Kathmandu — Energy developers have stated that even hydropower companies that meet the required standards have been unable to issue initial public offerings (IPOs), which has consequently affected project construction. During a press conference organized on Wednesday by the Independent Power Producers’ Association of Nepal (IPPAN), the developers shared this information.
They said that private sector investment in completed, under-construction, and soon-to-be-launched hydropower projects has already reached around NPR 1.5 trillion. There are plans to invest an additional NPR 3 trillion over the next 10 years. However, IPPAN stated that the issuance of IPOs and rights shares has been delayed for the past 28 months due to the Securities Board. This has not only discouraged private investors but has also led to local-level obstructions in project construction.
Similarly, they stated that if the policy requiring IPO issuance only after a project begins electricity production is implemented, local investors will be unable to invest in time, which could worsen local-level problems. IPPAN claimed that this concern was recently confirmed by the incident at the 45-megawatt Bhote Koshi project, where electricity production was halted for a month after locals demanded a 10% share allocation in their name. IPPAN said this incident reaffirms its long-standing position that share issuance for hydropower projects should take place during the construction phase itself, and it emphasized the urgent need for the Securities Board and the Government of Nepal to implement this recommendation.
To make the energy sector more responsible and accountable, a 12-point agreement was signed on September 10, 2023 between the Securities Board and IPPAN. The agreement aimed to enhance institutional governance and make the energy sector more organized and disciplined. It included commitments such as not lifting the lock-in period for shares until electricity generation begins, requiring subsidiary companies to have completed Power Purchase Agreements (PPAs) and financial arrangements before issuing rights shares, and allowing IPO issuance only after 65% of project construction is completed.
However, IPPAN stated that despite this understanding being in effect, delays by the Securities Board in approving and facilitating the issuance and sale of securities by hydropower companies have created a situation that could seriously affect Nepal’s energy development and expansion.
IPPAN has claimed that since May- June 2023 , hydropower companies have not been able to issue IPOs regularly. Currently, 43 companies with a combined capacity of 975 megawatts are waiting to issue IPO shares, while 7 companies are waiting to issue rights shares — a total of 50 companies facing delays. As a result, securities worth NPR 23.27 billion have not been issued on time. Developers claim that because of this, the energy sector has suffered a financial loss of around NPR 108.5 billion.
According to IPPAN, due to the delay in issuing the shares, interest expenses have increased by NPR 12.40 billion, project costs have risen by NPR 24.30 billion, and an estimated NPR 71.78 billion in revenue (based on IPPAN’s study) has been lost.
Additionally, the statement mentioned that six hydropower companies — Richet Hydropower, Beni Hydropower, Unique Hydel, Yambling, Laughing Buddha, and Puwa Khola Hydropower — were removed from the IPO application process on the grounds that their so-called “real net worth” was below 90. IPPAN noted that the term “real net worth” is neither practiced anywhere in the world nor included in Nepal’s legal framework, and that such arbitrary criteria have begun to create serious problems for the overall development of the energy sector.
IPPAN is an umbrella organization of energy producers. Its main objective is to identify the problems faced by energy entrepreneurs and to coordinate with relevant authorities to seek their resolution. At present, more than 570 energy-producing companies are affiliated with IPPAN as members.
The country’s electricity generation capacity has reached approximately 3,700 megawatts (MW), of which around 3,050 MW comes from projects developed by the private sector. Additionally, various projects with a combined capacity of about 5,416 MW are currently under construction by the private sector.