NRB to provide refinancing to 30 flood-damaged hydropower projects

KATHMANDU: In a collaborative effort between Nepal Rastra Bank, the Independent Power Producers Association (IPPAN), and Nepal Bankers Association, a decision has been reached to refinance 30 hydropower projects affected by floods. Following a tripartite discussion, the parties agreed to extend a re-loan for a period of one year.

IPPAN’s president, Ganesh Karki, expressed that they had initially sought a ten-year extension, but the agreement settled on a one-year refinancing period instead. President Karki stated, “Although the initial plan was for a 6-month extension, we have now secured a one-year refinancing period.”

These 30 projects suffered damage during the floods that occurred last June, with estimated losses amounting to 8.23 billion rupees.

In response to IPPAN’s request for Nepal Rastra Bank to refinance the flood-damaged power projects during the reconstruction phase, the National Bank pledged to provide additional support if the reconstruction is not completed within the stipulated timeframe, leading to the final decision to grant a one-year refinancing term.

In the discussions, Nepal Rastra Bank also agreed to capitalize interest and restructure loans for the flood-affected power projects.

Chairman Karki urged Nepal Rastra Bank to facilitate refinancing, interest capitalization, and loan restructuring for these damaged projects. Additionally, he requested that banks continue dividend distribution even if the interests on the hydropower projects are capitalized.

This comes in response to banks pressuring some of the flood-affected projects to repay loans after the Repayment Completion On Date (RCOD) has passed.

Recent directives issued by the central bank stipulate that dividends cannot be distributed based on interest income until the hydropower projects are operational.

Furthermore, banks experience profit reduction due to provisioning 12.5 percent of the loan amount when restructuring such loans.

This situation has caused banks to hesitate in investing in hydropower projects. To address this concern, IPPAN demanded that dividend distribution be allowed from the income, without the need for additional provisioning when interest is capitalized under the previous system.