Energy Company Registration in Nepal

Nepal’s power sector has been opened to private and foreign capital since the enactment of the Electricity Act, 2049 (1992), and today energy company registration in Nepal is one of the most common routes through which foreign investors enter the Nepali market. Whether the plan is a run-of-river hydropower project, a grid-connected solar power project, wind energy, biomass, or electricity trading, the investor must first incorporate a company at the Office of the Company Registrar and then obtain sector-specific licences. This guide, prepared by CompanyNP, explains the requirements, permitted activities, ownership structure, minimum investment, procedure, documents, timeline, costs, and the governing laws and authorities.

What Are the Requirements and Permitted Activities for an Energy Company in Nepal?

An energy company in Nepal is, in the first instance, an ordinary company registered under the Companies Act, 2063 (2006). What distinguishes it is the licensing regime under the Electricity Act, 2049 and the classification of “energy-based industry” under the Industrial Enterprises Act, 2076 (2020).

Who Can Register an Energy Company in Nepal?

The following persons and entities may promote and register an energy company:

Nepali citizens, singly or jointly, as promoters of a private or public limited company.
Foreign natural persons, foreign companies, and foreign institutional investors, subject to approval under the Foreign Investment and Technology Transfer Act, 2075 (2019) (FITTA).
Non-Resident Nepalis, who may invest in convertible foreign currency in accordance with FITTA and the Non-Resident Nepali Act, 2064.
Joint ventures between Nepali and foreign parties, which is the most frequently adopted structure in hydropower.

Persons and entities restricted by law, including those from countries with which Nepal has no diplomatic or permissible investment relations, and investors blacklisted by Nepal Rastra Bank or the credit information system, are not eligible. Nepal does not permit foreign investment in industries listed in Schedule 1 of FITTA, but energy generation, transmission, and distribution are not in that negative list, so one hundred percent foreign ownership is legally possible in the energy sector.

What Business Activities Can Be Undertaken?

The Electricity Act, 2049 recognises three principal licensed activities, and the Nepal Electricity Regulatory Commission Act, 2074 (2017) adds trading and supply as regulated functions.

Generation of Electricity

Generation covers hydropower, solar, wind, biomass, waste-to-energy, and other renewable sources. Under Section 3 of the Electricity Act, 2049, a licence is not required for the generation, transmission, or distribution of electricity of up to 1,000 kilowatts, although information must still be furnished to the prescribed authority. Every project above that threshold requires a survey licence followed by a generation licence issued by the Department of Electricity Development.

Transmission, Distribution, and Trading

Private companies may build and operate transmission lines and distribution systems under a separate licence, and may sell power to the Nepal Electricity Authority or to eligible consumers under a Power Purchase Agreement. Electricity trading, tariff determination, and market conduct fall under the jurisdiction of the Nepal Electricity Regulatory Commission.

Ancillary and Support Activities

Energy consulting, engineering, procurement and construction services, equipment supply, and operation and maintenance services can be registered as separate service companies. These do not require an electricity licence but do require industry registration where they fall within the scope of the Industrial Enterprises Act, 2076.

How Is Ownership Structure and Minimum Investment Regulated?

Ownership Structure Options

Private limited company: at least one shareholder and a maximum of one hundred and one shareholders, under Section 9 of the Companies Act, 2063. This is the standard vehicle for a single project company.
Public limited company: at least seven promoters and a minimum paid-up capital of NPR 10,000,000, mandatory where shares are to be issued to the public. Most hydropower companies convert to public limited status before an initial public offering, since licence conditions commonly require a local shareholding offer.
Branch office of a foreign company: permitted under Section 154 of the Companies Act, 2063 where a foreign entity has secured a contract in Nepal, but a branch cannot itself hold a generation licence as a domestic developer.
Joint venture company: Nepali and foreign shareholders hold shares in agreed proportions recorded in a joint venture agreement and reflected in the articles of association.

Foreign shareholding may be one hundred percent. Shareholding structure, share transfer, and any subsequent capital increase involving a foreign investor require prior approval from the foreign investment approving authority and reporting to Nepal Rastra Bank.

Minimum Investment Thresholds

The minimum foreign investment per foreign investor is NPR 20,000,000, fixed by notice of the Government of Nepal published in the Nepal Gazette under Section 9 of FITTA. This threshold applies to equity investment and is verified at the approval stage.
There is no minimum capital for a wholly Nepali-owned private limited company, other than the amount stated in its memorandum, although licence applications require proof of financial capacity.
Hydropower projects of 200 megawatts or more, and projects with a total investment of NPR 6,000,000,000 or more, fall under the Investment Board Nepal in accordance with the Public Private Partnership and Investment Act, 2075 (2019).
Investments below that threshold are approved by the Department of Industry.

