii. Any private entrepreneur, who constructs electric substation, and transmits and
extends the distribution lines be granted exemption from income tax for a period
of ten years.
iv. If the private companies take on contract for purpose the operation, maintenance
and management of the hydroelectric plant or transmission and distribution lines
under the ownership of Nepal Government, such companies shall be granted
exemption from income tax for a period five years.
v. The income tax shall be less than ten percent of the corporate income tax which
the government imposes from time to time.
vi. If the investor reinvests in the hydroelectric project in order to diversity the
project or to expand its established capacity by twenty- five percent or more, or
to modernize the technology or to develop the subsidiary industry, such investor
may deduct an amount of fifty percent of the new additional fixed asset, from the
taxable income of such hydroelectric projects. Such deduction may be at a time
or from time within three years.

2.1.1.3 “Electricity Development Policy -2058 (2001)”

Government of Nepal envisaged achieving the following by 2007 in its “Electricity

Development policy- 2058”

 A dominant private sector contributing 75 percent of total investment in

hydropower;
 Boosting of industrial consumption’s by 125 Percent;

33
  Establishment of power development fund and infrastructure development banks;
 Boosting of hydro capacity to meet a demand of 820 MW of which 70 MW to be
Export:
 Privatization of NEA.

“Electricity Development Policy- 2058” is imposed with the following Objectives:

 To utilized the existing water resources of the country and produce electricity
at a low cost;
 To make the electricity service dependable, reliable, and extend qualitative
service within the whole kingdom at a reasonable rate;
 To tie up the electrification with the economic activities;
 To extend the rural electrification in order to support rural economic
development;
 To develop hydropower as an exportable commodity;

“Electricity Development Policy- 2058” adopts the following policies to achieve above
objectives:

 Efforts shall be made to maximize the use of country’s hydropower potential in

order to meet the domestic demand of electricity.
 Construction and implementation of hydropower projects shall be encourage to
promote on the principles of build-operate transfer (BOOT)
 For making the electricity service dependable, reliable and extension of
qualitative service delivery within the kingdom at reasonable cost; the exiting
public sector institutions shall be restructured to promote the participation by
creating competitive environment of community/ corporations, institutions, local
agencies and private sector in hydropower production, transmission and
distribution.
 Small and medium hydropower projects shall be developed and promoted for
domestic use in order to strengthen the situation of domestic power supply. The
priority shall be given to develop hydropower projects on a competitive basis
suitable to the electricity.

34
 The hydropower projects shall be identified for export purpose. The private sector
shall export the electricity by developing such projects.
 The major multipurpose storage projects shall be developed in a way to render the
maximum down stream benefit to the country.
 The electrification program in the rural areas shall be encouraged.
 The rural electrification program shall be expanded in order to make the
electricity services available to maximum people. A “Rural Fund Electrification”
shall be established for this purpose.
 The rural electrification development program shall be based on mobilization of
people’ participation.
 To deliver reliable and dependable electricity services and, make it easily
available to consumers proper attention shall be given to safeguard their interests.
 For supplying the electrical energy at a reasonable rate, the electricity tariff
fixations process shall be made transparent and reasonable.
 The unauthorized leakage of electricity shall be controlled. For this purpose
necessary technical measures shall be adopted and legal arrangements shall be
formulated besides these measures, emphasis shall be given to mobilized people
participation to control the leakages.
 Incentives shall be provided for the proper utilization of electrical energy. In this
context, incentives shall be provided for the use of electrical energy for village
water supply, irrigation, industry and tourism sectors when electricity demand is
low ( when supply is in excess of demand).
 The appropriate incentive provisions shall be made to attract national and foreign
investment for the development of hydropower and transparent process shall be
followed.
 Capital market shall be operated for investment in the electricity sector.
 The use of local labour and skill shall be given priority in implementing the
hydropower projects.
 The industry producing the construction materials and equipments to be used in
the electricity sector shall be encouraged to develop the industry.

35
  Proper Arrangements shall be made to cover the risks arising in hydropower
projects.
 Arrangements shall be made to provide appropriate benefits at the local level
while operating hydropower projects.
 The adverse effects on environmental shall be minimized caused due to the
development and operation of hydropower projects and proper arrangements shall
be made to resettle the displaced families.
 Hydropower shall be developed to replace the biomass and thermal energy in
order to contribute towards environmental conservation.
 Regarding multi- purpose projects, the government could become a partner with
private sector looking at the possibility of irrigation development.

2.1.1.4 Interim Three Year Plan (Electricity and Energy Development)

The importance and contribution of electricity in the development of agriculture, tourism

and industries, and other social and economic sectors, is well established. The studies
undertaken to date have shown that the feasible potential is 83,000 MW. Of this
development of 42,000 MW has been considered as technically and economically viable.
The actual generation capacity of hydropower is only 556.4 MW; this is 0.67 percent of
feasible generation potential. Of this public sector contribution is 408.1 MW and 148.3
MW comes from the private sector.

Private sector investment in the development of electricity was significant in the ninth
plan period. In the tenth plan period, however, the investment of the private sector was
not encouraging. The government sector also failed to make investment in this sector
during the plan period. The capacity of electricity power generation is not sufficient to
meet even the domestic demand in the absence of effective investment plan, at present. In
this context, the possibilities of hydropower export and its contribution to overall
economic development of the country, continuities to remain as the major challenge. The
three year interim plan intends to develop the hydropower potential of the country as an
export commodity, expanding hydropower to the rural areas and providing quality

36
services with low investment, within the framework and perspectives of the hydropower
Development policy, 2001 and the National water plan ,2005.

a. Objectives

To create an environment conductive to domestic and foreign investment in the

development of hydropower and to ensure reliable, quality and easily accessible
electricity services for majority of the rural areas of the country, considering hydropower
as an important base for the comprehensive economic, development of the country.

b. Long Term Vision

The vision of the hydropower sector is to develop hydropower based on optimal

utilization of water resources to meet the domestic power demand and export the surplus
while expanding the development and services in order to contribute to the livelihood
improvement of Nepalese people.

Based on the perspective of National water plan, 2005, the target set for this sector in the
long-term (up to 2027) are:

 Generation of 4,000 MW of electricity to meet the domestic demand.

 Expansion of services of electricity in such a way as to ensure coverage of 75
percent of the population through national grid, 20 percent of the population
through non-grid ( Small and Micro hydropower) system and 5 percent of the
population through alternative energy sources.
 Per capita electricity consumption to be increased to 400 KWH.
 Significant expert of electricity to contribute to national remittance earnings.
c. Quantitative Targets
 Completion of the construction of ongoing hydropower projects adding 105MW,
and initiating the construction of new hydropower projects shall be taken up for
additional 2,115 MW.
 Additional 10 percent of the population shall be covered in the electricity services
through the national grid. To attain this electricity services shall be expanded to
cover additional 500 VDCs in the national grid.

37
  Per capita electricity consumption will be expanded to 100 KWH.
d. Strategies
 To arrange for effective regulation of generation, transmission and distribution of
electricity and the businesses thereto.
 To make the single door system effective in order to encourage domestic and
foreign investments in the survey, studies and other promotional activities for the
hydropower development.
 To coordinate and make consistent efforts in the expansion of electricity
generation potential and in doing so, taking into account the domestic
consumption as well.
 To develop the electricity transmission capacity, contributing to the overall
economic development and in doing so, to take the possibilities of inland
electricity export into account.
 To strengthen and expand the electricity distribution system for social and
geographic inclusion and to support the rural economy.
e. Problems, challenges and opportunities

Problems

The rate of implementation of hydropower projects under the initiative of the private
sector has not taken place at the pace of finalization of the purchase agreement of
electricity with the Nepal electricity Authority. The tendency of acquiring license for
hydropower development and not undertaking the production and distribution, which
needs to be discouraged, is being continued. Single door system has not performed as
expected. This is believed to inhibit the accelerated development of power industry in the
private sector. Consistent lowering of investments from the public sector has also been a
cause for inadequate development of hydropower. As a result of this, load shedding is
continuing in a country known for its enormous hydropower potential. Similarly, the
other constrains now appearing are: lack of public and private sector investments in the
development of the transmission and distribution system, and amendment in the existing
Electricity Act, 1992, implementation of the Hydropower Development Policy, 2001, has
not been taken up efficiency. This is constraining the development of hydropower. The

38
backlog bills payable by the government agencies and organizations and municipalities
have constantly been increasing.

Challenges

The electricity and power sector has been facing the following challenges.

 To ensure supply to meet the ever increasing demand for electricity.

 To make coordinated efforts for the development of hydropower and alternate
energy sources in order to provide electricity in the rural areas.
 To control the leakage of electricity.
 To rationalize the electricity tariff on time.

Strengths and Opportunities

 Encouraging people’s participation in the community Rural Electrification

program.
 Enhanced support of the people, based on the opinion that utilization of water
resources of the country is the only means for Nepal’s development. This has also
created impetus for increased people’s participation in the development of water
resources.
 Increasing investment of private investors and the domestic capital market in the
hydropower sector.
 Manual for the hydropower development prepared to ensure unified approach and
quality control in undertaking feasibility studies and construction works.
 Electricity development fund instituted under the support received from the World
Bank, under the policy to encourage private sector investment in hydropower
development.

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2.2. Review of Related Studies

Hydropower development has always been vital issue for Nepalese writers and
researchers. This Section/ topic is devoted to the review of some major articles published
in Journals, reports, newspapers and articles concerning state and problems of
hydropower development in the country and financial performance of private -public
hydropower Companies or NEA.

In an article published on The Himalayan Times (May 11, 2010), Dr. Kamal Raj
Dhungel (2010), has mentioned in his article “Hydropower in national development:
Crucial role to play” As is evident, Nepal is rich in water resources. Perhaps, it is one of
the richest countries in the world. Given the fact, development and rational use of water
resources would enhance economic growth and sustaining poverty reduction efforts.
However, maintaining and developing water resources require huge investments which
seem next to impossible without public and private partnership, be it domestic or
international investment. Interventions on water resource development among other
sectors should be economically efficient, i.e. maximize benefits and minimize costs.

It implies that the target groups or the ultimate beneficiaries should be carefully
identified. Besides these, pricing strategies should be developed such that the investors
are ensured that they will receive a good return on investment. An economic analysis of
water related projects have an important role in making these decisions, which reflect
welfare impacts in the society.

He further added that by 2008/2009, there was 689 MW installed capacity of

hydroelectric power; while demand for electricity increased multi-fold. However,
electricity contributes only 2.2% to the total energy consumption in Nepal. The energy
consumption in Nepal has always been dominated by traditional sources. In the fiscal
year 2008/2009, traditional sources contributed 85 per cent of total energy consumption,
while only 15 per cent of the total energy consumption had been met by commercial
sources. Various INGO's, NGO's and private sector entrepreneurs initiated micro-hydro
projects in different parts with the total installed capacity of 7 MW.

40
Dr. Kamal Raj Panta further added presently, around 40 per cent of the population use
electricity but recent labor force survey estimated that access of electricity reached to 56
percent of the total population. Nepal has a very low per capita availability of 71 kWh per
annum. However, electricity contributes only 2.2% to the total energy consumption and
around 10 per cent of the total commercial energy consumption. The only native source
of commercial energy is the electricity in Nepal, which is yet to be fully exploited. A
huge potential of generating hydropower is estimated to be around 83 thousand MW of
which only 43 thousand MW is considered viable from economic and technical point of
view. However, the exploitation of hydropower resources was about 0.83 percent of the
total potential and 1.6 percent of the economic potential capacity. Despite the huge
potential, Nepal is slow in hydropower development because of various reasons. In the
first place, in Nepal it is attributed to the dearth of adequate investment capital as it is one
of the poorest countries in the world. Consequently, Nepal is not able to invest adequate
amount of capital to harness its potential by installing large dams that require
multimillion dollars. Therefore, its development hinges on the lack of adequate capital.
Secondly, an over nationalistic view put its development in limbo. In the past,
hydropower development policy was not investment friendly to domestic as well as
international private developers. Thirdly, the generation per unit cost of electricity in
Nepal is so high that it is not comparable even with Bhutan and northern part of India.
For this reason, private sector involvement saw the high risk involved for their
investment. Fourthly, there is no consistent policy that attracts foreign investors to invest
in this sector. Regional cooperation with the formulation of encouraging domestic policy
and exploration of potential market for excess energy to export would be the most
probable model for harnessing untapped hydropower potential of Nepal.

In the Journal „Hydro Nepal‟ (issue2, January 2008), Anil Kumar Shah (2008) has
viewed on his article entitled “Banker’s Perspectives on hydropower Development in
Nepal: Problems and Prospects”. He has written now it is a great opportunity to invest in
the development of Nepalese hydropower sector and traced out on the possibilities and
problems associated with it. In his Words “The financial sector has identified hydropower
development as a lucrative financing opportunity. The success stories of few hydropower

41
projects developed by independent power producers in the recent past have also helped to
create positive market interest and response. On the other hand, the risk is relatively high
in this sector due to its technical nature, the necessity of huge funds and longer gestation
as well as repayment periods. The financial sector is entering the energy sector gradually
by taking some exposure, preferring to share the risk amongst various banks and
developing consortium financing.

The funds available in the local market are able to support projects with a capacity of 20-
50 mw only; for mega projects we will have to seek help from foreign institutional
investors. This, in turn, will increase the capacity of financial sector. Nepalese Banks
have also started to make alliances with Indian counterparts who will not only increase
their capacity to lend but will provide the technical expertise. Recently PTC India Ltd.
has agreed to enter into an agreement to work together with Nabil Bank Ltd for power
purchase sector development in Nepal. They have further appointed Nabil Bank Ltd to
liaise with other local banks to enter into similar agreements, which they intend to sign up
with Nabil Bank Ltd. This has opened up a new avenue for sharing of expertise and has
also increased the total capacity to lend.

In the Magazine Hamro Sampada (Year7, Issue 10, 2064 Falgun), Baburam
Bharadwaj (2064) has written an article entitled “Some Thoughts on Hydropower
Development in Nepal”. In this article he has focused on the opportunities, challenges
and issues.

He has added about opportunity on hydropower in Nepal that “From the study of 229
potential projects of different size in Nepal a technically feasible capacity of 42,133MW
has been derived. Among these 229 identified potential sites there are 157 projects
between10-100 MW, 47 between 100-300 MW; 20 between 300-1000MW; and 5 above
1000 MW. They make total 176,764 GWh/Year generations potential. Till now only 585
MW (less than 2% of the economically feasible capacity) has been harnessed.
Availability of various sizes (Pico, Micro, Mini, small, Medium to large) ranging from
few kilowatts to as big capacity as of 10,800 megawatts sites adds further attraction to
different domestic as well as international investors. The Karnali & Mahakali River Basin
that lies in the western part of Nepal has the largest potential (36.180 MW technically

42
feasible and 25,125 MW economically Feasible and the largest single scheme identified
so far in Nepal the Karnali Chisapani storage scheme (10,800 MW) lies in this basin. The
basin not only has highest potential but also has the highest percentage of economically
feasible potential (59.63%). The basin with second largest potential is SaptaKoshi River
basin with 20,650 MW technically and 10,860 MW economically feasible potential”.

Table 2.1: Theoretically & Economically Feasible Hydropower potential of Nepal

River Basin Theoretical potential (MW) Economically Feasible

Potential (MW)
Sapta Koshi 22,350 (26.83%) 10,860 (25.78%)
Sapta Gandaki 20,650 (24.79%) 5,270 (12.51%)
Karnali &Mahakali 36,180 (43.44%) 25,125 (58.63%)
Southern Rivers 4,110 (4.94%) 878 (2.08%)
Total 83,290 (100%) 42,133 (100%)
(Source: Hamro Sampada, Year7, Issue-10, 2064BS)

Nepal not only has potential for hydropower development but also has secured market
place to sell the electricity. The electricity hungry Indian Market also secures Power
Export Possibilities.

He has also focused about the challenges of hydropower development of Nepal, he said
that Hydropower development in Nepal not only opportunities but also packed with
numerous challenges. The youngest geological formations where the construction of
large structures like dams, tunnels and powerhouses are always of a hydropower scheme
is always packed with large number of geological problems that demands a great degree
of care and expertise. The capital intensive nature and long gestation period of the
development stage of the hydro projects further add uncertainties of return of investment.
The political instabilities and frequent changing government policies regarding the tax
structure further repels the investment in hydropower development. The complex
environmental sensitive add further difficulties in getting government approvals. At the
same time the requirements of environmental mitigation works are be- coming extra
financial and managerial burden for the project. Though there are ample opportunities in

43
domestic as well as Indian market to sell the generated electrical energy but it is not that
simple and easy. Securing a long term power purchase agreement with NEA and with
Indian Power trading corporation is another hurdle. As the hydropower project requires
large initial investment the availability of fund in local financial institution is also not
developed to the required extent. Though the list of difficulties is very long and
frightening but they are still manageable and are within the reach of the developers.

