The Independent Power Producers’ Association, Nepal (IPPAN) has demanded the removal of the provision that requires documents confirming at least 20% financial progress of a project in order to issue rights shares for project construction.

On Tuesday, under the leadership of Senior Vice President Mohankumar Dangi, IPPAN submitted a memorandum to Secretary of the Ministry of Energy, Water Resources and Irrigation, Chiranjeevi Chataut, and Chairman of the Electricity Regulatory Commission (ERC), Dr. Ram Prasad Dhital. The memorandum stated that the requirement for any company to have 20% financial progress before starting another project has created difficulties in investment management and project construction, and therefore should be removed.

The IPPAN team also requested that the rights shares be issued based on the company’s general assembly decision, since the provision allows mobilization of capital collected through rights shares only for dedicated projects and participation is limited to share investors.

According to Section 5 of the Electricity-Related Share Public Issuance Pre-Approval and Regulation Directive, 2022, Schedule 3, Clause (Ta), it is stipulated that documents confirming at least 20% financial progress of the proposed project must be presented for the public issuance of rights shares for project construction. The memorandum noted that under this provision, issuing rights shares to raise equity for the proposed project is constrained by loan agreement documents, and until the equity is mobilized to achieve 20% financial progress, the project is practically impossible to implement. Consequently, projects are being fully affected due to difficulties in raising equity and arranging loans.

IPPAN emphasized that a significant investment has already been made by developers through various studies, obtaining permits, detailed studies, power purchase agreements, and financial arrangements. It urged the government to remove this requirement to create a conducive environment and ease implementation for achieving the national target of 28,500 MW of production by 2035.

Senior Vice President Dangi requested facilitation of the rights share issuance system to open the way for further project construction. He noted that it is impossible to manage equity without issuing rights shares, and until equity is mobilized, banks and financial institutions will not disburse loans, thereby obstructing project construction. Since such shares are issued only for specific projects, achieving 20% financial progress before equity mobilization is impossible, and hence the requirement must be removed.

In response, Energy Secretary Chataut said he would take initiatives to address the problems observed in issuing rights shares. ERC Chairman Dr. Dhital stated that they would hold detailed discussions on potential difficulties arising from this provision and take steps to resolve them.

The meeting was attended by Senior Vice President Dangi, Executive Committee members Uttarkumar Shrestha, Kuber Mani Nepal, Shushan Karmacharya, Suman Joshi, Shankar Bashyal, and Chief Executive Officer Bhim Gautam, among others.

Urjasanchar