Problem in investment on promoter shares by commoners in lack of law

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    sharesCommoners seem to be interested to invest in promoter shares of hydropower projects but their hands have been tied in lack of legal provisions. A few hydropower developers have been indirectly collecting promoters’ investment from commoners on the basis of their background but there are no legal provisions to give continuity to that.

    Developers can collect promoters’ investment from commoners but that has yet to gather momentum in lack of legal provisions. A few developers have been generating such investment on the basis of personal relations, and showing good prestige and attractive returns. Developers advise that investment for projects can be generated through trustees licensed by the Securities Board of Nepal (SEBON) when enough investment cannot be generated for construction of projects.

    Director of the SEBON Niraj Giri says doors should be opened for institutional investment when commoners are willing to invest in hydropower projects. “Commoners are ready to invest in hydropower projects. Investment has not arrived in lack of a trustworthy mechanism. It is necessary to bring a separate trustee act to allow allocation of promoter shares to commoners,” he adds. He claims that the trustee act has been discussed for long but there has been no breakthrough.

    Clause 36 of the Company Act allows merchant bankers to issue bonds for companies with investment of commoners. Share analyst Rabindra Bhattarai says it is necessary to create legal groundwork to make commoners promoter shareholders before construction of hydropower projects. “Developers will not face problems in collecting investment to start construction of hydropower projects if there were legal provision. Institutional investment will be collected through trustee as in the case of merchant banker. Institutional investment made by commoners will be safe as the trustee takes care of issues like good use of investment, nature of projects and guarantee of returns,” he reasons.

    Stating that commoners seem to be interested to invest on promoter shares of hydropower projects, he says their hands have been tied in lack of legal provisions. He believes billions of rupees can be collected as trust of commoners can be earned if institutional investment through a trustee is opened. He says the trustee must be licensed by the SEBON to collect investment.

    Hydropower companies currently can issue shares to commoners only a year after start of construction. There have been problems for investment before start of construction due to that. President of the Independent Power Producers’ Association, Nepal (IPPAN) Khadga Bahadur Bista also says it should be properly managed. He reveals discussions were held about the issue some time back but the process has yet to move forward. “Such investment is necessary not just in hydropower projects but also in other big infrastructure projects,” he adds.

    The Energy Ministry has issued license for generation of 2086 MW to the Nepal Electricity Authority (NEA) and private sector. The government has already given permission to donor agencies like the Asian Development Bank (ADB) and the International Finance Corporation (IFC) under the World Bank to issue bonds worth Rs 50 billion each to collect investment from commoners for development of energy and other infrastructure.

    Soucre : Karbar Daily