Electricity Regulatory Commission Tightens Grip on Unauthorized Share Sales in Hydropower Sector

The Electricity Regulatory Commission (ERC) has ramped up enforcement against hydropower companies that have been selling shares beyond the permitted threshold without regulatory approval. Several firms have already faced action for violating this requirement, with more expected to come under scrutiny.

In the first seven months of the current fiscal year, six hydropower companies have been penalized for failing to adhere to ERC regulations. The commission has also issued public notices to ensure companies are well-informed about the rules governing share transactions.

According to ERC Rules 2018, companies involved in power generation, transmission, distribution, or trade must secure prior approval before executing share transfers that alter ownership between five percent and 50 percent. Transactions exceeding this limit are subject to a separate framework for mergers and acquisitions. However, companies already listed on the stock exchange are exempt from this approval process.

Furthermore, ERC approval is required before issuing rights shares for under-construction projects. The regulator maintains that these provisions are designed to prevent sudden ownership changes that could disrupt market stability and sectoral integrity.

A growing concern is the rising trend of share transactions occurring before financial closure, driven by the 35-year operational cap imposed on hydropower projects after receiving their generation licenses. This has led some promoters to divest their holdings prematurely.

With increasing regulatory oversight, hydropower companies are now expected to exercise greater compliance, ensuring that share transactions align with ERC’s directives to maintain transparency and sectoral stability.