Electricity Regulatory Commission Unveils Liberal Policy on Right Shares Issuance for Hydropower Companies

The Electricity Regulatory Commission has approved the pre-approval and regulation directive on the public issue of shares of electricity-related companies, 2078 BS. The meeting of the commission held on Ashwin 06 approved the directive.

In the directive, the commission has specified various conditions and made arrangements for the rights issuance by hydropower companies, opening the path for the companies to issue rights shares for new projects and projects under construction.

If a company establishes a subsidiary company with 51 percent or more ownership as the parent company, the way is open to issuing up to 200 percent of right shares. The parent company must have started commercial production of electricity from its project. Similarly, the power purchase agreement should have been completed and the project must have the power generation license. Furthermore, the parent company should be a company listed in the stock market of Nepal.

Meanwhile, a company other than the parent company may also issue right shares for the purpose of investing for less than 50% ownership in the project being constructed or going to be constructed. However, the physical progress of the construction of the project should have been more than 25% while issuing shares in this way. At most 100% rights shares can be issued for this purpose.

In case of rights issuance from one's subsidiary company or from a project under construction, the monetary amount collected via the rights shares issued earlier should have been fully spent on the construction of the project.

Similarly, hydropower companies can issue the right shares to complete the remaining construction work of the project in case it can't be completed with initial resources. But for this, the cost of project construction has to have gone higher than the company can bear due to uncontrollable circumstances. Uncontrollable conditions include disasters caused by natural disasters, epidemics, wars, internal rebellions, shutdowns, strikes, blockades, etc. that cause an obstruction in needed manpower and resources.

For this, the physical progress of the project should be at least 80%. A clear financial and scheduled action plan regarding the capital investment required to complete the construction must be passed by the Board of Directors and the AGM.

Although not related directly to the context of rights shares issuance, this directive has mentioned an added procedure for institutional investors to trade shares of hydropower companies. Any institution, company, or corporation that wishes to buy or sell the shares of a hydropower company should publicly unveil the intention 15 days prior to trading and also report to the Electricity Regulatory Commission.

To conclude this directive, these are the provisions:

1) Issuance of 200% rights for establishing a subsidiary with 51%+ ownership.

2) Issuance of up to 100% rights for investing in another company for less than 50% ownership.

3) Issuance of rights shares to complete projects affected by unfavorable conditions.

This is the directive document: