NRB ready to provide refinance facility to flood-hit hydel projects

Nepal Rastra Bank (NRB) has agreed to provide a refinancing facility to hydropower projects damaged by the recent floods. After a tripartite discussion between Independent Power Producers Association, Nepal (IPPAN), Nepal Bankers Association (NBA), and the NRB on Tuesday, the central bank agreed to refinance the flood-hit hydropower projects throughout the construction period.

During the meeting, IPPAN Chairman Ganesh Karki urged the central bank for refinancing, interest capitalization, and loan restructuring for flood-damaged projects. As some of the flood-hit hydropower projects’ whose required commercial operation date (RCOD) has been exceeded are facing pressure from the bank to pay back the loans, Karki  requested the NRB for an arrangement not to stop the dividend distribution of banks even if the interest of the hydropower project is capitalized.

As per the recent directive issued by the NRB,  banks can show interest income as profit in the investments made on hydropower projects until they begin commercial operation, but such profit cannot be distributed. While restructuring such loans, banks have to do provisioning of 12.5 percent of the total loan amount. Stating that banks are reluctant to lend in hydropower projects due to this provision, IPPAN urged the central bank to allow them (banks) to distribute dividends from the profits made from interest capitalization. 

The NRB Deputy Governor Bam Bahadur Mishra said that the central bank is ready to provide refinance facilities for the flood-damaged hydropower projects throughout the reconstruction period. “The central bank is ready to facilitate the issues of interest capitalization and loan restructuring,” said Mishra. 

Mishra, however, said that the promoters should also invest some funds for the reconstruction of the flood-damaged projects, not just relying on the NRB and banks. “Whether it is by giving the right shares or through other options, the promoter must also invest some money. The rest of the amount will be provided by the central bank and commercial banks,” said Mishra. 

Mishra asked the bankers to facilitate interest capitalization and restructuring of the loans as per the addition of RCOD by the Nepal Electricity Authority. According to Mishra, the central bank will provide necessary Deputy Governor Mishra said that IPPAN should recommend the names of flood-damaged projects, based on which the central bank will provide concessions including refinance facilities. The refinancing will be given for one year, according to Mishra. 

Around three dozen hydropower projects were badly hit by the June 16-17 flood that hit Eastern Nepal. The rain and flood of June 16-17 in four districts damaged 30 hydropower projects creating a loss of Rs 8.5bn. A preliminary study carried out by the IPPAN showed that 30 hydropower projects with a combined capacity of 463 MW were damaged by the floods in Taplejung, Panchthar, Sankhuwasabha, and Bhojpur districts. 

According to IPPAN, of the 30 projects, 17 were under-construction projects. Among the projects that were already operating, the Lower Hewa Khola sustained the biggest loss. The 22.1 MW project has been the worst hit; it suffered a loss of Rs 1bn due to the flood.The IPPAN claimed that the 25 MW Kabeli B-1 Project suffered damage of Rs 500m. In terms of damage to physical infrastructure, the 4.7 MW Upper Piluwa-2 Hydropower Project has been the worst hit. 

According to the IPPAN, 17 under-construction hydropower projects with a combined capacity of 327 MW suffered losses of over Rs 2bn due to floods. Among the under-construction projects, the most damage was seen in the Super Hewa Khola Project with estimated losses of Rs 800m. 

The construction work of the Super Hewa Khola Project was 90 percent completed before the flood hit it badly.