The Electricity Regulatory Commission (ERC) has intensified its enforcement actions against hydropower firms that have been selling shares beyond the allowed limit without obtaining regulatory consent. Numerous companies have already been penalized for breaching this rule, with additional entities likely to be investigated soon.
In the initial seven months of the current fiscal period, six hydropower companies have faced penalties for not complying with ERC regulations. The commission has also published public notices to ensure that companies are fully aware of the regulations regarding share transactions.
Under the ERC Rules 2018, firms engaged in power generation, transmission, distribution, or trading must obtain prior consent before executing share transfers that alter ownership between five percent and 50 percent. Deals that surpass this threshold fall under a different framework for mergers and acquisitions. Nevertheless, companies already listed on the stock market are not subject to this approval requirement.
Additionally, ERC consent is necessary prior to issuing rights shares for projects that are still under construction. The regulator insists that these provisions aim to prevent abrupt ownership changes that could undermine market stability and the integrity of the sector.
A growing concern is the increasing trend of share transactions occurring prior to financial closure, motivated by the 35-year operational limit imposed on hydropower projects upon obtaining their generation licenses. This has compelled some promoters to liquidate their holdings sooner than intended.
With heightened regulatory scrutiny, hydropower companies are now expected to enhance their compliance measures, ensuring that share transactions are in line with ERC’s directives to uphold transparency and stability within the sector.
