Nepal’s theoretical capacity for hydropower generation is around 80,000 MW, of which 43,000 MW is estimated to be economically feasible. The total installed capacity had reached 2,666 MW in mid-March 2023 — including 2,449 MW hydropower, 75.04 MW solar, 53.4 MW thermal, 88 MW from other renewal sources.
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Hydropower & Energy
Looking to invest in Hydropower and energy Sectors?
FDI Allowed
100%
Tax rebate
20% for hydropower generation and transmission
Tax exemption
100% tax exemption on the first 10 years; 50% tax exemption on the next five years
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Are you looking to invest in Hydropower and Energy sector in Nepal?
Documents Required
Foreign investors are required to apply to the DOI with following documents. The Feasibility Report must include following information:
- Project design
- Estimated cost
- Proposed financial resources
- Business/operation plan
- Preliminary EIA report
- Proposed revenue model
- Proposed royalty / Fee to government
- Joint Venture Agreement (JVA), in case of more than one investor
- Citizenship certificate of local investor or Certificate of Incorporation, including Memorandum of Association and Articles of Association, Shareholders’ register, tax clearance certificate, if the local investor is a company.
- Notarized copy of passport of foreign investor or Certificate of Incorporation, including Memorandum of Association and Articles of Association if the party is a company
- Bio-data / Company profile of the foreign party
- Financial Credibility Certificate (FCC) of the foreign investor provided by a home country bank or domiciled country bank
- Authority letter from the concerned companies or individuals to carry out any necessary work on their behalf, if applicable
- Other documents as required, based on the progress
- Documents required at the Company Registrar’s Office, local authority, IRD, DOI, and bank are more or less similar (in case of projects up to NPR 6 billion).
Permits/Approvals Required
All investors require permits/ approvals/ registration/ licenses from Department of Electricity Development (DOED).
Please refer to Electricity Act, 2049 (1992) Electricity Rules, 2050 (1993)
Survey License
- Requires feasibility studies, environmental impact assessment, and other necessary surveys
- License is issued by the DOED
- License valid for up to 5 years
Generation License
- Required before actual construction and operation of the project
- Typically valid for 35 years, after which the project reverts to the government
Environment Impact Assessment (EIA)
- Required for projects above 1 MW capacity
- Includes environmental and social impact studies
- Must be approved by the Environment Protection Council
Power Purchase Agreement (PPA)
- An agreement with the Nepal Electricity Authority (NEA) to sell electricity
- Required for securing financing
Land Acquisition and Water Rights
- Necessary permits for land use and water extraction from local authorities
- Requires coordination with local communities and government agencies
Foreign Investment Approval
- Investment Board Nepal (IBN) approves projects over 200 MW
Energy based industries
- Industries generating energy from water resources, wind, solar power, coal, natural oil and fuel or gas, biomass or other sources
- Industries manufacturing machines/equipment for energy generation
- Electricity transmission lines
- Electricity distribution system
Starting a FDI Business
| STEP-1 | Select Industry not in the negative list & make initial investment plan | Make necessary changes in the investment plan on the basis of the information acquired. |
| STEP-2 | Consultation with DOI/IBN | Visit DOI (if the project cost is up to NPR 6 billion); Visit Investment Board Nepal for initial consultation for projects over NPR 6 billion. |
| STEP-3 | Submission of Investment Application | Submit application form at the DOI/IBN with required documents. |
| STEP-4 | Investment Approval | Obtain approval from DOI/IBN |
| STEP-5 | Company Registration | Visit Office of the Company Registrar to register company, with a suitable company name and submit application, with required documents and fees. Online registration: LINK |
| STEP-6 | Local Business Registration | Visit municipality or rural municipality (Ward office) for business registration along with required documents. This registration is required for compliance with local regulations and obtaining permits or licenses required for your business operations. |
| STEP-7 | PAN & VAT Registration |
Visit Inland Revenue Department with application form along with required documents.
Online registration: LINK |
| STEP-8 | Environment Clearances | Based on the nature of industry or business and investment amount, decide the type of environmental assessment required (BIS, IEE, and EIA). You may need to also consult the Ministry of Forest and Environment. |
| STEP-9 | Industry Registration | Based on investment amount, register industry at DOI/IBN. |
| STEP-10 | Approval for bringing foreign investment | Get approval of NRB. |
| STEP-11 | Permits/ Approvals/ Registration/ Licensing | Permits/ approvals/ registration/ and licensing as required e.g., approval from Insurance Board for insurance companies, NRB approval for banks and financial institutions, DOED for electricity projects. |
