IPPAN Warns of Enormous Investor Losses from Delayed Share Issuances in Nepal’s Energy Sector

18th September 2025, Kathmandu

The Independent Power Producers’ Association of Nepal (IPPAN) has warned the Securities Board of Nepal (SEBON) that regulatory delays in approving share issuances have led to a colossal loss of over NPR 108.5 billion for investors in the energy sector.

IPPAN Warns of Investor Losses

This figure, equivalent to approximately USD 810 million, represents the cumulative financial impact on dozens of hydropower projects due to prolonged bureaucratic hurdles. IPPAN argues that these delays are jeopardizing Nepal’s energy security, stifling project development, and undermining investor confidence.

The Scale of Financial Losses

IPPAN’s detailed analysis, submitted in a letter to SEBON, breaks down the staggering financial impact caused by the regulatory bottleneck. Since May 2023, the association estimates that 50 hydropower companies, collectively representing 975 megawatts of generation capacity, have been stalled. The financial losses are attributed to several factors:

Unraised Capital: Approximately NPR 23.27 billion in new share capital has not been mobilized. This capital, which was expected to come from public share offerings (both IPOs and rights issues), is a critical component of project financing.

Increased Interest Expenses: Because companies could not raise equity capital through share issuance, they were forced to rely more heavily on bank loans. This has led to an additional NPR 12.40 billion in interest expenses.

Cost Escalation: The delays in IPO approvals have directly contributed to construction delays, resulting in a NPR 24.30 billion increase in project costs. This cost escalation is a significant burden on developers and can compromise a project’s financial viability.

Lost Government Revenue: The government has also suffered. IPPAN estimates a loss of around NPR 71.78 billion in potential tax and royalty revenues that would have been generated from the timely completion and operation of these projects.

These figures underscore the massive economic repercussions of the regulatory delays. The financial strain on hydropower companies is not just an inconvenience; it is a serious threat to their survival and to the long-term energy goals of the nation.

Regulatory and Policy Hurdles

According to IPPAN, the primary cause of these delays is SEBON’s inconsistent and often arbitrary application of its own regulations. The association points out that the regulator has been enforcing requirements that are not explicitly mandated by existing law. A major point of contention is SEBON’s demand that companies prove a net worth of over 90% of the project cost before being allowed to issue public shares. This requirement is particularly problematic for hydropower projects, which are capital-intensive and typically have a lower net worth during their construction phase. Furthermore, IPPAN noted that SEBON has been without a permanent chairman for months, which has contributed to the regulatory paralysis and slowed down the decision-making process. The absence of a permanent head can lead to a lack of clear policy direction and accountability, creating a bureaucratic quagmire for companies seeking approvals.

This regulatory gridlock is occurring despite an existing legal provision that allows hydropower developers to apply for IPO approval once 60% of construction is complete. IPPAN argues that SEBON’s insistence on post-production share issuance contradicts this provision and undermines the financial model of hydropower development in Nepal. By blocking access to public equity during the construction phase, SEBON is forcing developers into a position of excessive debt, which makes projects riskier and less attractive to investors.

A Call for Immediate Action

In its letter, IPPAN President Ganesh Karki urged SEBON to take immediate action to resolve the issue. The association’s demands are clear and specific:

Immediate resumption of IPO approvals: IPPAN is calling for SEBON to immediately restart the approval process for companies that have already filed applications, including those that were previously rejected.

Permission for share issuance during the construction phase: The association wants SEBON to adhere to the existing legal framework that allows for share issuance while a plant is still under construction. This would enable developers to raise much-needed capital and reduce their reliance on high-interest bank loans.

Elimination of cumbersome policies: IPPAN is urging SEBON to stop implementing policies that have slowed down the market, such as separate ISIN numbers for promoters and the public. Such policies add unnecessary complexity and can deter both domestic and international investors.

IPPAN has warned that if these issues are not resolved promptly, its member companies may be forced to launch a public protest campaign. This underscores the severity of the situation and the level of frustration felt by private power producers. The association believes that its commitment to corporate governance, including maintaining IPO lock-in periods until a project becomes operational, should be reciprocated by SEBON’s commitment to facilitating a more efficient and predictable regulatory environment.

Broader Implications for Nepal’s Economy

The ongoing regulatory deadlock poses a significant threat to Nepal’s broader economic strategy. Hydropower is a cornerstone of the nation’s development plan, with ambitions to become a major energy exporter to neighboring countries like India. The stalling of projects representing nearly a gigawatt of capacity risks not only delaying the country’s clean-energy expansion but also damaging the overall financial ecosystem. The current situation sends a negative signal to potential investors, both domestic and foreign, who may be wary of the unpredictable and cumbersome regulatory environment. Without prompt action from SEBON and the government, Nepal’s ambitious energy-generation goals could remain unfulfilled, and billions more in potential investment and public revenue will remain untapped. The financial health of the private sector, particularly in a capital-intensive industry like energy, is directly tied to a functioning and reliable regulatory environment, and the current crisis highlights the urgent need for reform.

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