Kathmandu, Nepal – The Independent Power Producers’ Association of Nepal (IPPAN) has called for the removal of the provision requiring hydropower projects to show a minimum of 20% financial progress before issuing right issues (hakprad shares). This call was made during a meeting on Tuesday, where a delegation from IPPAN, led by Senior Vice President Mohan Kumar Dangi, submitted a memorandum to the Secretary of the Ministry of Energy, Water Resources, and Irrigation, Chiranjeevi Chataut, and the Chairperson of the Electricity Regulatory Commission, Dr. Ram Prasad Dhital.
In the memorandum, IPPAN argued that the 20% financial progress requirement has been hindering the ability of companies to manage investments and proceed with the construction of hydropower projects. The provision, which mandates that a company must show financial progress of at least 20% for a project to qualify for issuing hakprad shares, has proven to be problematic and, in many cases, unfeasible, the association stated.
The provision in question is outlined in the Electricity Regulation Act, which requires a proposed project to demonstrate 20% financial progress before issuing hakprad shares for capital raising. According to the regulation, without securing self-generated capital through the issuance of these shares, a company is not eligible to proceed with the project’s financial structuring, making it nearly impossible to meet this requirement.
IPPAN highlighted that this regulation has significantly disrupted the smooth operation of many projects, as the requirement prevents companies from raising the capital they need. They emphasized that in many cases, large investments have already been made in studies, permits, detailed designs, power purchase agreements, and financial arrangements, making it unfair to impose such a financial burden at the early stages of development.
The delegation also pointed out that only dedicated projects should be eligible for issuing hakprad shares, and only shareholders should have the right to participate in the issuance. This provision, they argued, would better reflect the true financial status of the project and avoid undue hurdles in project implementation.
Regarding the 2035 target set by the government to produce 28,500 MW of electricity, IPPAN urged the government to create a more conducive environment for investment in hydropower and facilitate the development of more projects by removing this restrictive financial progress clause.
In the memorandum, Senior Vice President Dangi expressed that self-capital mobilization is a prerequisite for financing, and without it, banks and financial institutions are reluctant to provide loans, further stalling project progress. Dangi emphasized that it is impossible for companies to show a 20% financial progress without being able to issue hakprad shares, and suggested that the requirement be lifted to help unlock more projects.
In response, Secretary Chataut of the Ministry of Energy assured the delegation that the issue surrounding the issuance of hakprad shares would be taken up for review and efforts would be made to find a solution. Meanwhile, Dr. Ram Prasad Dhital, Chairperson of the Electricity Regulatory Commission, expressed his commitment to holding detailed discussions on the matter and finding a viable resolution to the challenges faced by power producers.
The meeting also included the participation of IPPAN committee members such as Uttarkumar Shrestha, Kuber Mani Nepal, Sushan Karmacharya, Suman Joshi, Shankar Bashyal, and Chief Executive Officer Bhim Gautam.
This move by IPPAN reflects the growing concerns within the independent hydropower sector about the regulatory challenges and the need for more flexible financial frameworks to support the country’s ambitious energy targets. Removing the 20% financial progress requirement could potentially unlock significant investment in hydropower development and expedite the construction of essential energy infrastructure.