Considering the past experiences, C.B. Bajracharya has highlighted the following
alternatives for hydropower development of Nepal:

Nepal Electricity Authority shall manage funds its own resources, Karmachari Sanchaya
Kosh and other Financial Entrepreneurs construct the 309 MW Upper Tamakoshi Project
as soon as possible to meet this power crisis. If this project gets through or is successfully
accomplished, NEA shall continue to venture into other new technically and
economically viable hydropower projects. Presently, the pipeline projects in NEA’s
consideration and construction phase are as follows:

Table No. 2.2

Projects under Construction Phase

S.N. Name of Hydropower Project Capacity

1 Middle Marsyangdi 70 MW
2 Upper Tamakoshi 309MW
3 Upper Trishuli A 61MW
4 Upper Trisuli B 40MW
5 Chameliya 30MW
6 Rahughat 27MW
7 Kulekhani IIi 14MW
(Source: Vidyut, Year 18, Issue-2, 2064 BS)

Certainly implementation of those projects is to be prioritized according to the technical

and financial viability and availability of funds. To create a feeling of ownership and to
attract public participation and cooperation, it would be more effective to provide some

44
shares to the local residents and involve them in the construction works. Due to this, it
would have some instinct of ownership and responsibility. In this way the construction
work would be completed smoothly without any obstacles. In the mean time, the power
evacuation facilities must be developed simultaneously as per the requirements.

Government of Nepal shall encourage local and foreign investors to invest in hydropower
development of Nepal. But seeing the past experience, government of Nepal must have
simple and development oriented laws, rules and regulations as above mentioned so as to
allure them. They must be convinced that their investment would certainly pay them back
in long run. The government on its part must be guided by the fact that electricity
generation in an important part of the infrastructure development and so this is one of the
main priority sectors. It must be construed that this is a national strategy. Recently some
genuine IPPs are taking interest in constructing some new power projects. In the
backdrop of this power scarcity, load shedding and fund crunches, it is very appropriate
and need of the hour to invite them to invest in this sector. Of course aforesaid, they must
feel secure about their investment.

After the successful implementation of the 20 MW Chilime hydropower projects, the

chilime hydropower company is trying for 80 MW Middle Bhotekoshi hydropower
project through local resources. They have set a target to complete this project within 4
years. If it happens, it would be great asset lessening the load shedding. Such
entrepreneurs must be encouraged by the government of Nepal and Nepal Electricity
Authority as well. They should feel secure and should be guaranteed for the optimum,
profit for their investment. They should guarantee and assured of the purchase of the
power generated by them in a reasonable price on along term basis.

The power purchase Agreement (PPA) must not be a clumsy and tiring but it should
always be done in a friendly manner and in a win- win position. From the past
experiences, we know that the small and medium sized projects, where Nepalese
expertise and workers are involved, are cheaper in comparison to those projects where
foreign expertise and consultants are involved. Further their equipments are costly
because of monopoly in some cases. Therefore Nepalese entrepreneurs or investors must
always be encouraged to invest in the small and medium sized hydropower production

45
Table No. 2.3

Hydropower Projects with foreign Investment Interest

S.N Name of hydropower project Capacity

1 Buddhi Gandaki 600MW
2 Upper Karnali 300MW
3 Arun III 402MW
4 West Seti 750MW
(Source: Vidyut, Year18, Issue-2, 2064 BS)

Seeing the increasing trend of the load growth and the power scarcity in Nepal, the
Government of Nepal must take now immediate actions for implementation of new big
hydropower projects, because completion of any hydropower project takes at least 4 to 5
years or more than that. Presently Nepal is facing heavy load shedding due to acute
power shortage and the public disenchantment and dissatisfaction is growing day by day.

Recently the government of Nepal had set up a task force to recommend for technically
and financial viable projects. As per the recommendation of task force and instructions of
the parliament committee, GMR, an Indian entrepreneur has been awarded to construct
the 300 MW Upper Karnali project. Some experts are of the view that, to get free energy
would be safer than having some shares at this moment of power crisis. Hence a global
competition must be floated among the interested and genuine investors on the basic
criteria of free energy to be supplied and the Government of Nepal must select the
investors who commit to provide maximum free energy to Nepal in case of other huge
projects also. Of course other criteria set by the government must also be made.
Certainly, this would have a very good impact on the development of our country in
every sphere. Since we have lacking of fund, a prompt decision must be made
immediately after rigorous discussions and deliberation at the backdrop of this power
scarcity.

46
In the Magazine New Business Age (Vol.7, No. 12, Bhadra 2065), Gyanendra Lal
Pradhan has written an article entitled “Hydropower Development and Private Sector”
in this article he has focused on the Role of private sectors and key issues of hydropower
development in Nepal. Pradhan is a hydropower entrepreneur of Nepal. About role of
private sector, he said that, “Global experiences have reaffirmed the notion that the
invisible hand of the market would always contribute to accelerate growth process in a
sustained manner. Market oriented development strategies encourage private sector
involvement, limiting the government’s role to a facilitator and developer of the private
sector through creating an environment conductive for private sector development. Since
the enactment of Hydropower Development policy in 1992, Electricity act in 1992 and
Electricity Regulations in 1993, entry of independent power producers (IPPs) in Nepal’s
power sector through non resource financing has been noticeable and the position of
NEA has been replaced from a sole monopoly to one of the licenses with the
responsibility to buy the privately generated power. But this is not adequate to attract
increased investment from the private parties in this sector”.

The 55-60 billion rupees of liquidity believed to be present now in the Nepali capital
market is not enough to generate more than 400 MW of hydro electricity. It is, therefore,
very practical for the state to expect increased participation from the private sector. Since
Nepal has adequate space to entertain private sector investments not only from Nepal but
also from the rest of the world, the state should give specific responsibilities to the Nepali
private sector in this regard.

For example, the Nepali private sector can be entrusted the sole responsibility to meet the
energy needs of the domestic market. For this, the state should take a proactive role to
create and foster congenial environment for the private sector to help construct every year
hydropower project (s) of 50 MW. Since the risk factor in investing on energy
infrastructure is negligibly low, it would be feasible for the private sector to invest around
7-10 billion rupees every year.

G. L. Pradhan, has focusing on key issues of hydropower development in Nepal, has

written as “analyze the key issues and challenges facing the power sector in Nepal,
especially the generation segment, prominent ones are the discouragement to the private

47
sector’s participation and the volume of investment. First, there has been no significant
additional investment from donors as well as from the private sector either in the
expansion of generation capacity or transmission facilities. Whatever investment is being
made for this is coming from the government only.

Second, the current trend of private sector investment in only small capacity plants of 1-5
MW range does not provide any substantial relief to meet the growing needs of the
country’s power system. The pace of capacity addition from private sector is far behind
what is required to cope with the growing demand of the country, which is increasing by
more than 10% annually. In other absence of private sector interest in this, the country
faces considerable deflects in near future, unless NEA takes leading role in bringing in
such projects in the system.

One of key technical issue or challenge facing the power sector in Nepal, especially the
generation segment, is the dominance of run-off-the-river (ROR) and daily pondage
hydropower plants. These are set up at a considerable cost but they are not able to
generate power throughout the year. The tariff based on average generation from these
plants has been partially responsible for the current high power tariff to the consumer.
Attempts by NEA to amend its present tariff structure to introduce seasonal tariff in
certain consumer categories to encourage demand side management is yet to be approved
by authorities concerned.

Also the power evacuation issue has emerged as a very important issue as it has been
impeding speedy conclusion of PPA. Investment has to be made for expansion of the
transmission network in tandem with creation of new generation capacity. The state does
not have adequate wherewithal to make these investments and therefore the investment
needs to be brought in either from domestic private sector participation or multilateral
funding route".

Pradhan has further added that, Investment in hydropower generation is considered the
best investment due to the low risk associated with this. But only three hydropower
companies are listed and traded in the Nepal stock exchange, namely: National
Hydropower Co Ltd. (7, 000,000 units of total amount: Rs. 700,000,000); Butwal power

48
company Company Limited (8,390,577 units of total amount: RS. 839,057,700) and
Chilime Hydropower Co. Ltd. (7,296,000 units of total amount: Rs 729,600,000).
However, the hydropower sector accounts for only 13.4 percent of the total shares traded,
according to the NEPSE data for the month of April, 2008.

Investment in hydropower is lucrative. Once the dam is built, hydropower projects

provide dividends to the investors forever. Revenues from dams are considered inert as a
lead weight. Projects can cell the power to utilities on long- term contracts, which might
span 30 or 50 or more years. Revenues from hydroelectric power plants are virtually free
from the panic at NEPSE or during recession. So why not invest in hydropower?

The answer is that the private sector is discouraged to invest. And liberalisation
propaganda and treating liberalisation as an end in itself are to blame for this. The aim of
liberalisation is to make the private sector the main actor in the economy. The private
sector can inject more capital, acquire new and modern technology, generates additional
resources for development and alleviate poverty. Private sector has to play a key role in
the integration of the national economy with global economy. In the process of such
integration there are various opportunities and challenges. The complex challenges have
to be dealt with in a joint effort of the government and private sector through appropriate
institutional mechanism.

2.3. Review of Related Thesis

Various research works have been done by MBS students in different aspects of banking,
NEA and hydropower companies such as financial performance, fund management, cost
volume profit analysis etc. Studies and reviews on financial performance, fund
management, cost volume profit analysis of other organization and their recommendation
are relevant to this study. In this context, some reviewed previous theses are as follows.

A Study done by Ram Chandra Khatiwada (2007), Entitled with “Financial

performance analysis of Butwal power Company” examines the financial strengths
and weakness of BPC based on its ratio analysis, income and expenditure analysis and
least square trend analysis. He has also used statistical tools.

49
The main objectives of his research are as Follows:

 To highlight about Butwal power Company like objective, policy, growth etc.
 To study the trend of financial performance and analyze the related financial
indicators.
 To analyze financial strength and weakness of Butwal power Company.
 To provide recommendation and suggestions on the basis of study and findings.

Major findings of his research are:

 The current ratio indicates that the company is using excessive current assets in
the first 3 fiscal years. It is maintaining the current ratio in the later 3 years near to
its normal standard. It reveals that the company is in perfect liquidity position.
The firm is in strong credibility position.
 The debtors’ turnover ratio reflects that debtor’s turnover ratio of Butwal Power
Company is fluctuating each year but is better in last two years study period than
the first two year.
 Fixed assets turnover ratio shows that Butwal Power Company utilized its fixed
assets in better way in later years in comparison to previous years except in
2059/060. Increment in fixed assets turnover ratio indicates the improved work
efficiency and financial condition. It shows the efficiency of a concern on
utilizing its fixed assets.
 The total assets turnover ratio of BPC in the study period is not good, it shows the
increment in ratio but increment is not satisfactory. Higher ratios indicate better
utilization of total assets of the organization. To improve the total assets turnover
ratio BPC should utilize total efficiency. But the company is improving efficiency
utilization of total assets.
 The local sales to bulk sales ratios shows that the BPC has extended the sales
system to the local and Nepal Electricity Authority by power purchase agreement.
This helps the company that the dependency of power selling is not constraint and
diversified selling process helps to mange hard times. The company sells to local
sales and to Nepal electricity Authority as bulk sales.

50
The recommendations are as follows:

 The company (BPC) is in strong credibility position. It should enjoy capital of

less cost by burrowing fund.
 The company has kept very high liquidity ratio. The investment in current assets
is excessive which should be controlled.
 Debtors’ turn over ratio of the company should be improved and made higher
which can help the company to cash its sales in proper time to avoid cash
shortage.
 Fixed assets turnover ratio shows the utilization of the assets in percentage. The
finding shows that the fixed assets are utilized properly and efficiently. It helped
to improve financial condition of the company.
 Total assets turnover ratio is not found satisfactory. To improve the total assets
turnover ratio BPC should utilize its total efficiency. It is found that the company
is improving its efficiency of utilizing total assets.
 The trend analysis revealed that the company has done better in total sales but
worse in operating income. It should improve the trend of operating income in
increasing order.

A Study Done by Chandra Dahal (2007), Entitled with “Cost –Volume Profit
Analysis of Public Enterprises and Private Company Ltd. (A Comparative analysis
between NEA and BPC)”. He was concerned with profit and cost analysis of NEA and
Butwal Power Company Limited. He used secondary data of annual reports of their
companies.

The Main Objectives of his Study were as follows:

 To study and analyze existing position of costs of NEA and BPC Pvt. Ltd.
 To identify break even point of both enterprises for avoiding losses.
 To compare and analyze P/V ratio, BEP and volume of these Enterprises.
 To examine problems being faced by these two enterprises and recommend for
solving these problems on the basis of study results.

51
Major findings of his study were:

 Sales of the BPC are increasing every year in fluctuating rate while sales has
increased in lower rate than BPC. BPC forecasted sales for FY 2064/65 is Rs
575.73 million and forecasted sales for NEA for FY 2064/65 is Rs 14518.6
million. The sales plan of both BPC and NEA are not systematic. So it is difficult
to achieve their target of increasing operating income.
 Variable cost of BPC is less compare to its fixed cost. Contribution margin ratio
of NEA is very less while it is satisfactory in place of BPC.
 BPC is running in profit while NEA is suffering from loss. BPC has earned
reliable profit and has made it able to stand as one of the most successful
enterprise of the country. In other hand, loss of NEA is gradually increasing. No
any systematic plans have been implanted for preventing the loss and improve
profit by NEA.
 BPC has high P/V ratio which reduces the break even level of the company but in
the case of NEA P/V ratio is very less which increase the BEP sales of the
authority.
 BPC’s margin of safety is in average above 50 percent which indicates the safety
of the company. But NEA’s margin of safety is negative due to higher BEP sales
than actual sales or there is no safety margin in NEA.

Based on above findings, Dahal has recommended that:

 In Nepal most of enterprises have no practice of CVP analysis in systematic

manner. So, it is suggested that every enterprises should apply or practice CVP
analysis.
 CVP analysis shows the relationship among the variables related to cost, revenue
and profit. Study of relationship between these variables helps improve the
business condition. So, this tool is very much too every organization.
 BPC and NEA have many expert and skilled manpower but these enterprises have
ignored the practice of CVP analysis. They have not classified or segregated
various types of costs into fixed and variable. It is essential to classify the costs
which help in controlling cost.

52
  Cost plan of both enterprises are not systematically maintained. So cost of every
sector should plan properly. It is necessary to establish cost control program in
these enterprises. It will maintain the discipline on cost control.
 NEA is operating in monopoly situation, strength, weakness, threats, and
opportunity should properly analyze to gain future opportunities.
 Sales revenue of both enterprises is in increasing trend but it is not sufficient to
cover the cost and earn desired profit. The variable cost of NEA is very high
which is required to reduce in future make profit. Sales plan of these enterprises
should clearly maintain and improve to catch market opportunity.
 BPC and NEA should consider BEP analysis while preparing sales plan,
production plan, and setting price of its products.

A Study done by Tomlal Subedhi (2008) Entitled “Fund Management of Hydropower

companies (With Special reference to Chilime Hydropower Company Limited,
Butwal Power Company Limited and National Hydropower Ltd)”. He was
concerned with fund management of these companies analyzing various ratios and of the
five years. He used secondary data of balance sheet and profit and loss a/c of these
companies.

The main objectives of his study were as follows.

 To draw the overviews of the development of private and public hydropower

companies in Nepalese hydropower sector.
 To evaluate the fund management and financial positions of public hydropower
companies with the help of various financial tools.
 To analyze the present trends of public hydropower companies.
 To suggest and recommend possible guidelines on the basis of major findings.

Major findings of his Study were as follows:

1. Current ratio of CHPCL, BPCL and NHPL were in fluctuating trend through out
the study period. The mean ratio of BPCL was higher than CHPCL and NHPL.
Likewise CV of NHPL was lower than CHPCL and BPCL, which means that
CHPCL and BPCL had more fluctuation in ratios as compared with NHPL. Mean

53
 ratio shows the highly liquid position of BPCL, which shows the hydropower
company did not have proper investment plan. CHPCL and NHPL had lower
mean ratio than that of BPCL but these hydropower companies may face the
problem of working capital if they need to pay current liabilities at demand.
Current ratios were in slightly fluctuating trend for CHPCL, BPCL and NHPL.
All three hydropower companies could not maintain the conventional standard of
2.1. However the average ratio of BPCL was greater than that of CHPCL and
NHPL, which signifies that BPCL was more capable of meeting immediate
liabilities in contract to CHPCL and NHPL.
2. Return on shareholder’s equity ratio measures the return on shareholder’s
investment in hydropower companies. The average ratio of CHPCL for the return
on shareholders equity was higher than that of BPCL and NHPL. Likewise the
CV CHPL was lower. The ratios of BPCL and NHPL were increasing trend
through out the study period. But the ratios of CHPCL were in fluctuating trend.
Average return on shareholders equity ratio of CHPCL was fluctuating trend.
3. Long-term debt to net worth ratio showed CHPCL and NHPL had higher long-
term debt for the beginning years and it was in decreasing trend. It shows that
both companies were repaying their debt and they were in sound position for the
settlement of solvency. Average ratio in NHPL was higher than that of CHPCL.
4. In the beginning two years, the hydropower companies applied higher funds on
investing activities because they had to acquire fixed assets and set up their
business at that period. After the commercial operation started, CHPCL and
NHPL applied their higher funds on financing activities for the repayment of long
–term loan.

