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Tribhuvan University

Institute of Engineering
Pulcho ! "am#us

Master$s of Science in %ene able Energy Engineering

& %EP'%T
'(

)*inancial %atio &nalysis+ of

CHILIME HYDROPOWER COMPANY LIMITED


E"'('MI"S '* E(E%,- P%'.E"TS /E,012ES3

"4I5IME 4P"5
Submitte6 to7 Mr< &mrit Man (a!armi Professor De#artment of Mechanical Engineering Submitte6 by7 8hem ,ya ali /09:;MS%;1113 Pitamber Pou6el /09:;MS%;1113 %amen6ra 8umar /09:;MS%;1123 Shiv 8umar Shah /09:;MS%;1113

Date of Submission March 10, 2011 Date of Submission .uly 12, 2011

Table of Contents
Table of Contents.................................................................................................................2

Executive Summary
Chilime Hydropower is a peak run-off river type plant with an installed capacity of 22.56 M constructed and owned by Chilime Hydropower Company !imited. "fter completion of the #ro$ect% the #lant has been &eneratin& power commercially since '( th )artik 2*52 with its full capacity. This company was established with capital comprisin& of (*+ e,uity and 6*+ loans. -ut of the total capital% 5'+ of e,uity share is owned by .epal /lectricity "uthority 0./"1% 25+ by ./" staffs and 2(+ was allocated for the &eneral public which has been issued publically recently. 2ased on our 3inancial 4atio "nalysis% we have found that5 the profitability ratios for the company are &reater than avera&e values indicatin& that the company is &eneratin& hi&her profit6 the li,uidity ratios also are hi&her than avera&e value which indicates that the company can raise capital easily and the rate of &rowth of current assets is hi&her than the rate of &rowth of current liabilities6 7imilarly% a rise in earnin&s per share with each fiscal year is the indication of safe investment in the company. The hi&her than avera&e value of avera&e settlement period for debtors indicates that the customers 0./" specially1 doesn8t clear debt on time. Overall, the financial position of this company is very strong as indicated by different financial parameters.

1. Companys Background
Chilime Hydropower #lant was established in '( th )artik 2*52. 9t is a peak run-off river type plant constructed and owned by Chilime Hydropower Company !imited. 9t is located at ':: km north of 2hotekoshi 4iver in 4asuwa ;istrict. The plant with its installed capacity of 22.56 M is deliverin& the power of 2* M under the #ower #urchase "&reement 0##"1 with .epal /lectric "uthority 0./"1 since 2( th "u&ust 2**:. The plant has been desi&ned to &enerate ':< = h ener&y per annum. The &enerated ener&y is bein& fed to the .ational =rid throu&h a :> km lon& 66 k? sin&le circuit transmission line at Trishuli% .uwakot ;istrict.

The electricity &enerated from the power plant is purchased by ./" at the powerhouse and evacuated as per the ##" made on ''th"shad 2*5(. The annual dimmed ener&y salable to ./" is ':2.@ = h% eAcludin& penalty-free outa&e of :6 hours 0<2* M h1 annually.

Performance of Power Plant The power plant has very efficient electromechanical e,uipment% as a result% it can &enerate electricity to fulfill the deemed ener&y as per the ##" a&reement with ./" as well as it has been able to &enerate >.>:+ eAcess ener&y in the fiscal year of 2*65B66. 9nsurance of the #ower #lant and assets has been made with 4astriya 2eema 7anathan.

2.

rgani!ational Structure

".

#$ective
".1 Primary o#$ective The primary ob$ective of this study is to calculate the different financial ratios viC. #rofitability 4atios% "ctivity 4atios% !evera&e 4atios% !i,uidity 4atios and Market 4atios of Chilime Hydropower Company !imited for the fiscal years from 2*6:B6( to 2*66B6<.

".2 Secondary

#$ective

The secondary ob$ective of the study is to eAamine the financial condition of the company and to find out whether the company is overtradin& or not.

%. &et'odology
3ollowin& are the ma$or steps that we followed to prepare this report which are briefly described below5 %.1 (iterature )eview5 4elevant literature on financial ratios was reviewed from DContemporary /n&ineerin& /conomicsE% :rd edition by Chan 7. #ark.

%.2

*ata Collection5 The re,uired financial eAtracted the for data from "nnual the for CH#C was

=eneral 4eports respective fiscal

years obtained from Chilime Hydro #ower Company !td.% head office located at =yaneswor.

%."

+nalysis and ,nterpretation of *ata5 7ince the data obtained were in .epali lan&ua&e% they were converted into /n&lish6 analyCed and finally various financial ratios were calculated.

%.%

+nalysis of -inancial )atios5 2ased on the financial ratios calculated% the financial condition of the company was eAamined.

. -inancial )atios +nalysis


3inancial ratios analysis is important to boards% mana&ers% shareholders% investors and others who make $ud&ments about the financial health of or&aniCations. -ne widely accepted method of assessin& financial statements is ratio analysis% which uses data from the balance sheet and income statement to produce values that have easily interpreted financial meanin&. Companies routinely evaluate their financial condition by calculatin& various ratios and comparin& the values to those for previous periods% lookin& for differences that could indicate a meanin&ful chan&e in financial condition. Many companies also compare their own ratio values to those for similar or&aniCations% lookin& for differences that could indicate weaknesses or opportunities for improvement. 3inancial ratio analysis is the calculation and comparison of ratios which are derived from the information in a companyFs financial statements. The level and historical trends of these

ratios can be used to make inferences about a companyFs financial condition% its operations and attractiveness as an investment. 3inancial ratios are calculated from one or more pieces of information from a companyFs financial statements. 3or eAample% the Gnet profit mar&inG is the net profit from operations divided by the total sales or revenues of a company% eApressed in percenta&e terms. 9n isolation% a financial ratio is a useless piece of information. 9n conteAt% however% a financial ratio can &ive a financial analyst an eAcellent picture of a companyFs situation and the trends that are developin&. " ratio &ains utility by comparison to other data and standards. Takin& our eAample% a net profit mar&in for a company of '5+ is meanin&less by itself. 9f we know that this companyFs competitors have profit mar&ins of '*+% we know that it is more profitable than their industry peer which is ,uite favorable. 9f we also know that the historical trend is upwards% for eAample has been increasin& steadily for the last few years% this would also be a favorable si&n that mana&ement is implementin& effective business policies and strate&ies. 3inancial ratios can be &rouped into certain cate&ories% each of which reflects a particular aspect of financial performance or position. The followin& broad cate&ories provide a useful basis for eAplainin& the nature of financial ratios to be dealt with5

..1 Profita#ility ratios #rofitability ratios provide an insi&ht to the de&ree of success in achievin& wealth for the owners. They eApress the profits made in relation to other key fi&ures in the financial statements or to some business resources. The four profitability ratios calculated are as follows5