The Nepal Electricity Authority (NEA) has initiated preparations to raise more than Rs 60bn from the market by launching an Initial Public Offering (IPO). 

The utility plans to restructure its authorized capital at Rs 300bn and issue 20 percent of its shares at a premium price of Rs 300 per share (face value Rs 100). It plans to use the funds to make equity investments in major hydropower projects, including Dudhkoshi, Upper Arun, Arun-4, Budhi Gandaki and Chainpur Seti, among others, with a combined capacity of approximately 3,000 MW. Additionally, the funds will be allocated to develop critical transmission infrastructure, such as 400 kV double-circuit transmission lines and substations across the country. The planned 400 kV transmission lines and substations are crucial for the NEA to reduce technical losses, improve grid stability and support the integration of new hydropower projects into the national grid. 

NEA has said it needs to make an investment of Rs 534bn (approx) by 2030 to improve its existing transmission infrastructure.

It submitted the IPO proposal to the Ministry of Energy, Water Resources and Irrigation two months ago. However, NEA officials say the ministry has not forwarded the proposal to the Finance Ministry for approval. Without the finance ministry’s nod, the proposal cannot be presented to the cabinet for a decision.

Earlier, the NEA’s proposal to issue shares to the general public reached the Cabinet of former Prime Minister Pushpa Kamal Dahal without obtaining the consent of the finance ministry. Although the cabinet decided to allow the NEA to issue shares by revising related laws, the government changed before the legal reforms could be implemented. After the new government was formed under KP Sharma Oli, the finance ministry pointed out that the Cabinet had made a decision regarding the amendment of laws for share issuance provisions without its consent. Consequently, the finance ministry requested that the proposal be restarted from the beginning.

NEA officials say that the planned IPO complies with the Securities Registration and Issue Regulation, 2016, which permits public share issuance at a premium rate if the entity has been profitable for three consecutive years, has a net worth higher than its paid-up capital and the share price determination method is endorsed by outside experts in their evaluation report. The NEA meets all these criteria and hsa received AA+ rating for three consecutive years.

The utility has AA+ credit rating for three consecutive years. The rating reflects NEA’s strong financial position with annual revenues exceeding Rs 116bn and assets valued at over Rs 700bn. The rating indicates a low risk of default and high confidence in the NEA’s ability to meet its financial obligations.

While the NEA had a net loss of Rs 8.89bn in 2015-16, it surprised many by earning a net profit of Rs 1.5bn in 2016-17. It posted a profit of Rs 14.46bn in 2023-24. The utility, which had an accumulated loss of Rs 34.61bn in 2015-16, now has an accumulated profit of Rs 47.41bn.