Kathmandu — The Independent Power Producers’ Association, Nepal (IPPAN), has drawn the attention of Prime Minister KP Sharma Oli to create a conducive environment for the issuance of shares by hydropower companies.
The Nepal Securities Board (SEBON), citing directives from the Public Accounts Committee, has not granted approval for the issuance of primary shares (IPOs) and rights shares of 53 hydropower companies for the past 20 months.
Due to the halt in the public issuance worth Rs 20 billion by 42 energy companies that had applied for IPOs, the approval for rights shares (worth around Rs 4.5 billion) of 11 companies has also been withheld.
IPPAN claims that the construction work of hydropower projects has come to a halt due to the lack of approval for share issuance. It also stated that the mandatory provision under the existing legal framework requiring hydropower companies to issue IPOs to the general public has not been implemented.
IPPAN has stated that the halt in issuing IPOs and rights shares of hydropower projects since July/August 2023 has brought a serious crisis to the construction of these projects.
Citing the directive from the 19th meeting of the Public Accounts Committee, which requires a real net worth of over 90 to issue IPOs, the Nepal Securities Board has withheld IPO approvals. Prior to that, IPO approvals had been stalled due to the absence of an appointed chairperson at the board.
Since the term “real net worth” does not exist in this sector, the Securities Board has stated that it cannot proceed with any actions until the government provides a clear definition. As a result, financial management of hydropower projects under construction by the private sector has faced problems. On the other hand, local communities affected by the projects have started obstructing construction, demanding to know why shares have not been provided to them.
The provision mentioned in Decision No. 6 of the Public Accounts Committee, which states that even after repaying the construction loan of a hydropower project, the one-third shares held by the initial shareholders cannot be sold even after a three-year lock-in period, has started to negatively impact the environment for equity investment.
Currently, in just one project, more than 10,000 founding investors have begun investing through crowd financing. The participation of both the general public and promoters in share investments has significantly contributed to capital mobilization in the capital-intensive energy sector.
If the provision that prohibits the sale of shares even after the lock-in period remains in place, it will reduce the likelihood of promoters of one project investing in another, thus diminishing the potential for large-scale projects in the future. This could also pose a serious obstacle to the implementation of the government’s “Energy Development Roadmap and Action Plan 2024,” which aims to produce 28,500 MW of electricity within the next 10 years. To meet this target, IPPAN has urged the Prime Minister to reconsider this decision and create an environment for IPO issuance based on the existing legal framework, facilitating investment through crowd financing in the founding shares of hydropower projects.
Earlier, IPPAN had sent letters to the Public Accounts Committee, the Minister and Secretary of Finance, the Minister and Secretary of Energy, the Securities Board, and others, requesting the creation of an environment for the issuance of the blocked shares. However, as the issue remains unresolved, IPPAN has urged the Prime Minister to take the initiative to resume the issuance of the blocked shares.
For this, IPPAN has expressed the expectation that the Prime Minister will provide the necessary instructions to facilitate and coordinate with the Public Accounts Committee of the esteemed Parliament, and issue necessary directives to the Securities Board, in order to create an environment for the swift commencement of hydropower project construction.
The total electricity production capacity in the country has reached 3,500 MW, with 190 projects of 2,800 MW capacity already in operation from the private sector.
There are 141 projects under construction with a capacity of 4,063 MW, and 141 projects with a capacity of 4,363 MW that have completed power purchase agreements (PPAs) with the Nepal Electricity Authority and are awaiting financial arrangements.
Source: Kantipur
