Over 90% of Hydropower Projects Driven by Private Investment: IPPAN

Nepal’s private sector has mobilized more than Rs 1310 billion in the country’s hydropower sector up to the last fiscal year 2024/25, according to a new study.

The study report, Investment in Nepal’s Hydropower Sector, prepared by the Independent Power Producers’ Association, Nepal (IPPAN), shows that the investment has been made across 923 hydropower projects that are currently in operation, under construction, or at various stages of development nationwide.

According to the report, made public by IPPAN on Sunday, 347 privately developed and under-construction projects have a combined installed capacity of 7,251 megawatts, with investments exceeding Rs 1243 billion. Of these, 204 operational projects generate 2,948 MW, while 143 projects under construction are expected to add 4,303 MW to the national grid.

Meanwhile, 576 projects that are in the stages of survey, study, design and licensing have a total potential capacity of 27,535 MW. The report states that around Rs 66.62 billion in equity investment has already been committed to these projects.

The study highlights the private sector’s growing dominance in hydropower development, noting that it currently accounts for more than 80 percent of Nepal’s total installed electricity generation capacity. Including projects under construction and in the development pipeline, private sector participation rises to around 90 percent, the report says.

IPPAN President Ganesh Karki said the private sector’s contribution to hydropower development has been crucial, adding that Nepal would likely still be facing power cuts without its active involvement.

On the public sector side, projects promoted by the Nepal Electricity Authority are producing 565 MW of electricity from 15 projects, with total investments of over Rs 101 billion, according to the report.

Despite the private sector’s substantial contribution, Karki said several government policies remain unfriendly to private investors. He pointed to restrictions on power trading, electricity wastage due to inadequate transmission lines, and lengthy environmental impact assessment and initial environmental examination processes as major bottlenecks.

He also said delays in share issuance approvals have left nearly three dozen projects waiting for clearance of initial public offering (IPO). The provision allowing IPOs only after power generation begins has adversely affected local and retail investors, he added.

Against the government’s target of generating 28,500 MW by 2035, the study stresses the need for policy stability, expansion of transmission infrastructure, and improved financial facilitation to attract domestic and foreign investment.

Energy Ministry Secretary Chiranjibi Chataut said the private sector played a key role in ending load-shedding in Nepal. He said that while the focus had previously been on increasing generation, equal emphasis is now needed on generation, transmission and distribution.

Growing Role of Banks and Capital Market

The report also highlights the expanding role of banks and financial institutions in hydropower financing. As of August 2025, bank lending to the hydropower sector stood at Rs 447 billion, a significant share of total outstanding bank credit of Rs 5.56 trillion.

In comparison, bank lending to the sector amounted to just Rs 2.76 billion in 2009. The report notes that this figure represents outstanding loans as of August, and that total amount increases further when fully disbursed loans are included.

By the end of the last fiscal year, bank loans amounting to Rs 870.79 billion had been extended to privately developed projects that are operational or under construction. Private sector equity investment, including projects at early development stages, stood at Rs 439.82 billion, while foreign loans under foreign direct investment exceeded Rs 54 billion.

Institutional investors such as the Citizen Investment Trust and the Employees Provident Fund have also invested more than Rs 66 billion in hydropower projects, the report states.

The capital market has emerged as another major funding source. Since the first hydropower IPO by National Hydropower, 93 companies have raised Rs 41.65 billion through IPOs, while 43 companies have mobilised Rs 56.32 billion through rights issues. The total equity of listed hydropower companies has crossed Rs 174 billion, according to the report.