Subedi has drawn following recommendations:

1. CHPCL and NHPL both hydropower companies have very low liquidity position
because the both current and quick ratios are below the standard. Both
hydropower companies cannot pay short- term liability at the time of their
creditor’s demand. It may create difficult situation in future. So, both hydropower

54
 companies should keep sufficient level of current and quick assets to maintain
their liquidity position.
2. Profitability position of NHPL was weaker than that of CHPCL and BPCL. It
should improve overall efficiency by investing its fund in more returnable assets.
I.e. risky area through proper risk analysis techniques.
3. Debt servicing capacity of NHPL appeared weak. So, it is better to search more
profitable investments by utilizing its capital and revolving fund. The capital
adequacy position of NHPL seems to be less satisfactory than that of CHPCL. So,
it needs to raise the net worth.
4. Earning of NHPL could not grow proportionately because of high cost bearing
outsiders’ fund i.e. debt capital. Therefore, NHPL is suggested to increase the
equity financing and minimize the debt capital.
5. Government should formulate plans and policies to attract private as well as
public investors for the growth of hydropower companies creating investment
friendly environment and focusing on their security in the hydropower
development.

55
2.4. Research Gap

The purpose of this study is to draw some ideas concerning to the financial performance.
In addition to that this study is made to receive some ideas, knowledge and suggestions in
relation to financial performance of hydropower companies. In this context, the previous
studies can’t be ignored because they produced the foundation to the present study. In
other words, there has to be continuity in research. This continuity in research is ensured
by linking the present study with the past research studies. It is clear that the reference of
new research can’t be found on the exact topics, i.e. “Financial Performance Evaluation
of Hydropower Companies” therefore to complete this research work, various books,
journals, articles and various published and unpublished dissertations and field opinion
are followed as guideline to make the research easier and smooth. The researcher can find
out the gaping from the past research that has to be fulfilled by the present research work.
In this regard, here the researcher is going to analyze the different procedure of financial
performance techniques of the selected hydropower companies.

“Financial Performance Evaluation of hydropower Companies” is a new topic for the

research work. It is expected that the uncovered areas of this research work will be
studied. The gapping between old and new research work will be focused and filled up
based on the given objectives and limitation in this research.

56
 CHAPTER- III

RESEARCH METHODOLOGY

3.1. Introduction

Research Methodology can be understood as a science of studying how research has been
done. This chapter looks into the research design, nature and sources of data, data
collection procedure and tools and technique of analaysis. For the purpose of achieving
the objectives of the study, the applied methodologies are used. The research
methodology used in the present study is briefly mentioned below:

3.2. Research Design

For the comparative evaluation of BPC and HPL, descriptive and analytical approaches
were used to evaluate the financial performance of these hydropower companies.
Descriptive approach is utilized for conceptualization, problem identification, conclusion
and suggestion of the study where as analytical approach will be followed the
presentation and analysis of data. Ratio analysis, correlation analyses have been done for
analyzing the research. The data have been analyzed on the basis of standard financial
formulas used in the books of financial management.

3.3. Population and sample

Total numbers of hydropower companies operated in Nepal are population. In Current

situation there are 14 Company in Operation (The Name of the Population are Listed
Below). Among the various companies two companies is selected purposively.

Name of the Private & Public Sectors Hydropower Companies, which are connected
to IPPAN, are listed below:

1. Annapurna Renewable Energy (P). Ltd.

2. Balephi Hydropower Company Limited
3. Bhotekoshi Power Company Private Limited (BKPC)
4. Butwal Power Copmpany Limited (BPC)

57
 5. East Nepal Development Endeavor
6. Himal Power Limited (HPL)
7. Himalayan Hydropower (P). Ltd.
8. Himal Hydropower Company
9. Khudi Hydropower Limited(KHL)
10. Lamjung Electricity Development (P). Ltd. (LEDCO)
11. Manang Trade Link Pvt. Ltd.
12. Molnia Power (P). Ltd.
13. Rairang Hydropower Development Company Private Limited (RHPD)
14. Sanima Hydropower Company (P). Ltd.
(Sourrce: www.ippan.org.np)

Name of the Sample Companies;

1. Butwal Power Company Limited (BPC

2. Himal Power Limited (HPL)

3.4. Sources of Data

The main sources of data for the purpose of this study are the published financial
statements of HPL and BPC. The study is thus mainly based on the secondary data. It
consist the annual reports which comprise Balance sheet and profit and loss account
statement. Information has also been collected from various publication of NEA.

Though the study has basically covers the secondary data, however, in some case primary
data were also obtained through conversation with the engineers and managerial officials
of both companies. All their available published and unpublished materials concerning
the study as well as some journal abstracts have also been used. In addition to that, a
number of relevant websites were visited to ensure the availability of information across
borders regarding the operation of companies.

3.5. Data Collection Procedure/ Techniques

For purpose of this study, following methods/ techniques are used:

58
 A. Secondary Data: The secondary data are collected from published accounting
statements of Himal Power Limited, Butwal power Company Limited, Nepal
Electricity Authority, Report of National Planning Commission.
B. Primary Data: Descriptive analysis is made with the help of primary data.
Primary data are collected by questionnaire and meeting with concern people.

3.6. Data Processing

Data obtained from the various sources can not be directly used in their original form.
Further they need to be verified and simplified for the purpose of analysis. Data
information, figures and facts so obtained need to be checked, rechecked, edited and
tabulated for computation. According to the nature of data, they have been inserted in
meaningful tables. Homogenous data have been sorted in understandable manner, odd
data excluded from the table. Using financial and statistical tools, data have been
analyzed and interpreted.

3.7. Data Analysis Tools

3.7.1. Tools for Secondary Data Analysis

3.7.1.1. Financial Tools

Financial tools are those, which are used for the analysis and interpretation of financial
data. They attempt to explore the financial state of a business and convey the strengths
and weakness of its policies and strategies. The following ratios are used for evaluating
the performance of selected sample companies:

i. Liquidity Ratios

Liquidity ratios measure the firm’s ability to satisfy its short- term commitments out of
current or liquid assets. The two primary test of liquidity are current ratio and quick ratio.

a) Current Ratio (CR)

Current Ratio =

59
b) Quick Ratio (QR)

Quick Ratio =

ii. Activity/ Efficiency/ Assets Management Ratio

Assets management ratios are also known as turnover ratios or activity ratios or
efficiency ratios. Following ratios are calculated to measure how efficiently a firm
employs the assets.

a) Fixed Assets Turnover Ratio

This ratio is calculated by dividing sales by net fixed assets i.e.

Fixed Assets Turnover =

b) Total Assets Turnover Ratio

Total assets turnover Ratio shows the relationship between sales and total assets. So this
ratio is calculated by dividing sales by total assets i.e.

Total Assets Turnover =

c) Average Collection Period

Average collection period is calculated by dividing sales by debtor’s turnover ratio i.e.

Average Collection period =

d) Debtor‟s Turnover ratio

Debtor’s turnover Ratio is calculated by dividing sales by closing debtors. i.e.

Debtor‟s Turnover Ratio = .

60
 e) Capital Employed Turnover Ratio

This ratio is calculated by dividing sales by Capital employed i.e.

Capital Employed Turnover =

iii. Profitability Ratio

Profitability is the end of result of a number of corporate policies and decisions.

Following are the major ratios used to measure the profitability of a firm.

a) Net profit Margin

Net profit Margin is the Ratio between net income and sales of a firm. It is calculated as:

Net Profit Margin =

b) Gross Profit Margin

This Ratio is calculated by dividing gross profit by sales, i.e.

Gross Profit Margin =

c) Operative Expenses Ratio

Operating Expenses Ratio is calculated by dividing total operating expenses by sales, i.e.

Operative Expenses Ratio =

d) Return on Assets

The Return on Assets (ROA), which is often called the firm’s return on total assets,
measure the overall effectiveness of management in generating profit with its available
assets. It is calculated as follows:

61
 Return on Total Assets =

e) Return on share holders equity (ROSHE)

Return on shareholders equity measures the return earned by the shareholders i.e. owners
of the company. This ratio can be calculated by using following formula:

Return on Shareholders‟ equity =

iv. Leverage/ Capital Structure Ratio

The leverage or capital structure Ratio may be defined as financial ratios which throw
light on the long-term solvency of a firm as reflected in its ability to assure the long- term
creditors with regard to (i) periodic payment of interest during the period of the loan and
(ii) repayment of principal on maturity or in predetermined instalments at the due dates.
This ratio indicates the mix of fund provided by owners and lenders.

a) Debt-Equity Ratio (D/E Ratio)

Debt to Equity Ratio is calculated dividing total debts by total shareholders equity. This
ratio shows the relationship between debt capital and equity capital.

Debt to Equity Ratio =

b) Debt to Total Assets Ratio (DTAR)

Debt to Total Assets Ratio is calculated dividing total debts by total assets. This ratio
shows the relationship between debt capital and total assets.

Debt to Total Assets Ratio =

62
 v. Invisibility Ratio

An analysis of invisibility Ratios helps the investors to know about the performance of
the company. Therefore following ratios have been calculated to rest earning capacity.

a) Earning Per Share (EPS)

This ratio is calculated dividing net profit after Taxes (EAT) by number of equity share
outstanding. It is calculated by using following formula

Earning Per Share =

b) Dividend Per Share (DPS)

The dividend per share (DPS) is the per share earnings distributed to the shareholders. It
can be calculated by following formula:

Dividend per Share =

c) Dividend Payout Ratio

This Ratio is the ratio between dividends per share (DPS) to earning per share (EPS) is
known as Dividend Payout Ratio. It can be computed by the following way.

Dividend Payout Ratio =

3.7.1.2. Statistical Tools

Statistical tools present the relationship among certain variables based on past trend and
help predict future values of one or more variable given the change in other associated
variables. These tools are useful to researcher in order to draw liable financial
consumptions from data available. The following statistical tools are used in this study
for evaluating the performance of selected companies.

63
 I. Arithmetic Mean

Arithmetic Mean (A.M) is the most commonly used of all the average. This is due to the
simplicity of its calculation and other advantage.Arithmetic Mean of given set of
observation is their sum divided by the number of observations. In general, if X 1, X2,
X3.................Xn are the given observations and N being number of observations, then
arithmetic mean usually denoted by is given by:

= =

II. Coefficient of Variation (CV)

Coefficient of Variation is method of measuring risk. It is the standardized measure of the

risk per unit of return. It is the percentage variance in the mean. Standard deviation is
considered as the total variation in the mean Coefficient of variation, denoted by CV is
given by:

CV = ×100%

Where, =

III. Co-efficient of Correlation (r)

It is a Statistical tool for measuring the intensity of the magnitude of linear relationship
between two series. Karl Pearson’s correlation coefficient measures the degree of linear
association between two variables. Let X and Y are two variables. Karl Pearson’s
Correlation coefficient between X and y is generally Denoted by r xy or simply r only. It is
defined as Follows:

r=

64
 Where,

N = Number of observation

∑X = Sum of observation in Series X

∑Y = Sum of observation in Series Y

∑X2 = Sum of squared observation in Series X

∑y2 = Sum of squared observation in Series Y

∑XY = Sum of the product of observation in Series X and Y

IV. Least Square Linear Trend

Trend Analysis is very useful and commonly applied tool to forecast the future event in
quantitative term, On the basis of the tendencies in the dependent variable in the past
period. The straight line trend implies that irrespective of the seasonal and cyclical as
well as irregular fluctuation, the trend values increase by absolute in arithmetic
Progression.

Mathematically Y = a+ bX

Where, Y= Value of the dependent Variable

a = Y- intercept

b = slope of the trend line

X = Value of the independent Variable

Normal equations fitting above equation are:

∑Y = Na + b∑X

∑XY = a∑X + b∑X2

Since, ∑X = 0, a = , and b ==

65
3.8. Research Variables

The research Variables are mainly related with the financial statements of BPC and HPL.
Profit and loss account, balance sheet, cash flow statement and time period are the main
research variable of the study, these variables are measured in terms of various
components of ratios.

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 CHAPTER IV

PRESENTATION AND ANALYSIS OF DATA

This chapter deals with presentation, analysis and interpretation of relevant data and
information of Butwal Power Company and Himal Power Company. To obtain the best
result data have been analyzed and interpreted using financial and statistical tools
according to the research methodology mentioned in the third chapter.

This chapter is partitioned into two sub heads as presentation of data from secondary
sources, and major findings of the study.

4.1 Presentation and Analysis of Data From Secondary Sources

The collected data are presented in this chapter. This section includes the data collected
from secondary sources. Secondary sources mean the data of the private-public sectors
hydropower companies derived from their annual reports, webpage and other already
published sources. The presentation and analysis of these numerical dates include ratio
analysis and correlation analysis.

4.1.1 Liquidity Ratio

Liquidity Ratios are used to judge the companies ability to meet the short term
obligations. These ratios involve the relationship between current Assets and Current
Liabilities and measured by current ratio and quick ratio.

a. Current Ratio

The current ratio of different sampled years has been presented in the table No. 4.1
below.

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 Table No 4.1

Calculation of Current Ratio

(In, 000)

Fiscal Year Current Assets Current Liabilities Ratio (Times)

BPC HPL BPC HPL BPC HPL
2001/02 286,201 2104,519 54,012 873,979 5.30 2.41
2002/03 520,987 2417,624 280,166 1086,310 1.86 2.23
2003/04 481,833 1894,736 207,655 485,105 2.32 3.91
2004/05 335,582 2182,303 54,172 809,554 6.19 2.70
2005/06 543,416 2326,983 433,619 784,873 1.25 2.96
2006/07 670,674 2230,147 562,584 881,517 1.19 2.53
2007/08 776,080 1703,231 595,871 443,000 1.30 3.84

Mean ( 2.77 2.94

Standard Deviation (σ) 1.936 0.63

Coefficient of Variation (CV) % 69.89 21.43
Sources: Annual Report of BPC &HPL (F/Y 2001/02-2007/08)

Looking over the trend of current ratio of BPC over 7 Years, it can be observed that other
than last three years, the company’s current ratio has remained satisfactory. Increased
creditors and payables of BPC is the reason for decreased current ratio in last three years.
On the Contrary, Current ratio of HPL has remained satisfactory.

BPC has fluctuating trend of current ratio, but average mean of Current ratio of 2.77
seems to be over than the conventional standard of 2:1 which suggest the sound liquidity
position. Similarly Current ratio of HPL is stable than BPC. Every year, the Current ratio
of HPL is over standard 2.1 and average mean is also over standard 2.1 (2.94>2.1).
Likewise BPC has a Higher CV than that of HPL which means that BPC has more
fluctuations in ratio than HPL. So Both Companies Current ratio position is satisfactory
but, comparatively the position of HPL is better than BPC.

68
 Figure No 4.1

The graphical presentation of current ratio shows that the current ratios of BPC have
more fluctuations since F/Y 2003/04 to 2005/06. It has increased in F/Y 2004/05 and
decreased in F/Y 2005/06. In contract, the current ratio of HPL has been slightly
increasing or decreasing trend since starting year to ending year.

Current Ratio of Butwal Power Company

(In 000)

Fiscal Year Current Assets Current Liabilities Ratio(Times)

2008/09 7,43,837 6,24,543 1.19
2009/10 651,519 5,66,569 1.15

Source: Annual Report of BPC FY 2009/10

In the year 2009/10, the current ratio of BPC has remained 1.19 and 1.15.
Comparatively, it has remained stable since the past four years.

69
 b. Quick Ratio

Table No 4.2

Calculation of Quick Ratio

(In, 000)

Fiscal Year Quick Assets Current Liabilities Ratio (Times)

BPC HPL BPC HPL BPC HPL
2001/02 236,064 2104,033 54,012 873,979 4.37 2.41
2002/03 477,002 2417,624 280,166 1086,310 1.70 2.23
2003/04 440,067 1894,736 207,655 485,105 2.12 3.91
2004/05 287,544 2182,303 54,172 809,554 5.31 2.70
2005/06 485,793 2326,983 433,619 784,873 1.12 2.96
2006/07 611,778 2215,154 562,584 881,517 1.09 2.51
2007/08 701,432 1683,337 595,871 443,000 1.18 3.80

Mean ( 2.41 2.93

Standard Deviation (σ) 1.60 0.63

Coefficient of Variation (CV) % 66.39 21.50
Sources: Annual Report of BPC &HPL (F/Y 2001/02-2007/08)

Above table reveals a fluctuating but satisfactory trend of quick ratio of BPC with a mean
of 2.41. Similarly quick ratio of HPL is also satisfactory with a mean of 2.93. Standard
deviation and CV of BPC is 1.60 and 66.39. In contrast Standard deviation and CV of
HPL are .63 and 21.50 it means that risk of BPC is higher than HPL.

70
 Figure No 4.2

The graphical presentation of quick ratios shows that the quick ratio of BPC experienced
a fluctuating in F/Y 2003/04 and since F/Y 2004/05 it has been decreasing gradually. In
contrast, the current ratio of HPL has been slightly increasing and decreasing over study
period.

Quick Ratio of Butwal Power Company

(In, 000)

Fiscal Year Quick Assets Current Ratio(Times)

Liabilities
2008/09 651114 6,24,543 1.04
2009/10 546976 5,66,569 0.96
Source: Annual Report of BPC (2009/10)

The quick ratio of BPC has remained 1.04 and 0.96 in the year 2009 and 2010
respectively. Comparatively, for three years it has been in decreasing trend.

