Eighteen hydropower companies yet only two (Chilime Hydropower and Butwal Power) in the lead!

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    “Nepal is the second richest country in terms of water resources”

    -A lie that we have been telling ourselves since decades.

    Yet, we cannot deny the potentiality of the development of the country lies in the water infrastructures. The abundant rivers, glaciers and lakes in Nepal shows that water resources can be a foundation for the infrastructural development of the country. One of the sectors that can make optimum utilization of water resources is hydropower sector. However, have the hydro powers been able to make a sustainable utilization of the water resources? The problem of power cut has been solved through the management of current resources. However, the question remains: have hydropower companies been able to boost up their productivity?

    The provided are the existing hydropower companies listed in NEPSE:

    Financial statements can further be an answer to the questions investors have about the performance of this sector. Therefore, the article promotes reader’s understanding on hydropower fundamental evaluation based on these indicators:

    Net profit:

    As per the net profit of third quarter of 2074/75, Chilime Hydropower Company Limited is in the lead with a profit of Rs 65.85 crore. Similarly, Butwal Power Company Limited (BPCL) has the second highest net profit of Rs 65.78 crore in the same quarter. The hydro powers with negative profit are Arun Kabeli Power Limited (AKPL), Dibyashwari Hydropower Company Limited (DHPL) and Khani Khola Hydropower Company Limited (KKHC).

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    Paid up capital:

    The central bank has not imposed any restriction on the increment of paid up capital of hydropower sectors. Chilime Hydropower Company Limited (CHCL) has the highest amount of paid up capital worth Rs 3.96 arba followed by Sanima Mai Hydropower Limited (SHPC) with paid up capital of Rs 2.11 arba and Butwal Power Company Limited (BPCL) with Rs 1.81 arba. However, BPCL’s paid up capital has increased post FPO which stands a Rs 2.21 arba.

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    Reserve and surplus:

    In terms of reserves and surplus, a tough competition is seen between CHCL and BPCL. Butwal Power Company (BPCL) has maintained its lead in reserve and surplus of Rs 4.84 arba. Chilime Hydropower Company (CHCL) has maintained second position with Rs 4.70 arba reserve and surplus fund. Investors are requested to note down the hydro powers with negative reserve and surplus are AKPL (-1.49 crore), DHPL (-5.23 crore), SPDL (-13.06 crore), KKHC (-23.59 crore) and NHPC (-44.28 crore).

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    Income from sales of electricity:

    The sale of electricity is the main source of income for hydro power companies. Therefore, any investors should consider the income from sales of electricity of a hydropower company while making investment decision. Chilime hydropower (CHCL) again maintained its lead with an income of Rs 80.46 crore. It is further followed by Sanima Mai Hydropower (SHPC) and Butwal Power Company (BPCL) with an income of Rs 56.69 crore and Rs 53.50 crore respectively.

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    Major indicators:

    Earnings per share (Annualized):

    Nepalese investors often regard EPS as the base of their investment decision. The top position, is occupied by Butwal Power Company Limited (BPCL) with an annualized EPS of Rs 48.44 per share. Similarly, it is followed by Chilime Hydropower Company (CHCL) with EPS of Rs 22.14 and United Modi Hydropower Limited (UMHL) with an EPS of Rs 19.33.

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    P/E Ratio:

    Butwal Power Company (BPCL) has the least PE ratio of 9.70 times. It is further followed by United Modi Hydropower Limited (UMHL) with P/E ratio of 9.88 times. RADHI is in the third place with a P/E ratio of 16.48 times.

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    Net worth per share:

    The highest net worth per share among these hydropower companies is Rs 367.47 of Butwal power Company Limited (BPCL). Chilime Hydropower Company Limited (CHCL) has the second highest net worth per share as of Q3 of FY 2074/75 i.e. Rs 218.60.

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    Market price:

    After the analysis, investors willing to invest in any of these hydropower companies can consider the following market price in descending order:

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    A full picture:

    Finally the table below provides a full picture with major indicators of the hydropower companies as of the third quarter of FY 2074/75:

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    From the table above, we can see that Chilime Hydropower Limited (CHCL) is leading in 3 indicators while Butwal Power Company (BPCL) is leading in the four indicators. However, this doesn’t capture the entire picture as there are numerous exogenous factors that must be kept on mind before making any investment decision. Provided the analysis, what is your opinion regarding hydropower companies? Do you think for a country with abundant water resources, there should be only two hydro power companies leading on the top of the chart? As an investor, have you lost your confidence in this sector? Or, are you positive towards this sector due to the absence of power cut which is the new achievement?

    Source : Share Sansar