A protracted bureaucratic stalemate at the Securities Board of Nepal (Sebon), the country’s stock market regulator, has pushed the hydropower sector into severe financial strain, leaving numerous projects waiting for permission to launch initial public offerings (IPOs) and rights issues.
Some of these applications date back three years, data show. The mounting backlogs have not only saddled companies with heavy bank interest burdens but also threaten project completion timelines.
According to the Independent Power Producers’ Association Nepal (IPPAN), projects with a combined capacity of an estimated 4,000 MW are awaiting Sebon’s go-ahead to launch IPOs and rights issues.
The IPO applications of 34 companies are currently pending with Sebon. These companies have sought the regulator’s nod to raise Rs 17.41bn from the market by issuing 174.1m primary shares. Rights issues for another 16 companies are also stuck.
Hydropower companies in Nepal typically adopt a financing model consisting of 70 percent debt and 30 percent equity. The 30 percent equity portion is sub-divided into two main ownership categories—promoters (70%) and public (30 percent).
According to project developers, banks often extend short-term bridge loans on the condition that they will be repaid using proceeds from public issues. They say banks often delay release of committed funds if a company fails to launch an IPO on time.
The delay in raising equity forces project owners to rely on costly secondary bank loans to finance construction. This inflates their Interest During Construction (IDC) and raises their total capital outlay. Since credit rating assessments and underwriting agreements are valid for only six months, developers are also forced to renew them regularly if IPO approval is delayed.
Among IPOs in the pipeline, Siuri Nyadi Power Ltd is seeking approval for the largest issue by volume. The company plans to raise Rs 3.03bn by floating 30.36m units—representing 49 percent of its issued capital—to finance its 40.27-megawatt run-of-river project on the Nyadi River in Lamjung district. Raghuganga Hydropower Ltd. has also applied to raise Rs 1.5bn through an offering of 15m primary shares. At the opposite end of the spectrum, Century Energy Ltd. is seeking permission for the smallest public issue in the queue, floating 510,000 units to raise Rs 51m.
Regarding rights issues, People’s Hydropower Co Ltd has sought permission to issue 32m rights shares to raise Rs 3.2bn. The smallest proposed rights issue is 2.5m shares by Barahi Hydropower Co.
A long queue for IPO approvals formed after Sebon remained without an executive chairman from Dec 2023 until late Nov 2024. Although the government appointed Santosh Narayan Shrestha to the post in Nov 2024, he did not expedite the approval process. IPPAN went so far as to accuse Shrestha of demanding kickbacks and commissions through intermediaries, further straining relations between Sebon and hydropower developers.
After Shrestha stepped down in mid-April, the government appointed Gopal Prasad Bhatta to the position on June 19. Even after the new appointment, Sebon has shown no signs of clearing the backlog of IPO and rights issue applications.
IPPAN has urged the new Sebon leadership to immediately remove obstacles delaying share issuances. In a memorandum submitted to Bhatta, IPPAN stated that prolonged delays have severely affected under-construction hydropower projects and the country’s capital market.
IPPAN also proposed introducing a mandatory one-month approval timeline for IPO applications once all required documents are submitted, establishing a one-door system among Sebon, the Electricity Regulatory Commission, rating agencies, and underwriters, eliminating overlapping legal procedures, reducing IPO-related fees, and limiting the lock-in period to a maximum of 18 months.