71
 4.1.2 Activity/ Efficiency/ Assets Management Ratios

a) Fixed Assets Turnover Ratio

Table No 4.3
Calculation of Fixed Assets Turnover Ratio
(In, 000)
Fiscal Year Sales Fixed Assets Ratio (Times)
BPC HPL BPC HPL BPC HPL
2001/02 236,278 2171,039 778,913 7548,112 0.30 0.29
2002/03 96,364 2193,850 763,484 8570,394 0.13 0.26
2003/04 283,167 2092,032 727,340 8213,644 0.39 0.25
2004/05 323,134 2104,124 714,016 7908,173 0.45 0.27
2005/06 358,419 2121,897 743,605 7551,062 0.48 0.28
2006/07 379,769 2307,461 743,893 7203,678 0.51 0.32
2007/08 421,687 2132,995 725,742 7002,613 0.58 0.30

Mean ( 0.406 0.281

Standard Deviation (σ) 0.139 0.026

Coefficient of Variation (CV) % 34.24 9.25
Sources: Annual Report of BPC &HPL (F/Y 2001/02-2007/08)

In above table, we can find that, Fixed Assets turnover ratio of BPC is increasing trend
except F/Y 2002/03. BPC has used its fixed assets quite adequately; generally an overall
mean sale of Rs 0.406 out of each rupee invested in fixed assets. Similarly Fixed assets
turnover ratio of HPL is slightly decreasing From F/Y 2002/03 to 2003/04, then slightly
increasing since F/Y 2004/05 to F/Y 2006/07 and last year has decreasing. Average mean
sale of HPL is Rs 0.281 out of each rupee invested in fixed assets. CV of HPL is 9.25%
which is less than the CV of BPC 34.24% thus the volatility of ratio is lower in HPL but
HPL has not used its fixed assets quite adequately than BPC.

72
 Figure No 4.3

Graphical Presentation of Fixed Assets Turnover Ratios

0.7
0.6
0.5
Ratios

0.4
0.3
BPC
0.2
0.1 HPL
0
2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08

Fiscal Year

The graphical presentation of fixed assets turnover ratios shows that the FATOR of BPC
experienced a bulky drop in F/Y 2002/03 and after recovery the New Year, since then it
has been increasing steadily. In contrast, the FATOR of HPL has slightly decreased in
first three years then slightly decreased in next 3 years and at last increased but stable
trend.

Fixed Asset Turnover Ratio of Butwal Power Company

(In, 000)

Fiscal Year Sales Fixed Assets Ratio(Times)

2008/09 4,30,800 7,65,339 0.56
2009/10 4,53,431 7,81,666 0.58

Source: Annual Report of BPC (2009/10)

The fixed asset turnover ratio of BPC is in increasing trend for last two years.

73
 b) Total Assets Turnover Ratio

Table No 4.4
Calculation of Total Assets Turnover Ratio
(In, 000)

Fiscal Year Sales Total Assets Ratio (Times)

BPC HPL BPC HPL BPC HPL
2001/02 236,278 2171,039 1622,165 9679,770 0.15 0.22
2002/03 96,364 2193,850 1825,464 10999,525 0.05 0.19
2003/04 283,167 2092,032 1579,195 10110,846 0.18 0.21
2004/05 323,134 2104,124 1439,238 10098,600 0.22 0.21
2005/06 358,419 2121,897 1744,447 9897,922 0.21 0.21
2006/07 379,769 2307,461 1882,271 9454,424 0.20 0.24
2007/08 421,687 2132,995 1986,926 8728,710 0.21 0.24
Mean ( 0.174 0.217

Standard Deviation (σ) 0.056 0.017

Coefficient of Variation (CV) % 32.18 7.83
Sources: Annual Report of BPC &HPL (F/Y 2001/02-2007/08)

Above table reveals a fluctuating and unsatisfactory trend of TATOR of BPC with a
mean of 0.174. In contrast, HPL has better TATOR mean of 0.217 and a rather
incremental trend except F/Y 2002/03. HPL also has less volatility in TOTAR with
compared to BPC which is indicated by its CV. Considering the result of TATOR, it can
be concluded that BPC is utilizing its current assets inefficiency or in other words, it has
heavily invested in current assets. However this also indicates that HPL has a weaker
liquidity position with compared to BPC.

74
 Figure No 4.4

The graphical presentation of TOTARs shows that the TATOR of BPC experienced a big
drop in F/Y 2002/03 and after increasing rapidly for next two years. It has again dropped
in F/Y 2005/06 and F/Y 2006/07 and at last F/Y 2007/08 also slightly increased. In
contrast the TATOR of HPL has been drop in F/Y 2002/03 then after increasing steadily.

Total Asset Turnover Ratio of Butwal Power Company

(In, 000)

Fiscal Year Sales Total Assets Ratio(Times)

2008/09 4,30,800 22,64,200 0.19

2009/10 4,53,431 23,41,444 0.19

Source: Annual Report of BPC (2009/10)

The Total Asset turnover ratio of BPC is stable in the year fiscal 2009 and 2010.

75
 c) Debtors Turnover Ratio/ Receivable Turnover Ratio

Table No 4.5

Calculation of Debtor’s Turnover Ratio

(In, 000)

Fiscal Year Sales Closing Debtors Ratio (Times)

BPC HPL BPC HPL BPC HPL
2001/02 236,278 2171,039 41,190 386,388 5.74 5.62
2002/03 96,364 2193,850 36,224 396,465 2.66 5.53
2003/04 283,167 2092,032 31,309 416,028 9.04 5.03
2004/05 323,134 2104,124 42,921 393,674 7.53 5.34
2005/06 358,419 2121,897 35,512 428,146 10.09 4.96
2006/07 379,769 2307,461 58,918 417,834 6.45 5.52
2007/08 421,687 2132,995 88,407 430,109 4.77 4.96

Mean ( 6.611 5.28

Standard Deviation (σ) 2.350 0.269

Coefficient of Variation (CV) % 35.55 5.09
Sources: Annual Report of BPC &HPL (F/Y 2001/02-2007/08)

Above table reveals a fluctuating trend of DTR of BPC except fiscal year 2007/08 and
slightly increasing and decreasing trend of DTR of HPL. Due to considerably increased
amount of debtors or receivable, the DTR of BPC and HPL have dropped to 4.77 and
4.96 respectively after experiencing a high turnover in the year 2007/08.

The mean DTR of BPC is slightly higher than that of HPL but HPL seems to have a
much stable trend of ratios with compared to BPC which is reflected by their
corresponding standard deviation of ratios. The CV with respect to DTR of BPC and
HPL are 35.55% and 5.09% respectively.

76
 Figure No 4.5

The graphical presentation of DTRs shows that the DTR of BPC has experienced rapid
ups and downs through the study period. In contrast, the DTR of HPL has slightly
decreased from first F/Y to 3rd F/Y then slightly increased in F/Y 2004/05 then slightly
decreased or increased through the study period.

Debtors Turnover Ratio of Butwal Power Company

(In, 000)

Fiscal Year Sales Closing Debtors Ratio(Times)

2008/09 4,30,800 1,71,359 2.51
2009/10 4,53,431 93,690 4.84

Source: Annual Report of BPC (2009/10)

The debtor’s turnover ratio of Butwal Power Company has decreased in the year 2009.
But in the Fiscal year 2010 it has increased.

77
 d) Average Collection Period (ACP)

Table No 4.6

Calculation of Average Collection Period

(In, 000)

Fiscal Year Days in a Year Debtors Turnover Ratio Average Collection

Period (Days)
BPC HPL BPC HPL
2001/02 360 5.74 5.62 63 64
2002/03 360 2.66 5.53 135 65
2003/04 360 9.04 5.03 40 72
2004/05 360 7.53 5.34 48 67
2005/06 360 10.09 4.96 36 73
2006/07 360 6.45 5.52 56 65
2007/08 360 4.77 4.96 75 73

Mean ( 65 68

Standard Deviation (σ) 30.659

8.527
Coefficient of Variation (CV) % 47.17
12.54
Sources: Annual Report of BPC &HPL (F/Y 2001/02-2007/08)

Above table reveals a very fluctuating trend of ACP of BPC with a mean of 65 days.
Except F/Y 2007/08, last four fiscal years of BPC present a very recovering trend of ACP
and more enthusiastic than that of HPL. ACP of HPL is 3 days more than BPC but Stable
trend of AC It has less volatility in ratios presented by CV of 12.54%. In contrast, BPC
has a CV of 47.17% which indicates its instable trait of receivable management.

78
 Figure No 4.6

The Graphical presentation of ACPs shows that ACP of BPC experienced rapid ups and
down for the first 3 years of study and since then it has remained considerably consistent.
In Contrast, the ACP of HPL has slightly increasing or decreasing trend over the study
period.

Calculation of Average Collection Period

(In, 000)

Fiscal Year Days in Year Debtors Ratio Average

Collection
Period(days)
2008/09 360 2.51 144
2009/10 360 4.84 75
Source: Annual Report of BPC (2009/10)

In the Fiscal year 2008/09, the average collection period of Butwal Power Company has
remained 144 days, which is quite higher then the last year. But in the year 2009/2010 it
has decreased to 75 days.

79
 e) Capital Employed Turnover Ratio

Table No 4.7
Calculation of Capital Employed Turnover Ratio
(In, 000)

Fiscal Year Sales Capital Employed Ratio (Times)

BPC HPL BPC HPL BPC HPL
2001/02 236,278 2171,039 1568,153 8805,791 0.15 0.25
2002/03 96,364 2193,850 1545,298 9913,215 0.06 0.22
2003/04 283,167 2092,032 1345,784 9625,740 0.21 0.22
2004/05 323,134 2104,124 1380,528 9289,046 0.23 0.23
2005/06 358,419 2121,897 1300,568 9113,048 0.28 0.23
2006/07 379,769 2307,461 1294,863 8572,907 0.29 0.27
2007/08 421,687 2132,995 1395,820 8285,711 0.30 0.26

Mean ( 0.217 0.24

Standard Deviation (σ) 0.081 0.017

Coefficient of Variation (CV) % 37.33 7.08
Sources: Annual Report of BPC &HPL (F/Y 2001/02-2007/08)

Above table, depicts that the Capital Turnover ratio of BPC is increasing trend except
F/Y 2002/03. In contrast the capital turnover ratio of HPL is decreasing in F/Y 2002/03
and stable in 2003/04 then slightly increasing trend except F/Y 2007/08. Coefficient of
variation (CV) of BPC is more (37.33) then HPL (7.08) because of low average mean and
high fluctuation in 2003/03. CETR of HPL is satisfactory trend.

80
 Figure No 4.7

The Graphical presentation of Capital Employed ratios shows that capital employed ratio
of BPC experience rapid down in 2002/03 and rapidly increase in 2003/04 then slightly
increase since 2003/04 to 2007/08. In contrast, the Capital employed turnover ratio of
HPL has slightly increased or decreased the study period.

4.1.3 Profitability Ratio

Profitability Ratios measure the success of the company in earning a net return on sales
or on investment.

81
 a) Net Profit Margin

Table No 4.8

Calculation of Net Profit Margin

(In, 000)

Fiscal Net Profit After Tax Sales Ratio %

Year BPC HPL BPC HPL BPC HPL
2001/02 124,626 960,034 236,278 2171,039 52.75 44.22
2002/03 (44,944) 773,597 96,364 2193,850 -46.64 35.26
2003/04 235,418 893,285 283,167 2092,032 83.14 42.70
2004/05 197,761 1162,551 323,134 2104,124 61.20 55.25
2005/06 288,419 878,986 358,419 2121,897 80.47 41.42
2006/07 252,840 1482,560 379,769 2307,461 66.58 64.25
2007/08 353,879 981,533 421,687 2132,995 83.92 46.02
Mean ( 54.49 47.02

Standard Deviation (σ) 34.71 8.94

Coefficient of Variation (CV) % 63.70 19.01
Sources: Annual Report of BPC &HPL (F/Y 2001/02-2007/08)

Above table reveals a fluctuating trend of BPC. In F/Y 2002/03, BPC has suffered a loss
of 64.64% due to decreased sales. However, the NPR has remained admirable in later
years with an overall mean ratio of 54.49%. In contrast, NPR of HPL has increasing or
decreasing trend over study period but stable then BPC. Mean of HPL has not better
47.02% but HPL has less volatility because of low fluctuation trend of NPR then BPC.
The CV with respect to NPR of BPC and HPL are 63.70% and 19.01% respectively.

82
 Figure No 4.8

The graphical presentation of NPR shows that after experiencing a massive drop in F/Y
2002/03 and rapid recovery the following year, the NPR of BPC since then, has been
experiencing ups and downs in its NPR to a range of 20%. In contrast, the NPR of HPL
has been decreasing and increasing in its NPR to a range of 4 to 18%

Calculation of Net Profit Margin of Butwal Power Company

In (000)

Fiscal Year Net Profit After Sales Ratio (%)

Tax
2008/09 2,91,592 4,30,800 67.68%
2009/10 2,24,233 4,53,431 49.45%

Source: Annual Report of BPC (2009/10)

83
 b) Operating Profit Ratio

Table No 4.9

Calculation of Operating Profit Ratio

(In, 000)

Fiscal Operating Profit Sales Ratio %

Year BPC HPL BPC HPL BPC HPL
2001/02 167,142 1944,732 236,278 2171,039 71 90
2002/03 22,123 1927,893 96,364 2193,850 23 88
2003/04 209,373 1828,348 283,167 2092,032 74 87
2004/05 230,695 1843,544 323,134 2104,124 71 88
2005/06 272,809 1895,080 358,419 2121,897 76 89
2006/07 276,296 2033,076 379,769 2307,461 73 88
2007/08 299,046 1736,457 421,687 2132,995 71 81
Mean ( 66 87

Standard Deviation (σ) 15.77 7.56

Coefficient of Variation (CV) % 23.89 8.69
Sources: Annual Report of BPC &HPL (F/Y 2001/02-2007/08)

Table 4.10 depicts that the operating Profit Ratio of BPC has stable except fiscal year
2002/03. Slightly increasing or decreasing trend over study period. Similarly the
operating profit ratio of HPL has better and stable, slightly increasing or decreasing trend
over study period. CV of BPC and HPL are 23.89% and 8.69% respectively.

The operating profit ratio of BPC and HPL seems to be better. Generally a 40% ratio is
supposed good and only in F/Y 2002/03 has less than 40% of BPC but, HPL Maintain
better OPR all over study period.

84
 Figure No 4.9

The Graphical presentation of operating profit ratios shows that operating profit ratio of
BPC has rapidly drop in F/Y 20002/03 and rapidly recovered in F/Y 2003/04 then
increasing trend before last fiscal year 2007/08 and slightly decreased in 2007/08.

Similarly, operating profit ratios of HPL has slightly increasing and decreasing trend over
the study period, slightly decreasing trend in first three year. Increasing in next two years
then decreasing in last two years but stable.

85
 c) Operating Expenses Ratio (OER)

Table No 4.10

Calculation of Operating Expenses Ratio

(In, 000)

Fiscal Year Operating Expenses Sales Ratio %

BPC HPL BPC HPL BPC HPL
2001/02 89,303 242,951 236,278 2171,039 37.80 11.19
2002/03 85,856 280,076 96,364 2193,850 89.10 12.76
2003/04 85,485 271,344 283,167 2092,032 30.19 12.97
2004/05 104,799 280,733 323,134 2104,124 42.43 13.34
2005/06 102,461 271,626 358,419 2121,897 28.59 12.80
2006/07 116,642 353,751 379,769 2307,461 30.71 15.33
2007/08 147,685 445,106 421,687 2132,995 35.02 20.87

Mean ( 40.55 14.18

Standard Deviation (σ) 20.03 2.95

Coefficient of Variation (CV) % 49.40 20.80
Sources: Annual Report of BPC &HPL (F/Y 2001/02-2007/08)

Above table a shows a fluctuating trend of Operating Expenses Ratio of BPC with a
range of 60.51% and mean ratio of 40.55%. After fiscal year 2002/03, BPC has been able
to maintain a decreasing trend of operating expenses ratio around 30%. In Contrast, HPL
has maintained an admirably low and consistent trend of OER with a mean ratio of
14.18% and CV of 20.80%. These ratios indicate that BPC has considerably high
operating costs with compared to HPL. The rate of fluctuation in ratios is also high in
BPC with a CV of 49.40%

86
 Figure No 4.10

The graphical presentation of OERs shows that after a huge increase in F/Y 2002/03, the
OER of BPC dropped massively the following year and since, then it has been
experiencing small ups and downs in its OER. In contrast, the OER of HPL has remained
much stable since the first year of its operation.

87
 d) Return On Total Assets (ROTA)

Table No 4.11

Calculation of Return on Total Assets Ratio

(In, 000)

Fiscal Year Net Profit + Interest Total Assets Ratio %

BPC HPL BPC HPL BPC HPL
2001/02 124,626 1644,573 1622,165 9679,770 7.68 16.99
2002/03 (44,944) 1423,961 1825,464 10999,525 (2.46) 12.95
2003/04 235,418 1458,182 1579,195 10110,846 14.91 14.42
2004/05 197,761 1655,154 1439,238 10098,600 13.74 16.39
2005/06 288,419 1315,243 1744,447 9897,922 16.53 13.29
2006/07 252,840 1843,439 1882,271 9454,424 13.43 19.50
2007/08 353,879 1255,597 1986,926 8728,710 17.81 14.38

Mean ( 11.66 15.42

Standard Deviation (σ) 6.36 2.14

Coefficient of Variation (CV) % 54.55 13.88
Sources: Annual Report of BPC &HPL (F/Y 2001/02-2007/08)

Above table reveals a fluctuating trend of ROTA of BPC with a mean ratio of 11.66%.
BPC does not carry loan burden therefore does not include interest calculation while
computing ROTA. In F/Y 2002/03, BPC has suffered a negative ROTA of 2046% due to
a loss of Rs 44,944. However, thereafter, the ROTA has been satisfactory. In contrast,
HPL has maintained stable trend of ROTA. It has slightly fluctuation with an overall
mean ratio of 15 .42. ROTA of HPL has slightly increased in one year then slightly
decreased in another year and it also more stability in ratios which is indicated by a CV
of 13.88%. BPC, with a lower mean ratio of ROTA and higher CV of ratios Proves to be
less attractive than HPL to investors and lenders.

