KATHMANDU, AUGUST 2

The Nepal Rastra Bank (NRB) has decided to extend the refinancing facility to hydropower projects damaged by floods across the country.

In a tripartite discussion held between Independent Power Producers' Association of Nepal (IPPAN), Nepal Bankers' Association (NBA) and the central bank on Tuesday, a joint decision was made to refinance the flood-damaged hydropower projects.

At the meeting, Ganesh Karki, president of IPPAN, had requested the central bank to facilitate refinancing, interest capitalisation and loan restructuring for flood-damaged projects.

Similarly, Karki also requested the banks not to stop paying dividends even if the interest is capitalised as the bank had pressured stakeholders to repay the loan when the required commercial operation date (RCOD) of some of the projects damaged by the flood had exceeded.

Earlier, the central bank had issued a directive not to distribute dividends even if the interest income can be shown as a profit until the hydropower projects start production. In addition, the profits of banks have been decreasing as they have to provide provisions of 12.5 per cent of the loan amount while restructuring them.

Stating that banks are reluctant to invest in hydropower projects, IPPAN has requested to make arrangements for dividends to be distributed from the income even if interest is capitalised and remove provision requiring additional amounts.

Addressing the demands raised by IPPAN, Deputy Governor Bam Bahadur Mishra said that the central bank is ready to refinance projects damaged by floods throughout the reconstruction period and that interest capitalisation and loan rescheduling will also be facilitated.

Mishra emphasised that the promoters should also set aside some capital for the reconstruction of the flood-damaged projects and not only depend on the NRB and other banks.

He also directed the bankers to look into the matter as the promoters have alleged that the funds secured from the insurance had to be used to pay interest to the banks.

'Bankers should facilitate capitalisation of interest and restructuring of the loan schedule as the Nepal Electricity Authority (NEA) has extended the RCOD period,' he said.

Due to the floods that occurred in Eastern Nepal on June 15 and 16, as many as 13 projects in operation and 17 under construction were damaged, incurring a loss of around nine billion rupees.

During the discussion, IPPAN's consultant Pushpa Jyoti Dhungana also requested the banks to reduce the risk burden of the already operational projects and make it easier to raise investment for new projects. He said that by reducing the risk burden of projects that have already paid 50 per cent of the loan after coming into operation, it will be easier for other projects to get loans.

Deputy Governor Neelam Dhungana urged the promoters to be cautious while investing in rebuilding the projects damaged by the floods. She also said that the refinancing facility will be provided for one year in the beginning and it can be renewed as per the need.

A version of this article appears in the print on August 3, 2023, of The Himalayan Times.