Issuance of hydropower IPO emphasised

By A Staff Reporter,Kathmandu, Feb. 19: Policymakers and private stakeholders have said that the issuance of primary and rights shares of hydropower companies should not be halted. 

Speaking at an interaction organised by the Nepal Association of Financial Journalists (NAFIJ) in Kathmandu on Tuesday, they urged the government to facilitate the Initial Public Offering (IPO) process for hydropower companies.

The government has set a target of generating 28,500 megawatts of electricity by 2035. To achieve this goal, including the necessary infrastructure development, requires an estimated investment of US$ 46.5 billion. 

However, despite this ambitious target, the government has not facilitated one of the key investment avenues—public issuance of shares by hydropower companies. Currently, 42 hydropower companies have pending applications at the Securities Board of Nepal (SEBON) for the IPO. 

Collectively, these companies have sought approval for the issuance of 179.06 million shares, worth Rs. 18.31 billion. Hydropower companies have been unable to secure IPO approval for the past 18 months, significantly impacting hydropower development,  said Ganesh Karki, President of the Independent Power Producers’ Association Nepal (IPPAN).

Challenge to manage funds

Suman Joshi, a member of the IPPAN said that despite the legal provision requiring hydropower companies to allocate 10 per cent of their shares to affected local communities, the delay in IPO approvals has led to growing dissatisfaction among the locals. Promoter companies are unable to distribute shares to locals despite their willingness to do so, she added.

According to Joshi, the IPO approval process has been stalled due to a directive issued by the Public Accounts Committee (PAC) of the House of Representatives (HoR) on December 28, 2023, which stipulated that hydropower companies issuing IPOs must have a minimum ‘real net worth’ of Rs. 90 per share. 

As a result, many hydropower companies have been unable to obtain IPO approval. Hydropower projects typically issue IPOs during their construction phase, during which their net worth is naturally lower. Hence, there is a pressing need for regulatory flexibility, the investors said.

“The inability to issue IPOs has also led banks and financial institutions to halt loan disbursements, affecting project construction,” Joshi stated. “If IPO issuance remains stalled, shareholders may also be discouraged from investing.”

She further highlighted that project delays result in increased costs while the Nepal Electricity Authority (NEA) imposes penalties for missed deadlines.

Rs. 1.5 trillion in limbo

Karki criticised the government for restricting hydropower producers, arguing that the sector, with an investment of Rs. 1.5 trillion, is now in limbo. 

Stating that the capacity of Nepali private sector companies has gone up significantly in terms of project development, he urged authorities to facilitate the share issuance process for hydropower companies. 

According to him, in some cases, frustrated residents have resorted to vandalising company vehicles. "How can the companies be blamed for this? Until IPOs are approved, shares cannot be distributed. The concerned authorities must address this issue,” he maintained.

Karki further said that there is a contradiction between the PAC and the Finance Committee of the Federal Parliament, and at a time when entrepreneurs should be focusing on projects, they are compelled to navigate bureaucratic hurdles, hampering the development of the sector. 

Assuring that efforts would be made to facilitate the private sector in the energy business, PAC Chairman, Rishikesh Pokhrel, stressed the need for solutions rather than disputes over the IPO halt. 

He suggested revisiting the previous PAC decision.

“We ruled that founding investors should not exit until loans are repaid,” Pokhrel explained. “However, we must clarify whether allocating 10 per cent shares to locals and the public constitutes a financial burden or a profit-sharing mechanism."

Chief Whip of the Nepali Congress, Shyam Kumar Ghimire, acknowledged the difficulties faced by hydropower companies due to the IPO halt and indicated that the PAC decision would be reconsidered. 

“Share issuance must not be driven by fraudulent intent—it must be regulated. IPO issuance is a good concept as it allows public investment and facilitates more projects. Therefore, IPOs should be approved, but their misuse must be prevented,” said Ghimire. 

NEA plans to issue IPO

Kulman Ghising, Executive Director of the NEA, acknowledged the risks associated with IPO investments and argued that necessary regulations should be put in place rather than halting the process altogether.

Ghising reiterated NEA’s commitment to facilitating power purchase agreements (PPAs) as required to meet the government’s 28,500-megawatt target. “Not all projects with signed PPAs proceed to construction. The private sector must take this issue seriously and avoid merely holding onto PPA approvals without implementation,” he said.

He informed that the NEA is preparing to issue its IPO, with all necessary formalities completed. “We have submitted the proposal to the Ministry of Finance, and once approved by the Cabinet, we will proceed with issuing shares,” he said. According to Ghising, the NEA plans to issue IPOs at a premium price, representing 20 per cent of its capital.

Need for efficient process 

Ram Prasad Dhital, Chairman of the Electricity Regulatory Commission (ERC), said the regulatory framework was being streamlined to ease IPO approvals. “Hydropower companies must submit documentation to the SEBON, the Company Registrar’s Office, and ERC. We are working towards making this process more efficient,” he said. 

Similarly, Joint Secretary of the Finance Ministry, Shyam Prasad Bhandari pointed to the lack of coordination among government agencies and stressed the need for policy stability to foster investment. 

According to him, while Nepal’s hydropower sector faces investment challenges, the primary issue lies in management rather than funding.

Rupesh KC, Deputy Director of the SEBON, said that 37 per cent of IPOs awaiting approval belong to hydropower projects. He reaffirmed the Board’s responsibility to balance capital mobilisation for economic growth while protecting investor interests.