Nepal Rastra Bank, IPPAN, and NBA Agree on Refinancing Flood-Damaged Power Projects
In a crucial tripartite discussion held at the Nepal Rastra Bank (NRB) headquarters in Baluwatar, the Nepal Rastra Bank, Independent Power Producers' Association, Nepal (IPPAN), and Nepal Bankers' Association (NBA) reached a consensus on refinancing flood-damaged power projects in the country, informed IPPAN through its official facebook wall. The meeting, which took place on Tuesday, addressed several pressing issues related to the reconstruction and financing of hydropower projects impacted by natural disasters.
During the meeting, the Nepal Rastra Bank agreed to extend support throughout the reconstruction period by providing re-financing options, interest capitalization, and loan restructuring for flood-affected power projects. The move comes as a significant relief to the Independent Power Producers' Association, Nepal (IPPAN), which had been advocating for necessary financial aid to restore and revive the damaged projects.
Ganesh Karki, the President of IPPAN, played a vital role in advocating for these financial measures during the discussion. He specifically requested the Nepal Rastra Bank to facilitate re-financing, interest capitalization, and loan re-structuring to alleviate the financial burden on the power producers.
President Karki also emphasized the need for the bank to continue paying dividends, even if the interest on the hydropower project loans is capitalized. He highlighted that some of the projects had faced challenges with the Required Commercial Date of Operation (RCOD) due to the flood's impact, causing additional pressure on the loan repayment.
Adding to the challenges faced by the hydropower sector, a recent directive issued by the Nepal Rastra Bank has mandated that interest income from investments in such projects cannot be distributed as profit until electricity production begins. This directive has caused a decrease in the bank's profits, as they are required to provision 12 and a half percent of the loan amount while restructuring these loans.
Due to this stringent provisioning system, banks have shown reluctance in investing in hydropower projects, even when they capitalize the interest following the old system. In light of this, IPPAN has demanded that banks should be allowed to distribute dividends from their income without having to make additional provisions for funds.
The agreement reached during this tripartite discussion aims to address the financial challenges faced by the flood-damaged power projects and create a conducive environment for investment in the hydropower sector. By extending support and implementing measures to ease the burden on power producers, the Nepal Rastra Bank, IPPAN, and NBA have demonstrated their commitment to fostering sustainable development in the country's energy sector.
The refinancing options, interest capitalization, and loan restructuring provided by the Nepal Rastra Bank are expected to play a crucial role in revitalizing the hydropower industry and contribute to the nation's efforts towards clean and reliable energy production.
As the country moves forward in its recovery process, stakeholders remain optimistic about the future of Nepal's hydropower sector, as it plays a pivotal role in meeting the nation's growing energy demands and fostering economic growth.
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