88
 Figure No 4.11

The Graphical presentation of ROTA ratios shows that the ROTA of BPC dropped in F/Y
2002/03; however it recovered profusely the following year. Since F/Y 2003/04, the ROE
of BPC has been experiencing small ups and downs in ROTA. In contrast, the ROTA of
HPL has been slightly increased or decreased over 7 year study period except F/Y
2006/07.

Calculation of Return on Total Assets of Butwal Power Company

In (000)

Fiscal Year Net Profit After Total Assets Ratio (%)

Tax
2008/09 2,91,592 22,64,200 12.87%
2009/10 2,24,233 23,41,444 9.56%

Source: Annual Report of BPC (2009/10)

89
 e) Return on Shareholders‟ Equity (ROSHE)

Table No 4.12

Calculation of Return on Shareholders‟ Equity

(In, 000)

Fiscal Year Net Profit After Tax Shareholders’ Equity Ratio %

BPC HPL BPC HPL BPC HPL
2001/02 124,626 960,034 1515,075 3123,889 8.23 30.73
2002/03 (44,944) 773,597 1537,645 3483,863 (2.92) 22.21
2003/04 235,418 893,285 1345,784 3818,257 17.49 23.39
2004/05 197,761 1162,551 1380,528 4302,006 14.32 27.02
2005/06 288,419 878,986 1300,568 4514,727 22.18 19.47
2006/07 252,840 1482,560 1294,863 5140,056 19.53 28.84
2007/08 353,879 981,533 1395,820 5317,483 25.35 18.46

Mean ( 14.88 24.30

Standard Deviation (σ) 9.24 4.36

Coefficient of Variation (CV) % 62.10 17.94
Sources: Annual Report of BPC &HPL (F/Y 2001/02-2007/08)

Above table reveals a fluctuating trend of BPC with a mean ratio of 14.88%. In F/Y
2002/03, BPC has suffered a negative ROE of 2.92%, due to loss of Rs 44,944. However,
after that the ROE has been satisfactory revolving around 20%. In Contrast, HPL has
maintained considerable higher trend of ROE with an overall mean ratio of 24.30% and
CV of 17.94%. HPL has also slightly fluctuated since fiscal year 2004/05but has higher
ROE than BPC. BPC with a lower mean ratio of ROE and higher CV of ratios proves to
be less attractive than HPL to shareholders.

90
 Figure No 4.12

Graphical Presentation of Return on Shareholders Equity

40

30
Ratios in %

20
BPC
10
HPL
0
2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08
-10
Fiscal Year

The Graphical Presentation of ROE ratios that the ROE of BPC dropped in F/Y 2002/03:
however it recovered profusely the following year and at last year BPC has maintain
higher ROE. Similarly ROE of HPL has slightly fluctuated since F/Y 2002/05 but HPL
has maintained higher ROE than BPC.

4.1.4 Leverage/ Capital Structure Ratios

Leverage Ratio also called as Capital Structure Ratios are calculated to judge the long
term financial position of the company. This ratio indicates the mix of fund provided by
owners and lenders.

a) Debt-Equity Ratio (D/E Ratio)

Debt to shareholders Equity is calculated dividing total debts by Total Shareholders

equity. This ratio shows the relationship between debt and equity capital.

b) Debt-To Total Assets Ratio (DTAR)

Debt to Total Assets Ratio is calculated dividing total debt by total assets. This ratio
shows the relationship between debt capital and total assets.

91
 Table No 4.13

Calculation of Leverage Ratios

(In, 000)

Fiscal Year Total Debt Of Shareholders Total Assets Leverage Ratios

HPL Equity of Of HPL Of HPL
HPL Debt to Equity Debt to
Total Assets
2001/02 5681,902 3123,889 9679,770 1.82 0.59
2002/03 6429,352 3483,863 10999,525 1.85 0.58
2003/04 5807,484 3818,257 10110,846 1.52 0.57
2004/05 4987,040 4302,006 10098,600 1.16 0.49
2005/06 4598,322 4514,727 9897,922 1.02 0.46
2006/07 3432,851 5140,056 9454,424 0.67 0.36
2007/08 2968227 5317,483 8728,710 0.56 0.34

Mean ( 1.23 0.48

Standard Deviation (σ) 0.48 0.12

Coefficient of Variation (CV) % 39.02 25
Sources: Annual Report of BPC &HPL (F/Y 2001/02-2007/08)

Above table reveals a decreasing trend of leverage ratios of HPL. The debt to
shareholders equity ratio has fallen from 1.85 to 0.56 in last six years due to continuously
decrease in long- term debt except F/Y 2002/03 and increase in shareholders equity.
Similarly, the debt to total assets ratio has fallen from 0.59 to 0.34 in last 7 years.

92
 Figure No 4.13

The Graphical presentation of leverage shows that the leverage ratios of HPL have been
decreased gradually through study period.

4.1.5 Invisibility Ratio

An analysis of invisibility ratios helps the investors to know about the performance of the
company. Therefore following ratios have been calculated to rest earning capacity.

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 a) Earning Per Share (EPS)

Table No 4.14

Calculation of Earning Per Share

Fiscal Year Earning After Tax No of Equity Share Rs

BPC HPL BPC HPL BPC HPL
2001/02 124,626,123 960,034,374 8390,580 17641,439 14.85 54.42
2002/03 (44,944,141) 773,597,416 8390,580 17641,439 (5.36) 43.85
2003/04 235,418,698 893,285,038 8390,580 17641,439 28.06 50.64
2004/05 197,761,775 1162,550,597 8390,580 17641,439 23.57 65.90
2005/06 288,418,689 878,985,535 8390,580 17641,439 34.37 49.82
2006/07 252,839,960 1482,560,083 8390,580 17641,439 30.13 84.04
2007/08 353,879,380 981,532,807 8390,580 17641,439 42.18 55.64

Mean ( 23.97 57.76

Standard Deviation (σ) 14.05 12.41

Coefficient of Variation (CV) % 58.61 21.49
Sources: Annual Report of BPC &HPL (F/Y 2001/02-2007/08)

We can find huge difference between the fluctuating trends of EPS of BPC and HPL.
While BPC is yielding a satisfactory mean EPS of Rs 23.97. HPL is yielding on better
mean EPS of Rs 57.76. In F/Y 2002/03, BPC has suffered a negative EPS of Rs 5.36 due
to a loss of Rs 44,944,141. However, thereafter the EPS of BPC has been much better
revolving around of Rs 30. HPL has less Variability in ratios, because of its High EPS.
The CV with respect to EPS of BPC and HPL are 58.61% and 21.49% respectively.

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 Figure No 4.14

The Graphical presentation of EPS ratios shows that the EPS of BPC dropped in F/Y
2002/03: however it recovered profusely the following years. Since, F/Y 2003.04, the
EPS of BPC has been experiencing small ups and downs in its EPS. In contrast, the EPS
of HPL has been experiencing bigger ups and downs since F/Y 2004/05 in its EPS.

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 b) Dividend Per Share (DPS)

Table No 4.15

Calculation of Dividend per Share

Fiscal Year Total Distributed dividend No of Equity Share Rs

BPC HPL BPC HPL BPC HPL
2001/02 83,905,800 293,358,000 8390,580 17641,439 10 17
2002/03 0 413,623,000 8390,580 17641,439 0 23
2003/04 335,623,200 558,891,200 8390,580 17641,439 40 32
2004/05 293,670,300 678,801,400 8390,580 17641,439 35 38
2005/06 251,718,000 666,265,000 8390,580 17641,439 30 38
2006/07 251,635,000 887,760,000 8390,580 17641,439 30 50
2007/08 251,717,300 804,105,000 8390,580 17641,439 30 46

Mean ( 25 34.86

Standard Deviation (σ) 13.36 10.95

Coefficient of Variation (CV) % 53.44 31.41
Sources: Annual Report of BPC &HPL (F/Y 2001/02-2007/08)

Above table reveals fluctuating trend of DPS of BPC in Fiscal Year 2002/03, BPC has
not distributed any dividend due to ma loss of Rs 44,944, While DPS of BPC of last 3
years is constant i.e. Rs 30. In Contrast, the DPS of HPL is increasing trend except last
year. DPS of HPL is better than BPC. The Mean DPS of BPC and HPL are Rs 25 and Rs
34.86 respectively. The CV with respect to DPS of BPC and HPL are 53.44% and
31.41% respectively which indicates high fluctuations in DPS of BPC rather than HPL.

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 Figure No 4.15

The graphical presentation of DPS ratios shows that BPC have been experiencing highly
fluctuating DPS ratios through the beginning of the study period. The EPS of BPC
dropped 0 % in F/Y 2002/03; however it jumped on 40% the following year then the DPS
ratios of BPC can be stable in last 3 years. In contrast DPS ratios of HPL has stable and
increasing trend from starting study period to 6 years and slightly decreased in F/Y
2007/08.

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 c) Dividend Payout Ratio (DPR)

Table No 4.16

Calculation of Dividend Payout Ratio

Fiscal Year Dividend Per Share Earning Per Share Ratios %

BPC HPL BPC HPL BPC HPL
2001/02 10 17 14.85 54.42 67.34 31.24
2002/03 0 23 (5.36) 43.85 0 52.45
2003/04 40 32 28.06 50.64 142.55 63.19
2004/05 35 38 23.57 65.90 148.49 57.66
2005/06 30 38 34.37 49.82 87.29 76.27
2006/07 30 50 30.13 84.04 99.57 59.50
2007/08 30 46 42.18 55.64 71.12 82.67

Mean ( 88.05 60.43

Standard Deviation (σ) 46.64 15.46

Coefficient of Variation (CV) % 52.97 25.58
Sources: Annual Report of BPC &HPL (F/Y 2001/02-2007/08)

Above table reveals the fluctuating trend of DPR of both Companies. In F/Y 2002/03,
BPC has not distributed any dividend due to loss of Rs 44944. The DPR of F/Y 2003/04,
2004/05 &2005/06 has been much luring to the investors of BPC revolving around 120%.
In contrast, HPL shows the lower DPR than BPC but it has stable compared then BPC.
The CV with respect to DPR of BPC and HPL are 52.97% and 25.58%. Due to high
fluctuation, CV of BPC is higher than HPL.

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 Figure No 4.16

The Graphical presentation of DPR ratios shows that BPC has been experiencing highly
fluctuating DPR through the study period. The DPR of BPC dropped to 0% in F/Y
2002/03; however it jumped on 142% the following year. The DPR ratio of HPL has
lower than BPC in ove3rall study period but it can be considered much stable than that of
BPC.

4.1.4.2 Correlation Analysis

Karl Person’s coefficient of correlation is most widely used in practice to measure the
degree of relationship between two variables of the company. So, it measured by using
the following formula.

I) Correlation Between Total Sales and Total Assets

The coefficient of Correlation between total sales and total Assets of both companies for
the different sampled years has been calculated in Appendix A.

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 Figure No 4.17

The coefficient of correlation between Sales (X) and Total Assets (Y) of BPC and HPL
came to be 0.221 and -0.079 respectively. This suggests that the two variables have
positive relation to each other in BPC and Negative relation to each other in HPL.

However, coefficient of correlation in BPC appeared less than 6 times of PE i.e.

0.221<6×0.242 which implies that the relation between sales and total assets is not at
significant level. Similarly coefficient of correlation in HPL also appeared less than 6
times of PE i.e. -0.079<6×0.253, which implies that the relation between sales and total
assets is not at significant level.

II) Correlation Between Total Sales and Net Profit After Tax

The coefficient of correlation between Total Sales and Net profit after Tax of both
companies for different sampled years has been calculated in Appendix A.

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 Figure No 4.18

The Coefficient of Correlation between Sales (X) and Net Profit after Tax (Y) of BPC
and HPL to 0.970 and 0.629 respectively, this suggests that the two variables have
positive relation to each other.

Coefficient of Correlation in BPC appeared greater than 6 times of PE i.e. 0.970>6×0.015

which implies that the relation between sales and net profit after tax is positive at
significant level. Similarly, Coefficient of Correlation in HPL appeared less than 6 times
of PE i.e. 0.629<6×0.154 which implies that the relation between sales and net profit
after tax is positive but not significant level.

III) Correlation Between Total Assets and Net Profit After Tax

The coefficient of correlation between Total Assets and Net profit after Tax of both
companies for different sampled years has been calculated in Appendix A.

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 Figure No 4.19

The Coefficient of correlation between Total Assets (X) and Net Profit after Tax (Y) of
BPC came to be 0.196. This suggests that the two variables have positive relation to each
other. Similarly the coefficient of correlation between total Assets (X) and Net Profit
after Tax (Y) of HPL came to be -0.423, this suggests that the two variables have
negative relation to each other and , it is likely that decrease in total assets is associated to
increase in net profit after tax of HPL.

However, the coefficient of correlation in BPC appeared less than six times of PE i.e.
0.196<6×0.245 which implies that the relation between total assets and net profit after tax
is not a significant level. Similarly, the coefficient of correlation in HPL also appeared
less than six times of PE i.e. -0.423<6×0.209 which implies that the relation between
total assets and net profit after tax is not a significant level.

4.1.5 Least Square Linear Growth Trend Analysis

Trend Analysis is a mathematical method which is widely used to find out future
tendencies based on past findings and present assumption. Further more it is applied for
findings out a trend line for those series which change periodically in absolute amount.

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 I) Least Square Trend Analysis of Total Sales Growth

Least Square Trend Analysis of Total Sales Growth of both Companies for the different
sampled years has been calculated in Appendix B.

Figure No 4.20

The Y-intercept (a) and slope of the trend line (b) of total sales of BPC remained to be Rs
299,831.14 and Rs 42796.04 respectively. During the study period, total sales of BPC
exposed an increasing trend. The trend equation of total sales is given by:

Yc =299,831.14+ 42,796.04X

According to the above trend equation, the forecasted value of total sales of BPC for
coming three years would be Rs 471,015.3, 513,811.34 and Rs 556,607.38 thousand
respectively.

Similarly, the Y-intercept (a) and slope of the trend line (b) of total sales of HPL
remained to be Rs 2160,485.43 and Rs 5105.53 respectively. During the study period,

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total sales of HPL exposed an increasing trend. The trend equation of total sales is given
by:

Yc =2160, 485.43+ 5105.53X

According to the above trend equation, the forecasted value of total sales of HPL for
coming three years would be Rs 2180,907.55, Rs 2186,013.08 and Rs 2191,118.81
thousand respectively.

II) Least Square Trend Analysis of Net Profit After Tax Growth

Least Square Trend Analysis of Net Profit after Tax Growth of both Companies for the
different sampled years has been calculated in Appendix B.

Figure No 4.21

1,600,000
Graphical Presentation of Least Square Trend Analysis of
Net Profit After Tax in Thousands NRs

1,400,000 Net Profit After Tax Growth

1,200,000

1,000,000

800,000 Actual Net Profit After Tax of BPC

600,000
Trend Values of HPL
400,000

200,000
Actual Net Profit After Tax of HPL
0

-200,000
Trend Values of HPL2
Fiscal Year

The Y-intercept (a) and slope of the trend line (b) of Net Profit after Tax of BPC
remained to be Rs 201,142.71 and Rs 47,726 respectively. During the study period, Net

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Profit after Tax of BPC exposed an increasing trend. The trend equation of Net Profit
after Tax is given by:

Yc =201,142.71+47,726X

According to the above trend equation, the forecasted value of Net Profit after tax of BPC
for coming three years would be Rs 392,046.71, Rs 439,772.71 and Rs 487,498.71
thousand respectively.

Similarly, the Y-intercept (a) and slope of the trend line (b) of Net Profit after Tax of
HPL remained to be Rs 1018,935.14 and Rs 52,433 respectively. During the study period,
Net Profit after Tax of HPL exposed an increasing trend. The trend equation of Net Profit
after Tax is given by:

Yc =1018, 935.14 + 52,433X

According to the above trend equation, the forecasted value of Net Profit after Tax of
HPL for coming three years would be Rs 1228,667.14, Rs 1281,100.14 and Rs
1333,533.14 thousand respectively.

III) Least Square Trend Analysis of Earning Per Share Growth

Least Square Trend Analysis of Earning per Share Growth of both Companies for the
different sampled years has been calculated in Appendix B.

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 Figure No 4.22

The Y-intercept (a) and slope of the trend line (b) of Earning per Share of BPC remained
to be Rs 23.97 and Rs 5.69 respectively. During the study period, Earning per Share of
BPC exposed an increasing trend. The trend equation of Earning per Share is given by:

Yc =23.97 + 5.69X

According to the above trend equation, the forecasted value of Earning per Share of BPC
for coming three years would be Rs 46.73, Rs 52.42 and Rs 58.11 respectively.

