New Regulations Being Introduced for Public Offering of Hydropower Companies

September 27, 2023 | Investopaper

To facilitate the initial public offering (IPO) for hydropower firms, a new requirement is being introduced mandating a minimum internal rate of return of 12 percent. This stipulation, aimed at enhancing the systematic and transparent nature of primary share issuance for hydropower companies, is slated to be incorporated into the Securities Registration and Issuance Regulations.

In consultations between the Securities Board and IPPAN, a representative body for hydropower producers, it was mutually agreed to introduce certain provisions into the regulations. Besides the 12 percent internal rate of return condition, hydropower companies seeking an IPO must furnish a certified statement confirming that at least 65 percent of the physical infrastructure has been completed.

Additionally, to proceed with an IPO, companies must obtain a commitment from their board of directors, assuring that the funds raised through the IPO will solely be utilized to repay bank loans or complete ongoing projects within the company.

In addition to IPOs, modifications to the Securities Issuance and Allotment Guidelines are on the horizon for rights shares issuance. These adjustments stipulate that if right shares are issued for investment in new projects, the company’s net worth should not fall below the paid-up capital. However, this provision will only be applicable to future board-registered companies.

To qualify for rights issuance, the company must engage in the commercial production of electricity from the project. The necessary funds for a new project can be raised in two installments during the issuance of rightful shares, as outlined in the guidelines. Furthermore, as per the regulations for hydropower companies, founders looking to sell their shares after the ‘lock-in’ period must ensure that the company has commenced commercial electricity production.


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