The Securities Board of Nepal (Sebon) is considering a new policy that would bar hydropower companies from issuing initial public offerings (IPOs) before they begin generating electricity.
According to an official at Sebon, the capital market regulator has held preliminary discussions on restricting hydropower developers from going public before starting power generation. This comes in response to growing concerns about risks posed to general investors when companies without completed projects raise funds from the public.
The recommendation to introduce such a policy originated from the High-Level Economic Reforms Advisory Commission, led by former Finance Secretary Rameshore Khanal. The commission suggested that the government take necessary legal measures to restrict IPOs by hydropower companies until they become operational.
The recommendation was later included in an economic reform action plan prepared by a committee headed by Chudamani Paudel, Secretary at the Office of the Prime Minister and Council of Ministers. The government formed the committee to prepare an action plan to implement the recommendations made by the Khanal-led commission.
The action plan states that the provision to prevent hydropower companies from going public before they start power generation could be implemented within two years.
Sebon has begun discussions on implementing the recommendation in line with the action plan prepared by the Paudel-led committee. Although no official decision on the timeline or the mechanism for implementing the rule has been made so far, the Sebon official said that consultations are ongoing with the Ministry of Finance and the Ministry of Energy, Water Resources, and Irrigation to explore feasible approaches.
Currently, hydropower companies that have completed at least 65 percent of their physical construction are eligible to issue IPOs. This existing provision has faced criticism in recent years, with concerns that it exposes the public to financial risk if the projects encounter delays or fail to complete construction.
At present, 36 hydropower companies have submitted applications to Sebon, seeking approval to issue over 174.8m shares worth approximately Rs 17.89bn. The IPO applications of these companies will be processed under the existing provision until a new decision is made.
Meanwhile, the Independent Power Producers’ Association of Nepal (IPPAN) has raised concerns that enforcing such a restriction could delay project implementation. IPPAN argues that allowing early IPO issuance enables developers to mobilize funds during the construction phase, which is often the most capital-intensive period for hydropower development.
