Public participation in hydro projects to help Nepal graduate from LDCs status

Locals of Rasuwa district have added assets worth Rs 4,439 per head in an average, apart from cash dividends in the last three fiscal years thanks to Chilime Hydropower that floated shares to the locals in 2010.
The distribution of wealth by Chilime Hydropower in Rasuwa — ranked 40th in the Human Development Index among the 75 districts in the country — will not only help the district climb up the ladder in the index but also come out of the poverty trap.
The 22.1 MW Chilime Hydropower project had floated 960,000 units of ordinary shares at a face value of Rs 100 per unit to the locals of Rasuwa district, where it is located.
The first indigenous hydropower project that has been constructed with domestic capital and technical know-how had then distributed 60 per cent cash dividend from the profit of fiscal year 2009-10; 30 per cent cash and 40 per cent stock dividend from fiscal year 2010-11’s profits; and 20 per cent cash and 30 per cent stock dividend from the profit of fiscal year 2011-12 to its shareholders.
The locals have received a total of Rs 1.92 billion stock dividends at current market prices and Rs 113.28 million cash dividends in the last three fiscal years.
According to the latest census of the Central Bureau of Statistics (CBS), Rasuwa has 9,778 households, with a total population of 43,300, which means today each individual shareholder of Rasuwa has Rs 4,439 worth of assets in the form of Chilime Hydropower’s stocks.
The Chilime model of hydropower development — that has been replicated at the Upper Tamakoshi Hydropower — is the best example of wealth creation and distribution through capital market, according to market analyst Rabindra Bhattarai.
However, it took the government and Nepal Electricity Authority (NEA) — one of the key promoters of Chilime Hydropower — almost 10 years to replicate the model that has proved to be an effective instrument to alleviate poverty.
"Locals should be involved and get shares not only to boost local growth but also to develop and exploit hydropower that has tremendous potential to help Nepal graduate from the current Least Developed Countries (LDCs) status to Developing Country club, by distributing wealth through public participation," according to president of Federation of Nepalese Chambers of Commerce and Industry Suraj Vaidya.
"The government is planning to graduate Nepal from the LDCs status by 2022 and hydropower development with active public participation will make the dream possible," he said, adding that it will also make locals responsible and the hydropower projects will not face any unnecessary trouble as locals will develop a sense of ownership as is happening with the Upper Tamakoshi Hydropower project.
Dolakha, which is ranked 37th in the Human Development Index, will be the next district to climb up the ladder in the index as the 456 MW Upper Tamakoshi Hydropower project is going to change the future of not only the district but also of the country by boosting energy supply.
The hydropower project which is under construction with active participation of locals will be completed by April 2016. It has completed around 50 per cent of construction and is planning to float shares worth Rs 3.60 billion soon to locals of Dolakha district and NEA, besides employees of lender agencies like Nepal Telecom, Employees Provident Fund, Rastriya Beema Sansthan and Citizen Investment Trust in the first phase, according to the hydropower company that will float shares worth Rs 1.58 billion to the general public in the second phase.
Energy is the key priority in the budget for next fiscal year, according to finance minister Shankar Koirala, who was once the energy secretary too.
Energy is the engine of growth, he said, adding that the budget will concentrate on energy also to reverse the trend of import-based economy to export-based economy, which is not possible without enough power supply for industrialisation.
"Hydropower projects — if attracted to capital market with incentives through budget — will not only help supply energy but also help reduce poverty," said expert member of the Securities Board of Nepal (Sebon) Dr Rewat Bahadur Karki.
Currently, there are only four listed hydropower companies — National Hydropower, Butwal Hydropower, Chilime Hydropower and Arun Valley Hydropower — at Nepal Stock Exchange (Nepse). But the secondary market will have two more companies — Upper Tamakoshi and 22-MW Sanima Mai Hydro — soon as Sanima Mai has already floated 1,055,000 units of shares at a face value of Rs 100 per unit making it a total of Rs 105.5 million to the locals recently.
The increasing number of listed hydropower companies will also help the capital market expand, apart from helping in poverty alleviation.
According to the amended Securities Registration and Issuance Regulation – 2065, hydropower companies must float shares to locals before they open their issue to the general public. "A company has to float a minimum of 30 per cent shares to the public and out of the 30 per cent, five per cent has to be separated for the company’s staff, 10 per cent for locals and the remaining for the general public," states the amended regulation that has fixed a lock in period of three years for shares distributed to locals.