Automatic Route Approval

Under FITTA and the related procedure adopted by the Government of Nepal, foreign investment up to NPR 500,000,000 in specified industries may be approved through the automatic route, which shortens the approval period considerably. Applicability to a particular energy project should be confirmed with the Department of Industry before filing, because eligibility depends on the sector classification and the notified list in force.

What Types of Energy Companies Can Be Registered in Nepal?

Classification by Energy Source

Hydropower companies: run-of-river, peaking run-of-river, storage, and pumped storage projects.
Solar energy companies: ground-mounted and rooftop grid-connected plants, and captive solar installations.
Wind energy companies: standalone wind farms and hybrid wind-solar projects.
Biomass, biogas, and waste-to-energy companies.
Energy storage and battery companies operating alongside generation licences.

Classification by Scale Under Industrial Law

The Industrial Enterprises Act, 2076 classifies industries as micro, cottage, small, medium, and large on the basis of fixed capital. Energy-based industries enjoy the status of a national priority industry, which is relevant for facilities, land use, and incentives. Registration of the industry with the Department of Industry is a mandatory step in parallel with company incorporation.

What Is the Procedure, and Which Documents Are Required?

Step-by-Step Registration Procedure

Project identification and eligibility check. Confirm the source, capacity, location, and whether the project falls under the Department of Electricity Development or the Investment Board Nepal.
Foreign investment approval. File an application with the Department of Industry, or with the Investment Board Nepal for large projects, enclosing the project report, investor documents, and proposed shareholding. Approval is issued in the form of a foreign investment approval letter.
Name reservation. Reserve the company name through the online system of the Office of the Company Registrar.
Company incorporation. File the memorandum of association, articles of association, consensus agreement where applicable, and shareholder details, and pay the registration fee. The Registrar issues a certificate of incorporation.
Tax registration. Obtain a Permanent Account Number from the Inland Revenue Department, and register for Value Added Tax where the transactions require it.
Industry registration. Register the energy-based industry with the Department of Industry under the Industrial Enterprises Act, 2076.
Survey licence. Apply to the Department of Electricity Development for a survey licence, valid for the period prescribed by the Electricity Act, 2049 and the Electricity Rules, 2050.
Environmental study. Complete a Brief Environmental Study, Initial Environmental Examination, or Environmental Impact Assessment as required by the Environment Protection Act, 2076 and the Environment Protection Rules, 2077, based on installed capacity and location.
Generation licence and Power Purchase Agreement. Submit the feasibility study, environmental approval, and financial closure documents, secure the generation licence, and execute the Power Purchase Agreement with the Nepal Electricity Authority.
Capital inflow and reporting. Bring in the approved investment through the banking channel, obtain Nepal Rastra Bank recording of the investment, and file share allotment returns with the Registrar.

Documents Required

Corporate and Investor Documents

Memorandum and articles of association in the prescribed form.
Passport copies of individual foreign investors, or certificate of incorporation, charter documents, and board resolution of a corporate investor, duly notarised and authenticated.
Bio-data and financial credibility certificate issued by a bank of the investor.
Joint venture agreement, where there is more than one investor.
Power of attorney appointing a local representative, which CompanyNP commonly executes for offshore clients.

Project and Licensing Documents

Project report or detailed project proposal with capacity, cost, and financing plan.
Feasibility or pre-feasibility study report for the licence application.
Map, coordinates, and evidence of the project site.
Environmental study report and the approval of the competent authority.
Land ownership or lease documents, and consent of the local level where required.

Timeline for Completion

Name reservation: one to three working days.
Foreign investment approval: approximately two to five weeks at the Department of Industry, and longer for Investment Board Nepal projects requiring a project development agreement.
Company incorporation: three to seven working days after approval.
Permanent Account Number and industry registration: three to seven working days.
Survey licence: several weeks to a few months, depending on site competition and completeness of the file.
Generation licence: depends on completion of the feasibility study, environmental approval, and financial closure.

A realistic timeline for company formation and initial registration is four to eight weeks; the full licensing cycle for a hydropower project extends over a considerably longer period.

