Hydropower Stocks in Nepal: Hype or Long-Term Value Investment?
Hydropower stocks dominate headlines and social media in Nepal—but are they worth the hype, or do they offer real long-term investment value? Dive into NEPSE trends, project performance, risk factors, and future outlook for the hydropower sector in this deep analysis.
Introduction: The Hydropower Boom in Nepal’s Stock Market
Over the last few years, hydropower stocks have become a buzzword in Nepal’s capital market. IPO oversubscriptions, double-digit listing gains, and aggressive retail trading have turned hydro shares into a fan favorite on NEPSE. But is this popularity just short-term hype—or is there real long-term investment value in the sector?
In this in-depth blog, we explore:
The current state of hydropower companies in NEPSE
Performance trends and case studies
Risks and challenges investors should consider
Long-term potential aligned with Nepal’s energy needs
1. Overview of Hydropower in Nepal
Nepal is blessed with abundant water resources, holding the potential to generate over 83,000 MW of hydroelectricity. However, installed capacity is just around 3,000 MW as of 2025.
The government’s strategy to:
End load-shedding
Export surplus electricity to India
Promote Public-Private Partnership (PPP)
has led to the rise of dozens of Independent Power Producers (IPPs), many of which are now publicly listed.
Notable Listed Hydropower Companies:
Butwal Power Company (BPCL)
Sanima Mai Hydropower (SHPC)
Chilime Hydropower (CHCL)
Upper Tamakoshi (UPPER)
Nyadi Hydropower (NYADI)
Mailung Khola (MKHL)
Super Madi (SMHL)
2. IPO Frenzy: The Hydro Share Madness
Hydropower IPOs have consistently seen:
100x+ oversubscription
30–100% listing gains
Social media hype and rumors
In 2022–2024 alone, over 25 hydropower companies went public. The minimum units allowed (10–50 per investor) and low initial pricing created mass retail participation.
Example: Super Madi Hydropower (SMHL)
IPO price: NPR 100
Listing price: NPR 260
Social media drove retail frenzy before and after listing
While this excitement has boosted trading volume, the fundamental value of most hydro stocks remains untested.
3. Financial Performance: Mixed Bag of Results
Let’s evaluate hydropower companies beyond just listing hype.
Key Financial Metrics to Consider:
Metric | What It Indicates |
|---|---|
EPS (Earnings per Share) | Profitability post-commissioning |
PE Ratio | Valuation comparison |
Project COD Date | When the plant started commercial production |
Power Purchase Agreement (PPA) | Fixed revenue model |
Transmission Risk | Whether power is evacuated or stranded |
Dividend History | Cashflow consistency |
Examples:
Butwal Power Company (BPCL)
One of the oldest and most stable players
Regular dividend-paying
Profitable from multiple projects
Good long-term holding
Upper Tamakoshi (UPPER)
Flagship national project
Delayed COD led to early volatility
Operational now; better outlook for FY 2082/83
Nyadi Hydropower (NYADI)
New entrant
Still under early-stage operation
EPS still low; high valuation based on hype
4. Risks in Hydropower Investment
Despite the potential, the sector carries serious risks for investors:
a. Construction Delays & Cost Overruns
Many projects face delays due to:
COVID-19 impact
Material shortage
Monsoon disruptions
Land acquisition issues
Delays mean no revenue, but loan interest keeps accruing.
b. Transmission Bottlenecks
NEA often cannot evacuate electricity from new projects due to lack of transmission lines—causing revenue loss.
c. Geopolitical & Natural Hazards
Earthquakes, landslides, floods are genuine threats to project viability.
d. Dividend Uncertainty
Most new hydro companies do not pay dividends for 2–5 years post listing.
5. Trading Trends: Are Hydro Stocks Just for Pump and Dump?
Due to their volatility, hydro stocks are:
Heavily traded by day traders
Often part of "pump and dump" schemes driven by rumors
Subject to sharp movements around AGMs and bonus announcements
Example:
In 2024, Mailung Khola (MKHL) spiked 90% in 10 days after a MoU rumor—only to drop 40% once the rumor faded.
6. Long-Term Value: Why Some Hydro Stocks Make Sense
Despite the volatility, hydro stocks can deliver value long term if you choose right:
Ideal Traits in a Long-Term Hydro Pick:
Project is already in operation (COD complete)
EPS > 5 and rising year-on-year
Stable dividend history
No major debt obligations
Diversified project portfolio
Stocks with Potential:
BPCL: Diversified, high dividend, stable earnings
CHCL: Part of NEA family, good reputation
SHPC: Transparent, good governance, fair growth
7. Future Outlook: Government Policies Matter
The government is focused on:
Increasing power exports to India
Expanding transmission lines (e.g., Tamakoshi Corridor)
Encouraging public investment via IPOs
If NEA ensures:
Timely payment for electricity
Grid access to all IPPs
Then, the future looks bright for hydro investors.
8. How to Analyze Hydro Stocks Before Buying
Checklist | Description |
|---|---|
Project Status | Under-construction or operational |
COD Date | Should be completed or imminent |
EPS & PE Ratio | Avoid companies with negative EPS for >2 years |
Debt-to-Equity Ratio | Avoid over-leveraged companies |
PPA with NEA | Is the rate fixed? Are escalations allowed? |
Board Quality | Check AGMs, audit reports, governance |
Conclusion: Hype or Long-Term Value?
✅ Yes, there is hype in hydro stocks—especially in IPOs and short-term trades.
✅ Yes, there is long-term value in stable, dividend-paying hydro companies.
❌ But not all hydro stocks are worth holding.
Investor Tip:
“Don’t chase every IPO or hydro rally. Study, filter, and invest in projects that are already producing electricity and earning profits.”
Whether you're a trader or a long-term investor, the hydropower sector will continue to play a crucial role in NEPSE. The key lies in due diligence and selective investing.