Fate of Hydropower Sector after listing of Upper Tamakoshi; somethings will never change no matter what

~ Rishab Agrawal

It is a known fact that Nepal has huge potential for energy generation through hydropower projects. The electricity that can be generated from hydropower is a bit more than 40,000 MW which is more than enough to export even after meeting energy demands of the country. If the right path is taken and corruption is reduced, hydropower sector can be the sector that uplifts the economics and standards of the country. Utilized in right way, this sector can initiate the process of development and growth.

However, this sector is currently at a nascent stage and lacks stability which adds to the risk while looking at it in terms of investment prospects. Only a handful of investors believe in holding share of hydropower sector while the rest invest in it for speculation purposes. Although this has no impact on the hydropower companies currently listed on the stock exchange or those which are in the pipeline of going public.

Recently, Upper Tamakoshi Hydropower Project (UPPER) got listed on NEPSE on 10^th January, 2019 and it took the market by storm after consecutively hitting the positive circuit day after day. The shares of the project that could be obtained at Rs.100 per share through IPO, peaked at Rs.342 per share within a few days of listing. A total of 3.45 Lakh units were exchanged at this price after which oversupply made the prices of the shares fall to a low of Rs.219 per share. Since the date of listing till the last trading day, the following were the top buyer broker of the scrip:

In the mentioned time period, a total of 3,060,059 units of shares were traded and the weighted average price of the scrip stands at Rs.270.24 per share. At the LTP of Rs.225 per share (as of 21^st Feb 2019) all the top buyer brokers of the scrip are in loss. The amount of loss per share is as high as Rs.56, incurred by Online Securities. In terms of total loss, Dynamic Money Managers are at the top with loss of Rs.73.66 Lakhs.

However, UPPER is at a relatively better position than some of its competitors. Some hydropower companies are trading at below par prices while some are trading very close to par value. Also, most hydropower companies are very close to their respective 52 week low prices. For analysis, a table containing the LTP and 52 week high/low of all the companies in this sector has been prepared.

Out of 25 listed hydropower companies, 10 of them are trading below the par value while a few are just above par. Many companies are currently trading close to the 52 week low while only 8 companies have declared dividends for shareholders from profits of FY 74/75. 5 companies are still due to conduct their AGMs. The remaining 12 companies are either newly listed companies, or haven’t declared any dividends.

Investors have the impression that they can get the scrips of hydropower companies in the secondary market at a value below par so why apply for IPOs worth Rs.100 per share. Due to these risks, investors want to sell the shares obtained in IPO soon after listing. This will have a negative impact on the upcoming hydropower companies who have received approval or are in the process of going public.

The above mentioned companies will be coming out with IPO in the coming months. If the current situation of the hydropower sector is not improved, then these issues will face a major problem of unsubscription due to lack of confidence in the sector.

This sector is considered to be one of the most unsafe and risky sectors for investment despite the fact that Nepal has massive hydropower potential. It can not only generate sustainable energy for the country but also export excess electricity to neighboring countries. But the only resource that Nepal has in abundance lacks stability in terms of investment due to various reasons. This is a sector that can be a turning point in the path of the country’s development if the resources are used at their full potential.

This issue should be amongst the top priorities of the concerned authorities. They must take steps to make this sector more reliable and stable, this will encourage investment in hydropower projects which will be the first step towards the economic growth and overall development of the country.