Cost of Registration

Company registration fee at the Office of the Company Registrar is calculated on authorised capital under the schedule of the Companies Regulation, 2064, rising in slabs as capital increases.
Foreign investment approval and industry registration fees are charged as prescribed by the Department of Industry.
Survey and generation licence fees are capacity-based and are prescribed in the schedules to the Electricity Rules, 2050.
Professional costs include notarisation, translation, environmental consultancy, feasibility studies, and legal advisory services.

Taxation and Fiscal Incentives

Section 11 of the Income Tax Act, 2058 (2002) grants a licensed person engaged in the generation, transmission, or distribution of electricity full exemption from income tax for a specified number of years from the date of commencement of commercial production, followed by a partial rebate for subsequent years, provided commercial operation begins within the deadline stated in the Act as amended by the prevailing Finance Act. Energy-based industries also benefit from customs and Value Added Tax facilities on plant and machinery under the Industrial Enterprises Act, 2076 and the annual Finance Act. Investors should confirm current rates and deadlines with the Inland Revenue Department, since the Finance Act amends these provisions annually.

Repatriation, Visas, and Post-Registration Compliance

Section 20 of FITTA permits repatriation of dividends, sale proceeds of shares, principal and interest of approved foreign loans, and technology transfer fees, with approval of Nepal Rastra Bank.
Business visas are available to foreign investors and their authorised representatives; a residential visa is available where the investment reaches the threshold stated in FITTA.
Continuing obligations include annual general meetings, annual returns to the Registrar, audited financial statements, income tax returns, Value Added Tax filings, and annual reporting to the Department of Industry and Nepal Rastra Bank.

Governing Laws

Companies Act, 2063 (2006) and Companies Regulation, 2064
Foreign Investment and Technology Transfer Act, 2075 (2019) and Rules, 2077
Electricity Act, 2049 (1992) and Electricity Rules, 2050
Nepal Electricity Regulatory Commission Act, 2074 (2017)
Industrial Enterprises Act, 2076 (2020)
Public Private Partnership and Investment Act, 2075 (2019)
Income Tax Act, 2058 (2002) and the prevailing Finance Act
Environment Protection Act, 2076 and Rules, 2077
Foreign Exchange (Regulation) Act, 2019 (1962)
Water Resources Act, 2049 and Land Acquisition Act, 2034

Competent Authorities

Office of the Company Registrar, for incorporation and corporate filings: ocr.gov.np
Department of Industry, for foreign investment approval and industry registration: doind.gov.np
Department of Electricity Development, for survey, generation, transmission, and distribution licences: doed.gov.np
Investment Board Nepal, for large-scale projects
Nepal Electricity Regulatory Commission, for tariff and market regulation
Nepal Electricity Authority, for Power Purchase Agreements and grid connection
Nepal Rastra Bank, for investment recording and repatriation
Inland Revenue Department, for tax registration and compliance

For related services, see CompanyNP’s guidance on company registration in Nepal and foreign investment in Nepal.

Frequently Asked Questions

Can a foreign investor own one hundred percent of a hydropower company in Nepal?

Yes. Energy generation is not listed in Schedule 1 of FITTA, so full foreign ownership is permitted, subject to approval by the Department of Industry or the Investment Board Nepal depending on the total project investment size.

Is a licence required for a small solar or micro-hydro project?

Under Section 3 of the Electricity Act, 2049, projects up to 1,000 kilowatts do not require a licence. However, prescribed information must be submitted to the concerned authority, and company registration plus environmental compliance remain mandatory obligations.

What is the minimum foreign investment for energy company registration in Nepal?

The notified minimum is NPR 20,000,000 per foreign investor, published in the Nepal Gazette under FITTA. Practical energy project costs normally exceed this figure substantially, particularly where hydropower construction and transmission infrastructure are involved.

Which authority approves projects above two hundred megawatts?

The Investment Board Nepal approves hydropower projects of 200 megawatts and above, and projects involving investment of NPR 6,000,000,000 or more, under the Public Private Partnership and Investment Act, 2075, usually through a project development agreement.

Are income tax exemptions available to licensed electricity companies?

Section 11 of the Income Tax Act, 2058 grants licensed generation, transmission, and distribution entities a full exemption period followed by a partial rebate, conditional on commencing commercial production within the deadline stated in the prevailing Finance Act.

Can profits and sale proceeds be repatriated abroad?

Yes. Section 20 of FITTA allows repatriation of dividends, share sale proceeds, approved loan repayments, and technology transfer fees in convertible currency, provided taxes are settled and Nepal Rastra Bank grants the necessary exchange approval.