Similarly, the Y-intercept (a) and slope of the trend line (b) Earning per Share of HPL
remained to be Rs 57.76 and Rs 2.97 respectively. During the study period, Earning per
Share of HPL exposed an increasing trend. The trend equation of EPS is given by:

Yc =57.76 + 2.97X

According to the above trend equation, the forecasted value of EPS of HPL for coming
three years would be Rs 69.64, Rs 72.61 and Rs 75.58 thousand respectively

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 CHAPTER –V

SUMMARY, CONCLUSION AND RECOMMENDATIONS

This chapter is the final chapter of the research which briefly deals with the summary of
the study. It also tries to draw the final conclusion of the study while attempting to offer
various recommendations. This chapter is divided into three subheadings. First
subheading deals with the summary of the study in which result of calculations found in
previous chapter is presented. The second subheading is related with the conclusion of
the study in which overall decisions made under the study are presented. The third
subheading includes remedies or recommendations of the study.

4.1. Summary

This research work entitled “Financial Performance Evaluation of Hydropower

companies- Comparative study between Butwal Power Company and Himal Power
Company”, has been carried out to know the financial performance of the companies.
Most of the hydropower sectors lack monitoring and evaluation on financial performance.
Nepal has a huge potential of hydropower which is sufficient to meet the energy needs of
this Himalayan country and its giant southern neighbour is India. But the foaming waters
are yet to be even partly harnessed, because of a shortage of funds and opposition to big
multi-million dollar hydroelectric projects from a strong, environmental lobby.

In august 1995, the Arun III project, which dam planners claimed would cover the
country’s power needs well into the next century, had to be shelved when the world Bank
pulled out from the dollar 1 billion scheme for environmental reasons. A surge in energy
demand was already creating long power shortage in the capital city, Kathmandu. The
government, left with little choice but to explore alternative power projects to meet the
demand, gave the go-ahead to a number of projects that were in scale but easier to
finance and build.

There has been a gradual change in local and global energy markets providing ample
space for both the private and public sectors. It is now increasing evident that the

107
participation of private-public enterprises in the power sectors can lead to better
mobilization of resources to meet the ever-increasing domestic and regional power
demand. The establishment of a few small and medium sized hydropower plants within
the last decade has laid the foundation for private-public sectors participation in Nepal.

The continuing interest shown by both the domestic and foreign private sectors investors
is encouraging for Nepal’s power sectors. Although the current interest of the private
sector is limited to small plants of capabilities less than 10 MW. The main reason behind
this may be because of the higher investment needs of larger projects. The increasing
demand of electricity can however be met only through a combination of small and
medium- sized projects. It is therefore pertinent for NEA to take up several medium sized
schemes for implementation in the public sector with donor assistance.

Although the demand for power is rising every year, generation have not been
implemented in tandem. The delays experienced in middle Marsyandi, the only public
sectors project presently under operation, is an example of the uncertainties faced even
after a project enters the construction phase. Public sector generation projects take
considerable preparation time before execution. The process of mobilization of resources
for generation and other projects is also very time consuming and uncertain. Decision for
taking up such projects should therefore be made well in advance so that power plants
come into operation in a timely fashion as per the system requirements. The identification
and implementation of projects involving relatively low investments is the key to
providing affordable electricity to the people of Nepal.

 Butwal Power Company was established in 1996 when total capacity of the power
in the country was only 3.45 MW. BPC with assistance from the United Mission
to Nepal developed Tinau Project in 1967 to light up town of Butwal and promote
industrial development in the area. BPC is not only involved in design and
construction work but also owns and operates the 12 MW Jhimruk Hydropower
plant and the 5.1 MW Andhikhola Hydropower plant. The company supplies
power to the national electricity grid besides lighting up nearly 23,000 local
households. BPC is currently the largest public supplier in Nepal.

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 The Khimti-I Hydropower project is the first private sector power project in
Nepal, Based on a Build-Own-Operate-Transfer (BOOT) Structure. The power
plant is owned and operated through the company Himal Power Limited (HPL).

 Himal Power Limited was established in 2049 B.S (1993) when Butwal Power
Company (BPC) tighter with the Norwegian companies statkraft SF, Alstom
Power a.s (Formerly ABB kraft), and GE Energy a.s (Formerly Kvaaerner
Energy) registered HPL under Nepal’s Company Act 2021 B.S.

 In addition to the investors, the International Finance Corporation (IFC), the

Asian Development Bank (ADB), EksportFinans a.s. the Norwegian agency for
development Cooperation (NORAD) and the Nordic Development Fund (NDF)
have contributed to the financing of HPL.

 As this study is related to the financial evaluation of BPC and HPL, a number of
financial and statistical tools have been used to meet the prescribed objectives.
Ratio analysis being the primary financial tool includes all five categories namely,
Liquidity ratio, Activity ratio, Profitability ratio, Leverage ratio and other ratios.
To further analyze the financial data, a number of statistical tools have been used
such as arithmetic mean, standard deviation, coefficient of variation, coefficient
of correlation, probable error of correlation coefficient and least square trend line.

 With respect to ratio analysis five different categories have been used with their
sub divisions according to these ratios the following fact has been discovered.

 The liquidity ratios of the companies seem to be inconsistent. BPC and HPL both
have maintained proper liquidity position. The mean and CV of current ratios of
BPC came to be 2.77 and 69.89%, the mean and CV of current ratios of HPL
came to be 2.94 and 21.43%. Similarly the mean and CV of quick ratio of BPC
came to be 2.41 and 66.39%, the mean and CV of quick ratio of HPL came to be
2.93 and 21.50%

 Except that of DTRs all other activity ratios of BPC present fairly consistent
trends for the last four years. Whereas, HPL holds less variation in all activity

109
 ratios as compared to BPC, the mean and CV of FATORs of BPC came to be
0.406 and 34.24%. Similarly, the mean and CV of FATORs of HPL came to be
0.281 and 9.25%. Similarly, the mean and CV of TATORs of BPC came to be
0.174 and 32.18%, the mean and CV of TATORs of HPL came to be 0.217 and
7.83%. Similarly, mean and CV of DTRs of BPC came to be 6.611 and 35.55%,
the mean and CV of DTRs of HPL came to be 5.28 and 5.09%. Similarly the
mean and CV of ACPs of BPC came to be 65 days and 47.17%, the mean and CV
of ACPs of HPL came to be 68 days and 12.54%.

 Due to loss incurred in F/Y 2002/03, BPC present fluctuating trends of

profitability ratios. Unlike BPC, HPL has considerably low OERs and shows
rather consistent trends of profitability ratios. But it has lower NPRs then BPC.
The mean and CV of NPRs of BPC came to be 54.49% and 63.70%, the mean and
CV of NPRs of HPL came to be 47.02% and 19.01%. Similarly the mean and CV
of Operating profit ratios of BPC came to be 66% and 23.89%, the mean and CV
of operating profit ratio of HPL came to be 87% and 8.69%. Similarly, the mean
and CV of OERs of BPC came to be 40.55% and 49.40%, the mean and CV of
OERs of HPL came to be 14.18% and 20.80%. Similarly, the mean and CV of
ROTA ratio of BPC came to be 11.66% and 54.55%, the mean and CV of ROTA
of HPL came to be 15.42% and 13.88%. Similarly, the mean and CV of ROE of
BPC came to be 14.88% and 62.10%, the mean and CV of ROE of HPL came to
be 24.30% and 17.94%.

 While BPC is all equity financed, the leverage ratios HPL reveal decreasing risk
of insolvency each year. Except debt to equity in F/Y 2002/03, While the mean
and CV of debt to shareholders equity of HPL came to be 1.23 and 39.02%, the
mean and CV of debt to total assets ratios of HPL came to be o.48 and 25%.

 The invisibility ratio of both companies present fluctuating trends but though HPL
has higher trend of EPS and DPS ratios and DPRs remain lower as compared to
BPC. The mean and CV of EPS ratio of BPC came to be Rs 23.97 and 58.61%,
the mean and CV of EPS of HPL came to be Rs 57.76 and 21.49%. Similarly, the
mean and CV of DPS ratios of BPC came to be Rs 25 and 53.44%, the mean and

110
 CV of DPS of HPL came to be 34.86 and 31.41%. Similarly, the mean and CV of
DPRs of BPC came to be Rs 88.05 and 52.97%, the mean and CV of DPRs of
HPL came to be Rs 60 and 25.58%.

 Similarly, the probable errors of BPC and GPL came 0.242 and 0.253
respectively. The coefficient of correlation between sales and total assets of BPC
shows positive. Similarly the coefficient of correlation between sales and total
assets of HPL show negative. The coefficient of correlation between these two
variables of BPC and HPL came 0.221 and -0.079 respectively.

 The coefficient of correlation between sales and net profit after tax of BPC shows
positive relation and significant relation. Similarly, the coefficient of correlation
between sales and net profit after tax of HPL shows positive relation but not
significant relation. The coefficient of correlation between these two variables of
BPC and HPL came 0.970 and 0.629 respectively. Similarly, the probable errors
of BPC and HPL came to 0.015 and 0.154 respectively.

 The coefficient of correlation between total assets and net profit after tax of BPC
shows positive relation. Similarly, the coefficient correlation between total assets
and net profit after tax of HPL shows the negative relation. The coefficient of
correlation between these two variables of BPC and HPL came to be 0.196 and -
0.423 respectively. Similarly, the probable error of BPC and HPL came to be
0.245 and 0.209 respectively.

 According to the trend equation , the forecasted value of total sales of BPC for
coming three years would be Rs 471,015.3, Rs 513,811.34 and Rs 556,667.38
thousand respectively. Similarly, the forecasted values of total sales of HPL for
coming three years would be Rs 2180,907.55, Rs 2186,013.08 and Rs
2191,118.61 thousand respectively.

 According to the trend equation , the forecasted value of net profit after tax of
BPC for coming three years would be Rs 392,046.71, Rs 439,772.71 and Rs
487,498.71 thousand respectively. Similarly, the forecasted values of net profit

111
 after tax of HPL for coming three years would be Rs 1228,667.14, Rs
1281,100.14 and Rs 1333,533.14 thousand respectively.

 According to the trend equation, the forecasted value of EPS of BPC for coming
three years would be Rs 46.73, Rs 52.42 and Rs 58.11 respectively. Similarly, the
forecasted values of EPS of HPL for coming three years would be Rs 69.64, Rs
72.61 and Rs 75.58 respectively

4.2. Conclusion

As per the analysis and interpretation of data the following conclusions have been
derived.

 Both companies have maintained proper liquidity position. Which means both
companies average ratios are above standard level, but incapability of BPC to meet
current liabilities as compared HPL.
 The fixed assets turnover ratios of both companies are satisfactory and some what
consistent. However, both companies have not been able to utilize its current assets
appropriately as the total assets turnover ratio remains vulnerable against that of HPL.
Though the debtor’s turnover ratios are almost, equivalent, considering the average
collection period. It can conclude that BPC suffers less the problem of outstanding
debt collection.
 Though BPC has considerably high operating expenses ratio and inconsistent trend in
its net profit ratios. The overall performance with respect to profitability is not far
behind to HPL. However, considering the return on shareholders equity and return on
total assets, it is obvious that one would preferably invest in HPL rather in BPC.
 BPC is all equity financed and thus the risk of insolvency is minimized for this
company. The risk of insolvency of HPL has been decreasing each year with the
decrease in its leverage ratios.
 Though HPL has a two times higher EPS with compared to that of BPC, it tight
custom of dividend payout ratio conceals the real charisma. In other hand, BPC being
much liberal in distributing the earning in form of dividends. On might confuse to
pick the preferable investment between BPC and HPL.

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 The coefficient of correlation between sales and total assets of BPC show positive
and insignificant relation. Similarly, the coefficient of correlation between sales and
total assets of HPL shows negative but not significant relation. It also reveals that it is
likely that decreased in total assets is associated to increase in sales of HPL more than
in sales of BPC.
 The coefficient of correlation between total sales and net profit after tax of BPC and
HPL show positive relation and significant relation in BPC but not significant relation
in HPL. It also reveals that BPC is slightly more successful than BPC to be able to
yield more uniform profit and its sales.
 The coefficient of correlation between total assets and net profit after tax of BPC
show positive and insignificant relation. Similarly the coefficient of correlation
between total sales and net profit after tax of HPL show negative but insignificant
relation. It reveals that the net profit after tax of HPL is more reactive than of BPC to
fluctuations in total assets.
 The growth trend analysis of total sales, net profit after tax and earning per share of
BPC demonstrate a higher increasing trend than that of HPL.
 From the primary data analysis, it can concluded that ratio analysis is used to analyze
the performance, ROE does show the performance of Hydropower companies, total
sales are used in the proper way to maximize the profit, present return of Hydropower
companies is higher than the expectation of investors, operating expenses affected the
performance of Hydropower companies and private sectors performance is better than
public sectors.

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 SWOT analysis

Table No. 5.1

Companies BPC HPL

Strengths  Availability of funds  Low operating expenses
 No Loans and borrowings  Tax subsidy and
 Diversified sources of increasing profits
income
Weaknesses  Inefficient use of resources  High level of fixed costs
 High operating expenses  Lack of strategies to
 Lack of strategies to realize financial plans
realize financial plans
Opportunities  Plenty of market  Plenty of market
availability availability
 No competition  No competition
 Sales electricity to NEA
in US dollar
Threats  High research cost  High research cost
 Tightening power  Different problems faced
purchase agreement by of local Communities
NEA

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4.3. Recommendations

Based on conclusion, some recommendations are presented below:

 The liquidity of both companies is satisfactory but to BPC has to cut off current
liabilities to maintain a proper liquidity position.
 Fixed assets turnover ratio of BPC is satisfactory but total assets need to be
managed more effectively. Similarly, both fixed assets and total assets need to be
managed more effectively in HPL. BPC needs to find better ways to control and
improve its receivable.
 The profitability position of both companies is satisfactory. However HPL can do
much to increase the net profit margin. And BPC can do much to increase the
ROE and ROTA by better utilization of its assets. There is also a need for
effective production management to control operating cost of BPC.
 Despite the availability of lucrative investment opportunities, shareholders need to
be satisfied with dividends. HPL should adopt a more liberal dividend payout
policy, as the earning per share is healthy to support such policy.
 The projected sales values can be met by setting production and sales plans and
formulating proper policies and strategies. The private- public sectors should
implement new techniques of management such as participative management,
management by objective and total quality management.
 The hydropower sectors should maintain research budgets to study new
hydroelectric projects across the country. These should be proper cost control on
maintenance activities.
 The hydropower sectors should introduce SWOT analysis to improve their
capability of dealing with external forces and managing internal issues of
strengths and weaknesses.
 The hydropower sectors should maintain a separate human resource department to
make sure that there is an effective system of handling grievance of employees
and conduction of management development and training programs.

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 As per hydropower policy, 1992 the government of Nepal shall provide an
exemption of income tax to the projects of private sector generating and
distributing electricity from the hydroelectric project up to the capacity of 1,000
KW. Likewise, the government shall provide income tax exemption facility to the
hydroelectric projects constructed under to investment of private sector producing
more than 1,000 KW for a period of fifteen years starting from the date of its
commercial production. So, the hydropower companies are suggested to invest in
the new hydropower projects utilizing such benefits to meet the present crisis of
electricity in the country.
 The hydropower sectors should follow the practices of setting financial goals for
future activities and should develop major programs to accomplish them.
 Government should formulate plans and policies to attract private as well as
public investors for growth of hydropower companies creating investment
friendly environment and focusing on their security in the hydropower
development.

116
 BIBLIOGRAPHY

Books

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Distributors.

Bhattarai Rabindra,(2004), Investments Theory and Practice, Kathmandu: Buddha Academic

Publishers and Distributors Pvt. Ltd.

Bhattarai, R. (2004), Investments, Kathmandu: Buddha Academic Publishers and Distibutors,

Pvt. Ltd.

Dambolena, I.G. & S.J. Khoury (1980), Ratio Stability and Corporation Failure: Journal of Finance;
New York: Harper and Row Publishers.

Helfart E.A, (1992), Techniques of Financial Analysis, Bombay: Jay Publishing House.

Jain S.P. & Narang K.L. (1974), Cost Accounting Principles and Practice, New Delhi: Kalyani
Publishers.

Joshi, P.R., (2001), Research Methodology; Third Addition, Kathmandu: Buddha Academic
Publishers and Distributors, Pvt. Ltd.

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Joshi, Shyam, (2057), Managerial Economics: Kathmandu : Taleju Prakashan, Bhotahity.

Joshi, Shyam (1990) An Introduction to Economic Theory: Kathmandu : Nabin Prakashan.

Khan, M.Y. and Jain, P.K, (1992): Financial Management, Second Edition, New Delhi : Tata MC
Graw: Hill Publishing Co. Ltd.

Lynch, M. Richard & Williamson, W. Robert (2003), Accounting For Management Planning and
Control, 3rd addition, New Delhi : Tata Mc Graw Hill Publishing Company.

Pandey I.M., (1999) Financial Management, New Delhi : Vikash Publishing House Pvt. Ltd.

Paudal, R.B., Bohora, Kesharjung, Gautam Rishiraj, Paudel, Surya Bahadur, (2008) Fundamentals
of Corporate Finance, Kathmandu : Asmita Publication.

Redman, L. V. Morry A.V.H. (1923), The Romance of Research, London: Mac Millan.

