Last year (2015) in September, news emerged that an investment bank based out of Las Vegas, US – InvestBank – acquired a 70% equity stake in the 440 MW Tila-1 hydro-electric project and 420 MW Tila-2 hydro-electric project (http://tinyurl.com/z9rxyrh). Tila-1 and Tila-2 had the projected costs of US$ 649 Million and US$ 555 Million respectively. It further mentioned that InvestBank is working in cooperation with S.C. Power Company Pvt. Ltd. to develop the two hydroelectric projects. S.C. Power Company is affiliated with Bastola Organization, a diversified multinational conglomerate based in Nepal.
Investors and business readers in Nepal and around the world read and watched the news with awe about yet another foreign investment in mega hydro-power projects in Nepal.
The Udaya Group goes behind mega foreign investment reporting by media in the frontier market to validate accuracy and claims, and so we dug into this one too. I personally spoke with Don Christensen, who serves as the Chairman, CEO and President of InvestBank, to understand the context and actuality of this deal. So, despite of what was extrapolated in the media, below is the actuality of this “investment” for the benefit of our readers and investors:
- InvestBank has not actually invested 70% of the total costs of two projects (US$ 649 + US$ 555) or neither 70% of either of those projects.
- InvestBank rather made an investment in S.C Power Company – which is a legal entity setup to construct the project. 70% of S.C Power Company’s equity likely held by InvestBank is obviously not anywhere close to 70% of US$ 1.2 Billion!
- InvestBank is to now to sell this opportunity to investor group and raise funds from investors who are willing risk capital in frontier market hydro projects. I wasn’t given the detail of how much was raised or when they intend to fully raise the needed amount but only that the work is in progress.
- Don mentioned that he didn’t even visit Nepal to close the deal. It would be very strange if a US$ 845 Million project deal was inked without the investor even visiting the site!
So there you go – readers of business news coming out from the frontier markets are suggested not to just follow the news hook, line, and sinker and to do your own due-diligence. The Udaya Group will continue to follow and report on any progress surrounding Tila-1 and Tila-2 projects.