Kathmandu — Finance Minister Rameshwor Prasad Khanal has said that although suggestions were made to allow hydropower companies to issue IPOs only after electricity production begins, permission cannot be denied unless the law is amended.
While meeting with a delegation from the Independent Power Producers’ Association of Nepal (IPPAN) on Monday, Minister Khanal clarified that IPOs of hydropower companies that have already submitted applications cannot be rejected without the formulation of additional legal provisions.
In the meeting, while discussing the issue of securities issuance and sale of hydropower companies, IPPAN President Ganesh Karki said that due to the Securities Board halting hydropower companies’ IPOs for the past 28 months, promoters and the state together have already incurred financial losses of over 100 billion rupees.
Chairman Karki stressed that the public issuance of over Rs. 23 billion from around four dozen companies currently in the pipeline should be carried out as soon as possible. He argued that hydropower companies should not be required to meet a net-worth threshold to obtain IPO approval, since large investments are involved. He further noted that the law already requires energy projects to issue shares to locals and the general public even during the construction phase. Therefore, the Securities Board’s unjust decision to reject IPO applications until power generation begins—without any legal basis—should be annulled.
He demanded that the rule allowing IPO applications after 50% of construction is completed and granting approval once 65% is completed be implemented. He also raised the issue that CDSC has been assigning separate ISIN numbers to promoters and the general public, and that shares of hydropower companies which have already conducted public issuance have not yet been listed on NEPSE. He urged Finance Minister Khanal to abolish the dual ISIN system and ensure those companies’ shares are listed.
Similarly, Chairman Karki informed Minister Khanal that banks have started pressing companies that took loans against IPO collateral to repay them, while also stopping such loans for projects that have not yet started generating electricity. Since the inflow of funds through IPOs has also become uncertain, dozens of hydropower projects that have already reached the stage of power generation are facing delays in construction and a significant increase in financial liabilities. He urged Khanal to take the matter seriously and help resolve the problem.
In the current fiscal year’s budget, a “Take and Pay” provision was included in the power purchase agreements (PPAs) for run-of-the-river (ROR) projects. Although then-Prime Minister KP Sharma Oli, while addressing the House of Representatives during the budget’s passage, had stated that this provision would go against hydropower development and was therefore withdrawn, it has still not been removed from the budget.
As a result, even the regular PPAs for projects under 10 MW have been halted, and the PPAs for projects amounting to 13,000 MW that have completed studies and are in the pipeline have also become uncertain. Therefore, IPPAN has urged Finance Minister Khanal to remove the “Take and Pay” provision from the budget and to facilitate the opening up of PPAs.
Similarly, although the Electricity Act provides that only 1% customs duty should be levied on the import of spare parts for hydropower projects, the government has for the past two years been charging 28% duty before allowing such imports. Citing the provisions of the Electricity Act, IPPAN requested Finance Minister Khanal to ensure the proper arrangement for importing spare parts.
In addition, IPPAN complained that local governments have been arbitrarily imposing taxes, issuing letters, and demanding shares from hydropower projects. They urged Minister Khanal to put a stop to such practices.
After listening to the IPPAN delegation, Finance Minister Khanal said that although he had suggested that it would be more appropriate to allow hydropower companies to issue IPOs only after electricity generation begins, the necessary law to implement that suggestion has not yet been formulated. Since the House of Representatives has already been dissolved, there is no possibility of enacting or amending a new law immediately. Therefore, he stated that all companies should be granted IPO approval in accordance with the existing law.
On the issue of the Securities Board refusing to accept applications from projects that have not yet been completed, Finance Minister Khanal responded with a counter-question: “Since no law has been enacted to implement the suggestion of allowing IPOs only after power generation begins, why has it been stopped already?”
He further clarified that creating or amending a law requires the House of Representatives, but since it has now been dissolved, hydropower companies should continue to receive IPO approvals and other facilities under the existing law. He also expressed his commitment that, even if a new law cannot be introduced, the government will work within the framework of the current law and its given mandate to encourage energy producers and boost their morale.
