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By Dipesh Ghimire

IPPAN Urges Policy Reform on Rights Share Issuance to Accelerate Hydropower Development

IPPAN Urges Policy Reform on Rights Share Issuance to Accelerate Hydropower Development

The Independent Power Producers' Association, Nepal (IPPAN) has called on the government to remove the requirement that hydropower projects must demonstrate at least 20 percent financial progress before issuing rights shares. The association argues that the existing provision has become a major structural barrier to investment and has slowed down the pace of project development across the energy sector.

On Tuesday, an IPPAN delegation led by Senior Vice President Mohan Kumar Dangi submitted a memorandum to Energy Ministry Secretary Chiranjivi Chataut and Chairperson of the Electricity Regulatory Commission Ram Prasad Dhital. The delegation emphasized that the current regulation has created practical difficulties in mobilizing both equity and debt financing for new projects.

Under existing rules, developers are required to prove that a project has achieved at least 20 percent financial progress before issuing rights shares to existing shareholders. This provision is included in the regulatory guidelines issued in 2078 BS. However, IPPAN maintains that such progress cannot be achieved without first securing sufficient capital, making the rule unrealistic in practice.

Developers point out that project financing in Nepal follows a step-by-step process. Banks and financial institutions generally demand strong equity participation before approving loans. At the same time, companies are unable to raise equity through rights shares unless they meet the 20 percent progress threshold. This creates a financial deadlock, where neither equity nor debt can be mobilized easily.

In its memorandum, IPPAN highlighted that project promoters already invest heavily during the early stages. These include expenses for feasibility studies, environmental assessments, licenses, detailed project reports, power purchase agreements, and land acquisition. Despite these significant investments, developers still fail to meet the regulatory benchmark, delaying project implementation.

According to industry experts, this situation has discouraged many investors from entering new hydropower ventures. Smaller and medium-sized developers, in particular, are struggling to sustain long-term financing. As a result, several approved projects remain stalled at the planning stage, unable to move toward construction.

IPPAN has also proposed that companies be allowed to issue rights shares based on decisions taken by their annual general meetings. Since rights shares are offered only to existing shareholders, the association argues that such fundraising does not expose the public to additional risk. Instead, it strengthens internal capital structures and improves financial stability.

The association believes that relaxing the regulation is essential to meet Nepal’s long-term energy goals. The government has set a target of generating 28,500 megawatts of electricity by 2035. IPPAN argues that without flexible financing policies, this ambitious target will be difficult to achieve, especially when private-sector investment remains the main driver of hydropower expansion.

Senior Vice President Dangi stated that most projects cannot proceed without issuing rights shares. He explained that banks are unwilling to release loans unless promoters contribute sufficient equity. “Without equity, there is no financing, and without financing, construction cannot begin,” he said, adding that the current provision has effectively blocked project pipelines.

Energy sector analysts observe that the regulation may have been introduced to ensure financial discipline and prevent speculative projects. However, in practice, it has created unintended consequences. Instead of improving transparency, it has increased delays and raised overall project costs due to prolonged development timelines.

Receiving the memorandum, Secretary Chataut assured IPPAN that the ministry would study the issue and explore possible solutions. Similarly, Chairperson Dhital stated that the commission would review the regulatory challenges and initiate discussions for reform. Officials acknowledged that policy adjustments may be necessary to reflect changing market realities.

The meeting was attended by IPPAN executive members including Uttarkumar Shrestha, Kubermani Nepal, Sushan Karmacharya, Suman Joshi, Shankar Basyal, and Chief Executive Officer Bhim Gautam, indicating strong institutional backing for the demand.

Overall, IPPAN’s call reflects growing pressure for regulatory modernization in Nepal’s hydropower sector. While financial safeguards remain important, stakeholders argue that excessive rigidity may undermine development objectives. Balancing accountability with flexibility will be crucial in ensuring that hydropower projects move forward efficiently and contribute to national economic growth.

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