Sthapit, PhD. A.B., Gautam, H.: Joshi, P.R., Dango, P.M. (2002): Statistical Method, Correlation
and Regression Analysis: Kathmandu: Taleju Pustak Bitarak

The World Book Encyclopedia, World Book International, Vol. 10

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Van Horne, C. James (2002), Financial Management and Policy, New Delhi: Pearson Education
(Singapore) Pvt. Ltd.

Weston, J. Fred, Besley, Scott and Brigham, F. Eugene (1996): Essentials of Managerial Finance;
The Dryden Press: Harcourt Brace College Publishers.

Wolf, Howard, K. and Pant Premraj (2003), Social Science Research and Thesis Writing, Reprint :
Kathmandu: Buddha Academic Publishers and Distributors, Pvt. Ltd.

Previous Thesis

Amatya, Eliza (2005), An Evaluation of Financial Performance of Nepal Electricity Authority, An

Unpublished MBS Thesis (Nepal Commerce Campus).

Dahal, Chandra (2007), Cost- Volume-Profit Analysis of Public Enterprises and Private Company
Limited (A comparative analysis between NEA and BPC) An Unpublished MBS Thesis,
(Central Department of T.U.).

119
Kandel, Madan (2005), Financial Performance and Employee Opinion on the Performance of
NEA, An Unpublished MBS Thesis (Nepal Commerce Campus).

Karki, Roshan (2008), Financial Performance Evulation of Purbanchal Gramin Bikash Bank, An
Unpublished MBS Thesis (Central Department of T.U.).

Khatiwada, Ram Chandra (2007), Financial Performance Analysis of Butwal Power Company, An
Unpublished MBS Thesis (Shanker Dev Campus).

Subedi, Tom Lal (2005), Fund Management of Hydropower Companies (with special reference to
Chilime Hydropower Company Ltd., Butwal Power Company Ltd. & National Hydropower
Company Ltd.) An Unpublished MBS Thesis (Central Department of T.U.).

JOURNAL AND ANNUAL REPORTS

120
Butwal Hydropower Company Ltd. Annual Report F/Y 2001/02-2007/08

Chilime Hydropower Company Annual Report F/Y2007/08

Himal Power Limited Annual Report F/Y 2001/02-2007/08

Journal of Hydro Nepal (Issue 2, January, 2008)

Journal Of VIDYUT (Year 18, Issue 1, 2064 Bhadra) Published by Nepal

Electricity Authority

Magazine of Abhiyan Saptahik

Magazine of New Business age

National Hydropower Company Annual Report F/Y 2006/07

Nepal Electricity Authority Annual Report F/Y 2006/07

The Magazine of Hamro Sampada (Year 7, Issue 10, 2064, Falgun)

121
 APPENDICES

 Appendix A
Computation of Correlation of Coefficient
 Appendix B
Computation of Trend Values
 Appendix C

Computation of Standard of deviation and Covariance

 Appendix D

Seven Year Summary of Financial Statements (Balance Sheet and Income Statement) of
Butwal Power Company Limited (BPC) and Himal Power Limited (HPL)

122
 Appendix A
Computation of Correlation of Coefficient and Probable Errors
I. Correlation between Total Sales and Total Assets of BPC

(In Thousand
NRs)
Year Sales(X) Total Assets (Y) X2 Y2 X×Y
2001/02 236,278 1,622,165 55,827,293,284 2,631,419,287,225 383,281,901,870
2002/03 96,364 1,825,464 9,286,020,496 3,332,318,815,296 175,909,012,896
2003/04 283,167 1,579,195 80,183,549,889 2,493,856,848,025 447,175,910,565
2004/05 323,134 1,439,238 104,441,581,956 2,071,406,020,644 465,066,731,892
2005/06 358,419 1,744,447 128,464,179,561 3,043,095,335,809 625,242,949,293
2006/07 379,769 1,882,271 144,224,493,361 3,542,944,117,441 714,828,175,399
2007/08 421,687 1,986,926 177,819,925,969 3,947,874,929,476 837,860,864,162
Total ∑X = ∑Y = ∑X2 = ∑Y2 = ∑ X×Y =
2098,818 12,079,706 700,221,044,516 21,062,915,353,916 3,649,365,546,077
Correlation(r) = 0.221
r= = 0.221

II. Correlation between Total Sales and Total Assets of HPL

(In Thousand
NRs)
Year Sales(X) Total X2 Y2 X×Y
Assets (Y)
2001/02 2,171,039 9,679,770 4,713,410,339,521 93,697,947,252,900 21,015,158,181,030
2002/03 2,193,850 10,999,525 4,812,977,822,500 120,989,550,225,625 24,131,307,921,250
2003/04 2,092,032 10,110,846 4,376,597,889,024 102,229,206,835,716 21,152,213,379,072
2004/05 2,104,124 10,098,600 4,427,337,807,376 101,981,721,960,000 21,248,706,626,400
2005/06 2,121,897 9,897,922 4,502,446,878,609 97,968,859,918,084 21,002,370,998,034
2006/07 2,307,461 9,454,424 5,324,376,266,521 89,386,133,171,776 21,815,714,657,464
2007/08 2,132,995 8,728,710 4,549,667,670,025 76,190,378,264,100 18,618,294,786,450
Total ∑X = ∑Y = ∑X2 = ∑Y2 = ∑ X×Y =
32,706,814,673,576 682,443,797,628,201 148,983,766,549,700
15,123,398 68,969,797
Correlation(r) = -0.079

r= = -0.079

123
 III. Correlation between Total Sales and Net profit after tax of BPC
(In Million
NRs)
Year Sales(X) Net profit after X2 Y2 X×Y
tax (Y)
2001/02 236 125 55,696 15,625 29500
2002/03 96 (45) 9,216 2,025 (4320)
2003/04 283 235 80,089 55,225 66505
2004/05 323 198 104,329 39,204 63954
2005/06 358 288 128,164 82,944 103104
2006/07 380 253 144,400 64,009 96140
2007/08 422 354 178,084 125,316 149388
Total ∑X = 2098 ∑Y = 1408 ∑X2 = 699,978 ∑Y2 = 383,348 ∑ X×Y =
504,271
Correlation(r) = 0.970

r= = 0.970

IV. Correlation between Total Sales and Net profit after tax HPL
(In Million
NRs)
Year Sales(X) Net profit after X2 Y2 X×Y
tax (Y)
2001/02 2,171 960 4,713,241 921,600 2,084,160
2002/03 2,194 774 4,813,636 599,076 1,698,156
2003/04 2,092 893 4,376,464 797,449 1,868,156
2004/05 2,104 1,163 4,426,816 1,352,569 2,446,952
2005/06 2,122 879 4,502,884 772,641 1,865,238
2006/07 2,307 1,483 5,322,249 299,289 3,421,281
2007/08 2,133 982 4,549,689 964,324 2,094,606
Total ∑X = 15,123 ∑Y = 7,134 ∑X2 = 32,704,979 ∑Y2 = 7,606,948 ∑ X×Y =
15,478,549
Correlation(r) = 0.629

r= = 0.629

124
 V. Correlation between Total assets and Net profit after tax BPC
(In Million
NRs)
Year Total Net profit after X2 Y2 X×Y
assets(X) tax (Y)
2001/02 1,622 125 2,630,884 15,625 202,750
2002/03 1,825 -45 3,330,625 2025 (82,125)
2003/04 1,579 235 2,493,241 55,225 371,065
2004/05 1,439 198 2,070,721 39,204 284,922
2005/06 1,744 288 3,041,536 82,944 502,272
2006/07 1,882 253 3,541,924 64,009 476,146
2007/08 1,987 354 3,948,169 125,316 703,398
Total ∑X = 12,078 ∑Y = 1,408 ∑X2 = 21,057,100 ∑Y2 = 384,348 ∑ X×Y =
2,458,428
Correlation(r) = 0.196

r= = 0.196

VI. Correlation between Total assets and Net profit after tax HPL
(In Million
NRs)
Year Total Net profit after X2 Y2 X×Y
assets(X) tax (Y)
2001/02 9,680 960 93,702,400 921,600 9,292,800
2002/03 10,999 774 120,978,001 599,076 8,513,226
2003/04 10,111 893 102,232,321 797,449 9,029,123
2004/05 10,099 1,163 101,989,801 1,352,569 11,745,137
2005/06 9,898 879 97,970,404 772,641 8,700,342
2006/07 9,454 1,483 89,378,116 2,199,289 14,020,282
2007/08 8,729 982 76,195,441 964,324 8,571,878
Total ∑X = 68,970 ∑Y = 7,134 ∑X2 = ∑Y2 = 7,606,948 ∑ X×Y =
682,446,484 69,872,788

Correlation(r) = -0.423

125
 r= = -0.423

Appendix B
Computation of Trend Values
I. Least Square Trend Analysis of Total Sales Growth Of BPC

(In Thousand
NRs)
Fiscal Year Time X =Time-4 Sales (Y) X2 X×Y Trend Value
(Y= α+bx)
2001/02 1 -3 236,278 9 -708,834 171,443.02
2002/03 2 -2 96,364 4 -192,728 214,239,06
2003/04 3 -1 283,167 1 -283,167 257,035.10
2004/05 4 0 323,134 0 0 299,831.14
2005/06 5 1 358,419 1 358,419 342,627.18
2006/07 6 2 379,769 4 759,538 385,423.21
2007/08 7 3 421,687 9 1,265,061 428,219.26
∑X = 0 ∑Y = ∑X2 = 28 ∑XY =
2098,818 1,198,289
α = 299831.14 b = 42796.04
2008/09 8 4 471,015.30
2009/10 9 5 513,811.34
2010/11 10 6 556,607.38

Mathematically Y = α+ bX

Where, Y= Value of the dependent Variable

α = Y- intercept
b = slope of the trend line
X = Value of the independent Variable
Normal equations fitting above equation are:
∑Y = Nα + b∑X

∑XY = α∑X + b∑X2

126
 Since, ∑X = 0, a = , and b =

II. Least Square Trend Analysis of Total Sales Growth Of HPL

(In Thousand
NRs)

Fiscal Year Time X =Time-4 Sales (Y) X2 X×Y Trend Value

(Y= α+bx)
2001/02 1 -3 2,171,039 9 -6,513,117 2,145,168.84
2002/03 2 -2 2,193,850 4 -4,387,700 2,150,374.37
2003/04 3 -1 2,092,032 1 -2,092,032 2,155,379.9
2004/05 4 0 2,104,124 0 0 2,160,485.43
2005/06 5 1 2,121,897 1 2,121,897 2,165,590.96
2006/07 6 2 2,307,461 4 4,614,922 2,170,696.49
2007/08 7 3 2,132,995 9 6,398,985 2,175,802.02
∑X = 0 ∑Y = ∑X2 = 28 ∑X×Y =
15,523,398 142,955
α = 2,160,485.43 b = 5,105.53
2008/09 8 4 2,180,907.55
2009/10 9 5 2,186,013.08
2010/11 10 6 2,191,118.61

Mathematically Y = + bX

Where, Y= Value of the dependent Variable

α= Y- intercept
b = slope of the trend line
X = Value of the independent Variable
Normal equations fitting above equation are:
∑Y = Nα + b∑X

∑XY = α∑X + b∑X2

Since, ∑X = 0, a = , and b =

127
 III. Least Square Trend Analysis of Net Profit After Tax Growth Of BPC

(In Thousand
NRs)

Fiscal Year Time X =Time-4 Net Profit X2 X×Y Trend Value

After Tax (Y= α+bx)
(Y)
2001/02 1 -3 124,626 9 -373,878 57,964.71
2002/03 2 -2 -44,944 4 89,888 105,690.71
2003/04 3 -1 235,418 1 -235,418 153,416.71
2004/05 4 0 197,761 0 0 201,142.71
2005/06 5 1 288,419 1 288,419 248,868.71
2006/07 6 2 252,840 4 505,680 296,594.71
2007/08 7 3 353,879 9 1061,637 344,320.71
∑X = 0 ∑Y = ∑X2 = 28 ∑X×Y =
1407,999 1,336,328
a = 201,142.71 b = 47,726
2008/09 8 4 392,046.71
2009/10 9 5 439,772.71
2010/11 10 6 487,498.71

Mathematically Y = α+ bX
Where, Y= Value of the dependent Variable
α= Y- intercept
b = slope of the trend line
X = Value of the independent Variable
Normal equations fitting above equation are:

∑Y = Nα + b∑X
∑XY = α∑X + b∑X2

Since, ∑X = 0, a = , and b =

128
 IV. Least Square Trend Analysis of Net Profit After Tax Growth Of HPL

(In Thousand
NRs)

Fiscal Year Time X =Time-4 Net Profit X2 X×Y Trend Value

After Tax (Y= α+bx)
(Y)
2001/02 1 -3 960,034 9 -2,880,102 861,636.14
2002/03 2 -2 773,597 4 -1,547,194 914,069.14
2003/04 3 -1 893,285 1 -893,285 966,502.14
2004/05 4 0 1,162,551 0 0 1,018,935.14
2005/06 5 1 878,986 1 878,980 1,071,368.14
2006/07 6 2 1,482,560 4 2,965,120 1,123,801.14
2007/08 7 3 981,533 9 2,944,599 1,176,234.14
∑X = 0 ∑Y = ∑X2 = 28 ∑X×Y =
7,132,546 1,468,124
a = 1,018,935.14 b = 52,433
2008/09 8 4 1,228,667.14
2009/10 9 5 1,281,100.14
2010/11 10 6 1,333,533.14

Mathematically Y = α+ bX
Where, Y= Value of the dependent Variable
α= Y- intercept
b = slope of the trend line

X = Value of the independent Variable

Normal equations fitting above equation are:
∑Y = Nα + b∑X
∑XY = α∑X + b∑X2

129
 Since, ∑X = 0, a = , and b =

V. Least Square Trend Analysis of Earning Per Share Growth Of BPC

(In Thousand
NRs)
Fiscal Year Time X =Time-4 Earning Per X2 X×Y Trend Value
Share (Y) (Y= α+bx)
2001/02 1 -3 14.85 9 -44.55 6.9
2002/03 2 -2 (5.36) 4 10.72 12.59
2003/04 3 -1 28.06 1 -28.06 18.28
2004/05 4 0 23.57 0 0 23.97
2005/06 5 1 34.37 1 34.37 29.66
2006/07 6 2 30.13 4 60.26 35.35
2007/08 7 3 42.18 9 126.54 41.04
∑X = 0 ∑Y = ∑X2 = 28 ∑X×Y =
167.8 159.28
a = 23.97 b = 5.69
2008/09 8 4 46.73
2009/10 9 5 52.42
2010/11 10 6 58.11

Mathematically Y = α+ bX

Where, Y= Value of the dependent Variable

α= Y- intercept
b = slope of the trend line
X = Value of the independent Variable
Normal equations fitting above equation are:
∑Y = Nα + b∑X

∑XY = α∑X + b∑X2

130
 Since, ∑X = 0, a = , and b =

VI. Least Square Trend Analysis of Earning Per Share Growth Of HPL

(In Thousand
NRs)

Fiscal Year Time X =Time-4 Earning Per X2 X×Y Trend Value

Share (Y) (Y= α+bx)
2001/02 1 -3 54.42 9 -163.26 48.85
2002/03 2 -2 43.85 4 -87.7 51.82
2003/04 3 -1 50.64 1 -50.64 54.79
2004/05 4 0 65.90 0 0 57.76
2005/06 5 1 49.82 1 49.82 60.73
2006/07 6 2 84.04 4 168.08 63.7
2007/08 7 3 55.64 9 166.92 66.67
∑X = 0 ∑Y = ∑X2 = 28 ∑X×Y =
404.31 83.22
a = 57.76 b = 2.97
2008/09 8 4 69.64
2009/10 9 5 72.61
2010/11 10 6 75.58

Mathematically Y = α+ bX
Where, Y= Value of the dependent Variable
α= Y- intercept
b = slope of the trend line
X = Value of the independent Variable

Normal equations fitting above equation are:

