Electricity Regulatory Commission tightens rights share issuance of hydro companies

KATHMANDU: The Electricity Regulatory Commission (ERC) has issued a directive on Pre-Approval and Regulation of Public Issuance of Shares of Hydropower Companies, 2078, tightening hydropower companies from issuing right shares.

As provisioned in the directive, hydropower companies are required to get pre-approval from the commission while issuing right shares. After the board of the companies decides to issue right shares, it needs to send the proposal to the commission to receive the pre-approval. Once the commission gives green signal, then only can the companies present the right shares proposal in the General Assembly Meeting of the respective company.

As per ERC, such provision was introduced after the companies started issuing right shares indiscriminately. Although the commission has introduced strict provisions to control right share issuance, it has allowed the companies from making cross-holding investment.

A company can make the institutional investment of fifty one percent or more in other projects that shall remain under the same company. Similarly, provision has been made to make institutional investment in secondary company’s projects or establishing secondary companies for the construction of the project. Capital required for the investment should be raised by issuing right shares. The right shares have to be issued in the ratio of 1:2.