It has been found that the Electricity Production Company (VUCL) did not inform the Investment Board and the Electricity Regulatory Commission while inviting expressions of interest for financial investment in the 1,902 MW Mugu Karnali and 454 MW Kimathanka Arun hydropower projects. Hydropower projects with a capacity of more than 200 MW fall under the jurisdiction of the Investment Board.

According to Clause 4 (gha) of the Public-Private Partnership and Investment Act, 2075 (2019), the Investment Board is responsible for overseeing energy projects other than those estimated to cost more than 6 billion rupees or hydropower and energy projects with a capacity exceeding 200 MW. However, bypassing its jurisdiction, VUCL has invited proposals for financial investment in the Mugu Karnali and Kimathanka Arun hydropower projects.

VUCL has invited proposals stating that “it is necessary to move forward with the process of raising investment under the public-private partnership model, and to enhance domestic capacity and encourage local investors.” The proposal calls for an investment partnership with at least 51% equity investment in the project.

The CEO of the Board, Sushil Gyawali, stated that the Mugu Karnali and Kimathanka Arun hydropower projects fall under the jurisdiction of the Board as per the law. “No one discussed these two projects with the Board while moving forward with the process,” he said. “Even if there is no coordination now, they will have to come to the Board for investment approval when bringing in investments.”

CEO Gyawali stated that hydropower projects exceeding 200 MW require a decision from the Council of Ministers to assign them to the Department of Electricity Development, the Electricity Production Company, or the Nepal Electricity Authority. However, no such decision has been made by the Council of Ministers regarding the Kimathanka Arun and Mugu Karnali projects. VUCL has created an “Investment Facilitation Procedure” and issued a call for expressions of interest for at least 51% investment in the Mugu Karnali and Kimathanka Arun hydropower projects.

Energy officials argue that since the licenses for the Mugu Karnali and Kimathanka Arun hydropower projects are registered under VUCL, prior approval from the Electricity Regulatory Commission would be required to change the share structure. “It has been stated that shares are being sought for 51% financial investment in the projects. Since the license is in the name of the company, the shares are being sought on behalf of the company,” an official from the Ministry of Energy said.

Rule 45 of the Electricity Regulatory Commission Regulations, 2075 (2019), states that “a company or institution authorized to undertake electricity generation, transmission, distribution, or trade must obtain prior approval from the Commission to publicly issue shares or to buy or sell shares in a manner that results in more than a 5% change in the share structure.”

Source: Kantipur