Private Investment in Nepal’s Energy Sector Crosses NPR 13 Trillion, Report Shows

Private sector investment in Nepal’s energy sector has reached NPR 13.10 trillion, highlighting the scale of private capital mobilised in hydropower and related infrastructure over the past decades. The figure comes from a special study conducted by the Independent Power Producers’ Association Nepal (IPPAN), marking the first time such a comprehensive assessment of private investment in the energy sector has been carried out.

According to IPPAN, the study was undertaken to quantify how much capital the private sector has committed to Nepal’s power industry, an area traditionally viewed as high-risk due to long gestation periods, regulatory uncertainty and financing challenges. The findings, released on the occasion of IPPAN’s 26th anniversary, underscore the growing role of private developers in shaping the country’s energy landscape.

Banks as the Backbone of Energy Financing

The report reveals that commercial banks and financial institutions account for NPR 8.70 trillion of the total investment in the form of loans. This indicates that Nepal’s banking system has been the primary engine supporting hydropower development, often extending long-term credit despite liquidity pressures and regulatory constraints.

The remaining investment has been made by private developers as equity capital, reflecting significant risk exposure taken by entrepreneurs and investors. Analysts note that such a high level of equity participation suggests strong long-term confidence in Nepal’s hydropower potential, even though returns are often delayed due to construction timelines and power purchase agreement structures.

First Comprehensive Mapping of Private Energy Capital

IPPAN officials say this is the first systematic attempt to calculate total private sector exposure in the energy sector. Until now, discussions around investment were largely based on project-by-project estimates rather than an aggregated national picture. By consolidating data across operational, under-construction and pipeline projects, the study provides a clearer understanding of the financial scale involved.

Energy experts say the findings help explain why policy stability and financial sector coordination have become increasingly critical. With trillions of rupees tied up in energy assets, even small regulatory changes can have wide-ranging implications for banks, developers and the broader economy.

Implications for Financial Stability

The heavy involvement of banks also raises questions about sectoral concentration risk. A large portion of bank lending is now linked to hydropower projects, making the performance of the energy sector closely intertwined with financial system stability. Delays in project completion, cost overruns, or power evacuation bottlenecks could therefore have spillover effects on banks’ balance sheets.

At the same time, the report highlights how private investment has reduced the fiscal burden on the government, allowing large-scale power generation to expand without excessive reliance on public funds. Policymakers view this as a positive shift, provided risks are managed effectively.

Confidence Amid Structural Challenges

Despite persistent challenges such as transmission constraints, seasonal demand fluctuations and payment delays, private investment continues to flow into the energy sector. IPPAN attributes this to Nepal’s long-term electricity demand growth, export potential to neighbouring countries, and policy commitments toward renewable energy.

Industry insiders say the NPR 13.10 trillion figure is not just a measure of money invested, but also of institutional confidence built over years of regulatory evolution and private-sector participation.

The report is expected to influence future policy debates on power sector financing, bank exposure limits and investment facilitation. IPPAN has urged the government and regulators to recognise the scale of private capital already committed and to ensure predictable policies, timely project approvals and improved transmission infrastructure.

As Nepal positions itself as a regional energy exporter, the findings serve as a reminder that private investors and banks have already placed substantial financial bets on the sector’s success. How effectively the country manages these investments may determine not only the future of its energy industry, but also the resilience of its broader financial system.