∑Y = Nα + b∑X

131
 ∑XY = α∑X + b∑X2

Since, ∑X = 0, a = , and b =

Appendix C: Computation of Standard Deviation and Coefficient of Variance

Calculation of Current Ratio

Year BPC HPL

(X) (X- )² (Y) (Y-Y)²

2001/02 5.30 6.4009 2.41 0.2704

2002/03 1.86 0.8281 2.23 0.49

2003/04 2.32 0.2025 3.91 0.9604

2004/05 6.19 11.6964 2.70 0.0529

2005/06 1.25 2.3104 2.96 0.0009

2006/07 1.19 2.4964 2.51 0.1764

20007/08 1.30 2.1609 3.80 0.7569

∑(X- )²= 26.0956 ∑(Y-Y)²= 2.709

132
S.D ( ) =√∑(X- ) ² S.D ( ) =√∑(X- ) ²
N N

=√17.7592 =√ 2.762

7 7

=1.60 =0.63

CV = ×100% CV = ×100%

= 1.936 x 100% = 0.6.3 x 100%

2.77 2.94

=69.89% = 21.43%

Calculation of Quick Ratio

Year BPC HPL

(X) (X- )² (Y) (Y-Y)²

2001/02 4.37 3.8416 2.41 0.2809

2002/03 1.70 0.5041 2.23 0.5041

2.12 2.12 0.0841 3.91 0.9409

2004/05 5.31 8.41 2.70 0.0576

2005/06 1.12 1.6641 2.96 0.0004

133
2006/07 1.09 1.7424 2.53 0.1681

20007/08 1.18 1.5129 3.84 0.81

∑(X- )²= 17.7592 ∑(Y-Y)²= 2.762

S.D ( ) =√∑(X- ) ² S.D ( ) =√∑(X- ) ²

N N

==√17.7592 S.D ( ) =√2.762

7 7

=1.60 =0.63

CV = ×100% CV = ×100%

=1.60 = 0.63

2.41 2.93

= 66.39% =21.50%

Calculation of Fixed Asset Turnover Ratio

Year BPC HPL

(X) (X- )² (Y) (Y-Y)²

2001/02 0.30 0.01124 0.29 0.00081

2002/03 0.13 0.076176 0.26 0.000441

2.12 0.39 0.0003 0.25 0.00096

2004/05 0.45 0.002 0.27 0.000121

2005/06 0.48 0.005 0.28 0.000001

134
2006/07 0.51 0.0108 0.32 0.001521

20007/08 0.58 0.03027 0.30 0.00036

∑(X- )²= 0.135780 ∑(Y-Y)²= 0.003485

S.D ( ) =√∑(X- ) ² S.D ( ) =√∑(X- ) ²

N N

==√0.135780 S.D ( ) = √0.003485

7 7

=0.139 =0.026

CV = ×100% CV = ×100%

=0.139 = 0.0223

0.406 0.281

= 34.24% =9.35%

Calculation of Total Asset Turnover Ratio

Year BPC HPL

(X) (X- )² (Y) (Y-Y)²

2001/02 0.15 0.000576 0.22 0.00009

2002/03 0.05 0.015376 0.19 0.000729

135
2.12 0.18 0.000036 0.21 0.000049

2004/05 0.22 0.002116 0.21 0.00049

2005/06 0.21 0.001296 0.21 0.00049

2006/07 0.20 0.000676 0.24 0.000529

20007/08 0.21 0.001296 0.24 0.000529

∑(X- )²= 0.021376 ∑(Y-Y)²= 0.002776

S.D ( ) =√∑(X- ) ² S.D ( ) =√∑(X- ) ²

N N

==√0.021376 S.D ( ) = √0.002776

7 7

=0.056 =0.017

CV = ×100% CV = ×100%

= 0.056 = 0.017

0.174 0.217

= 32.18% =7.83%

Calculation of Debtors Turnover Ratio

Year BPC HPL

(X) (X- )² (Y) (Y-Y)²

2001/02 5.74 0.7586 5.62 0.2156

2002/03 2.66 15.610 5.53 0.0625

136
2.12 9.04 5.9000 5.03 0.0625

2004/05 7.53 0.84456 5.34 0.0036

2005/06 10.09 12.1034 4.96 0.1024

2006/07 6.45 0.02592 5.52 0.0576

20007/08 4.77 3.3892 4.96 0.1024

∑(Y-Y)²= 0.5066
∑(X- )²= 38.63

S.D ( ) =√∑(X- ) ² S.D ( ) =√∑(X- ) ²

N N

== √38.63 = √0.5066

7 7

=2.350 =0.269

CV = ×100% CV = ×100%

= 2.350 = 0.299

6.61 5.28

= 35.55% =5.09%

Calculation of Average Collection Period

Year BPC HPL

(X) (X- )² (Y) (Y-Y)²

2001/02 63 4 64 16

2002/03 135 4900 65 9

137
2003/04 40 625 72 16

2004/05 48 289 67 1

2005/06 36 841 73 25

2006/07 56 81 65 9

20007/08 75 100 73 25

∑(Y-Y)²= 101
∑(X- )²= 6840

S.D ( ) =√∑(X- ) ² S.D ( ) =√∑(X- ) ²

N N

==√6840 = √101

7 7

=31.25 =3.7984

CV = ×100% CV = ×100%

= 31.25 = 3.7984

65 68

= 47.17% =12.54%

Calculation of Capital Employed Turnover

Year BPC HPL

(X) (X- )² (Y) (Y-Y)²

2001/02 0.15 0.0045 0.258 0.0001

2002/03 0.06 0.025 0.22 0.0004

138
2003/04 0.21 0.00005 0.22 0.0004

2004/05 0.23 0.0002 0.23 0.0001

2005/06 0.28 0.004 0.23 0.0001

2006/07 0.29 0.0054 0.27 0.0009

20007/08 0.30 0.007 0.26 0.0004

∑(Y-Y)²= 0.0024
∑(X- )²= 0.046039

S.D ( ) =√∑(X- ) ² S.D ( ) =√∑(X- ) ²

N N

==√0.04609 = √ 0.0024

7 7

=0.081 =0.018

CV = ×100% CV = ×100%

= 0.081 = 0.0024

0.217 0.24

= 37.33% =7.08%

Calculation of Operating Expenses Ratio

Year BPC HPL

(X) (X- )² (Y) (Y-Y)²

2001/02 37.80 7.56 11.19 8.94

2002/03 89.10 2357.1 12.76 2.0164

139
2003/04 30.19 107.33 12.97 1.4641

2004/05 42.43 3.54 13.34 0.7056

2005/06 28.59 143.0416 12.80 1.9044

2006/07 30.17 96.83 15.33 1.3225

20007/08 35.02 30.58 20.87 44.756

∑(Y-Y)²= 61.1091
∑(X- )²= 2745.98

S.D ( ) =√∑(X- ) ² S.D ( ) =√∑(X- ) ²

N N

==√2745.98 = √61.1091

7 7

=20 =2.95

CV = ×100% CV = ×100%

= 20 = 2.95

40.55 14.18

= 49.40% =20.83%

Calculation of Return on Total Asset Ratio

Year BPC HPL

(X) (X- )² (Y) (Y-Y)²

2001/02 7.68 15.8404 16.99 2.46

2002/03 (2.46) 199.37 12.95 6.100

140
2003/04 14.91 10.56 14.42 1

2004/05 13.74 4.33 16.39 0.9409

2005/06 16.53 23.72 13.29 4.5369

2006/07 13.43 3.13 19.50 16.64

20007/08 17.81 37.83 14.38 1.0816

∑(Y-Y)²= 32.76
∑(X- )²= 294.78

S.D ( ) =√∑(X- ) ² S.D ( ) =√∑(X- ) ²

N N

==√294.78 = √32.76

7 7

=6.49 =2.16

CV = ×100% CV = ×100%

= 6.49 = 2.16

11.66 15.42

= 54.55% =13.88%

Calculation of Return on Shareholder‟s Equity

Year BPC HPL

(X) (X- )² (Y) (Y-Y)²

2001/02 8.23 44.22 30.73 41.35

2002/03 (2.42) 316.84 22.21 4.368

141
2003/04 17.49 6.81 23.39 0.8281

2004/05 14.32 0.3136 27.02 7.40

2005/06 22.18 53.29 19.47 23.33

2006/07 19.53 21.63 28.84 20.61

20007/08 25.35 109.62 18.46 34.10

∑(Y-Y)²= 131.98
∑(X- )²= 552.73

S.D ( ) =√∑(X- ) ² S.D ( ) =√∑(X- ) ²

N N

== √552.73 = √131.98

7 7

=9.24 =4.36

CV = ×100% CV = ×100%

= 9.24 = 4.36

14.88 24.30

= 62.10% =17.94%

Calculation of Return on Leverage Ratio

Year BPC HPL

(X) (X- )² (Y) (Y-Y)²

2001/02 1.82 0.3481 0.59 0.121

2002/03 1.85 0.3844 0.58 0.01

142
2003/04 1.52 0.0841 0.57 0.008

2004/05 1.16 0.0049 0.49 0.0001

2005/06 1.02 0.0441 0.46 0.0004

2006/07 0.67 0.3136 0.36 0.0144

20007/08 0.56 0.4489 0.34 0.0196

∑(Y-Y)²= 0.0646
∑(X- )²= 1.63

S.D ( ) =√∑(X- ) ² S.D ( ) =√∑(X- ) ²

N N

==√1.63 = √0.0646

7 7

=0.48 =0.12

CV = ×100% CV = ×100%

= 0.48 = 0.12

1.23 0.48

= 39.02% =25%

Calculation of Earning Per Share

Year BPC HPL

(X) (X- )² (Y) (Y-Y)²

2001/02 14.85 83.174 54.42 11.2

2002/03 (5.36) 860.3 43.85 193.5

143
2003/04 28.06 16.73 50.64 50.70

2004/05 23.57 0.16 65.90 66.3

2005/06 34.37 108.16 49.82 63.04

2006/07 30.13 37.95 84.04 690.64

20007/08 42.18 331.60 55.64 4.49

∑(Y-Y)²= 1079.87
∑(X- )²= 1438.03

S.D ( ) =√∑(X- ) ² S.D ( ) =√∑(X- ) ²

N N

==√1438 = √1079.87

7 7

=14.05 =12.41

CV = ×100% CV = ×100%

= 14.33 = 12.42

23.97 57.76

= 58.61% =21.49%

Calculation of Dividend per Share

Year BPC HPL

(X) (X- )² (Y) (Y-Y)²

2001/02 10 225 17 318.9

2002/03 0 625 23 140.65

144
2003/04 40 225 32 8.1796

2004/05 35 100 38 9.8596

2005/06 30 25 38 9.8596

2006/07 30 25 50 229.3

20007/08 30 25 46 124.09

∑(Y-Y)²= 840.848
∑(X- )²= 1230

S.D ( ) =√∑(X- ) ² S.D ( ) =√∑(X- ) ²

N N

==√1230 = √840.848

7 7

=13.36 =10.95

CV = ×100% CV = ×100%

= 13.25 = 10.95

25 34.86

= 53.44% =31.41%

Calculation of Dividend Payout Ratio

Year BPC HPL

(X) (X- )² (Y) (Y-Y)²

2001/02 67.34 428.9 31.29 849.139

2002/03 0 7752.8 52.45 63.68

145
2003/04 142.55 2970.25 63.19 7.6176

2004/05 148.49 3652.99 57.66 7.6729

2005/06 87.29 0.5776 76.27 250.90

2006/07 99.57 132.71 59.50 0.8649

20007/08 71.12 286.63 82.67 494.617

∑(Y-Y)²= 1674.492
∑(X- )²= 152224.8

S.D ( ) =√∑(X- ) ² S.D ( ) =√∑(X- ) ²

N N

=√152224.8 = √1674.492

7 7

=46.64 =15.46

CV = ×100% CV = ×100%

= 46.64 = 15.46

88.05 60.43

= 52.97% =25.58%

Appendix C
I. Seven Year Summary of Financial Statements of Butwal Power Company
Limited (BPC)
Balance Sheet
In Thousand
NRs
Particulars 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08

ASSETS &
PROPERTY

146
Fixed Assets 756,006 763,484 727,340 714,016 743,605 743,893 725,742

Capital Work in 13,907 890 5,277 318 18,576 1,111 7,247

Progress

Long Term 544,426 537,648 356,906 381,505 434,481 465,705 477,858

Investment

Current Assets 286,201 520,987 481,833 335,582 543,416 670,674 776,079

Stock 50,137 43,985 41,766 48,038 57,623 58,896 74,646

Current Work in 7,829 6,898 8,163 9,477 19,394 23,258 29,944

Progress

Debtors and 41,190 36,224 31,309 42,921 35,512 58,918 88,407

Receivables

Cash and Bank 119,186 120,645 324,349 172,240 364,373 457,035 412,635
Balance

Advance and 67,859 313,235 76,246 62,906 66,514 72,567 170,447

Deposit

Deferred Revenue 12,625 2,455 7,839 7,817 4,369 888 4,765

Expenditure

TOTAL 1622,165 1825,464 1579,195 1439,238 1744,447 1882,271 1991,691

CAPITAL &
EQUITY

Equity 839,058 839,058 839,058 839,058 839,058 839,058 839,058

Reserve and 676,017 698,587 506,726 541,470 461,510 455,805 556,762

Surplus

Funds 53,079 7,653 - - - - -

Current 54,012 280,166 207,655 54,172 433,619 562,584 595,871

Liabilities

Bank Overdraft - - - - - 89,947 183,956

Creditor & 45,893 32,983 207,271 52,318 432,012 441,779 356,934

Payables

Advance &Deposit 544 247,183 384 1,854 1,607 30,858 29,433

Provisions 7,574 - 25,756 4,538 10,260 24,824 -

TOTAL 1622,165 1825,464 1579,195 1439,238 1744,447 1882,271 1991,691

Source: Annual Report of BPC (F/Y 2001/02 -2007/08)

147
 Profit and Loss Account
In Thousand NRs
Particulars 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08

INCOME

Electricity Sales to 213311 67954 249530 286795 318483 334166 372521

NEA

Electricity Sales to 22967 28410 33637 36339 39936 45603 49166

Customers

Consultancy 16441 7768 8212 8831 11498 9535 18894

Service

Total Operating 256445 107979 294858 335494 375270 392938 446732

Income

Income from Other 25076 165 236753 60218 116909 96403 196463
Sources

TOTAL INCOME 281521 108144 531611 395712 492179 489341 643195

EXPENDITURE

Power Plant 39836 43702 47369 59600 57715 74565 82514

Expenses

Distribution 29673 27170 27170 30296 31054 33303 48428

Expenses

Consultancy 19794 14984 10946 14903 13692 8774 16743

Service

Administrative 15249 25066 38371 41201 34990 37645 53508

Expenses

Loss on Fixed - 73 376 - 6090 - -

Assets

KHP Back End - - 100075 - - - -

Payment

Provision of loss of - - - - - 9479 6869

Investment

Depreciation 44770 42093 46131 47413 49959 51924 55103

Staff Bonus 3297 - 8933 4046 6791 5926 9504

148
TOTAL 152619 153088 279371 197459 200291 226882 279915
EXPENDITURE

Net PROFIT 128902 (44944) 252240 198253 291888 262459 363280

Before Tax

Income Tax 4276 - 16822 492 3469 9619 9401

Provision

Net Profit After 124626 (44944) 235418 197761 288419 252840 353879
Tax

Last Year Balance 423419 386166 381552 281346 185484 222131 222805

Income Tax (77973) 40330 - 47 (55) (531) (18570)

Adjustment

Dividend (83906) - (335624) (293670) (251717) (251635) (251717)

Net Profit 386166 381552 281346 185484 222131 222805 306397

Transfer to B/S

Source: Annual Report of BPC (F/Y 2001/0 2 -2007/08)

II. Seven Year Summary of Financial Statements of Himal Power Limited

(HPL)
Balance Sheet
In Thousand NRs
Particulars 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08

ASSETS &
PROPERTY

Fixed Assets 7548112 8570394 8213644 7908173 7551062 7203678 7002613

Capital Work in 27139 11507 2466 8124 19877 20599 22866

Progress

Current Assets 2104310 2417624 1894736 2182303 2326983 2230147 1703231

Account 204310 396465 416028 393675 428146 417834 430109

Receivable/
Debtors

Inventories 486 - - - - 14993 19894

Cash and Bank 1718131 1873603 1341952 1636866 1737778 1581610 1100228
Balance

Prepaid 181592 147556 136756 151762 161062 200174 132094

Advances, Loan

149
&Deposit

Deferred - - - - - 15536 20907

Revenue
Expenses

TOTAL 9679770 10999525 10110846 10098600 9897922 9454424 8728710

CAPITAL &
LIABILITIES

Equity 1764144 1764144 1764144 1764144 1764144 1764144 1764144

Reserve & 1359745 1719719 2054113 2537862 2750583 3375912 3553339

Surplus

Secured Loans 5681902 6429352 5807484 4987040 4598322 3432851 2968227

Current 873979 1086310 485105 809554 784873 881517 443000

Liabilities

TOTAL 9679770 10999525 10110846 10098600 9897922 9454424 8728710

Source: Annual Report of HPL (F/Y 2001/02 -2007/08)

Profit And Loss Account

In Thousand NRs
Particulars 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08

Revenue From 2171039 2193850 2092032 2104124 2121897 2307461 2132995

Sale of
Electricity

Other Income 16645 14209 7660 20154 3263 59 16

Interest Income - - - - 41545 79308 48553

Total Revenue 2187683 2208059 2099692 2124278 2166705 2386827 2181563

Operation & 242951 280076 271344 280733 271626 353751 445106

Administrative
Expenses

Profit From 1944732 1927983 1828348 1843544 1895079 2033076 1736457

Operation

Interest 684539 650364 564897 492603 436257 360879 274064

Depreciation 302012 363403 390697 327661 391492 388112 330872

Foreign (21446) 106288 (38761) (163786) 170412 (241856) 131840

Exchange Gain/
Loss

150
Write Off - 18542 - 790 - - -

Deferred Tax - - - - - - (5755)

(Profit) loss on - - - - 6 13125 3872

disposal of
Assets

Provision for 19593 15789 18230 23726 17938 30256 20031

Bonus

Profit Before 960034 773597 893285 1162551 878986 1482560 981533

Tax

Provision For - - - - - - -
Income Tax

Profit After 960034 773597 893285 1162551 878986 1482560 981533

Tax

Balance of 693068 1359744 1719719 2054113 2537862 2750583 3345383

Profit as per
Last Year

Interim - - (383014) (678801) (155320) (330480) (694185)

Dividend

Proposed (293358) (413623) (175877) - (510945) (5572800 (109920)

Dividend

Balance of 1359744 1719719 2054113 2537862 2750583 3345383 3522811

Profit Transfer
To B/S

Source: Annual Report of HPL (F/Y 2001/02 -2007/08)

151