This report explores the current market situation for hydropower stocks in Nepal in light of recent flood risks, infrastructure impact, and financial factors like interest rates.
Recently, hydropower stocks have faced a lot of selling pressure because of heavy rains and the fear of floods. When the NEPSE index dropped by 34 points in a single day, the total turnover was 6 arba 35 crore rupees. Out of that, hydropower stocks alone contributed about 2 arba 70 crore rupees in transactions. The hydropower sub-index also fell by 61 points that day.
Investors seem to be selling because they are worried about damages like the ones we saw in Rasuwa last month. However, there has been no report of any huge physical damage to the power plants themselves so far. Some transmission lines were damaged, but the main project structures are safe.
Understanding the Flood Risks
Weather forecasts suggest that the low-pressure system is getting weaker, so rain is expected to decrease. The risk in Koshi and Bagmati areas has gone down, while Gandaki and some western areas saw more impact. Looking at the river basins, there are about 48 projects in Koshi, 41 in Gandaki, and 6 in the Bagmati basin. People were most worried about the Gandaki-Narayani basin this time.
Investors are more careful now because they remember the damage from last year’s big floods. Even though transmission lines had some issues, they can be fixed to restore power supply. This shows that while the power plants are safe, investors should consider transmission infrastructure as a separate kind of risk.
Opportunities from Interest Rates and Production
Currently, the interest rates of banks are relatively low. Since hydropower projects use a lot of loans, lower interest rates help reduce the financial cost for these companies. This could lead to better profits for projects that are already running and also improve the financial health of future projects.
Also, because of the past experience, many projects are now better prepared for floods and landslides. During the rainy season, rivers have more water, so plants can produce more electricity. Some projects had issues with full capacity before, but after the expansion of transmission lines like the Marshyangdi corridor, many plants are getting benefited.
What Should Investors Look For
When looking at hydropower companies, do not just check the current share price or production capacity. You need to look at the loan, interest rate, power purchase agreement (PPA) rate, transmission line status, and investment in new projects. Some small companies are putting their money into new, big projects, which will add to their future income. In short, while flood fear caused the selling, the real value depends on production capacity, PPA rates, and how companies manage their debt and new investments.
AI Disclaimer: This article was originally published on https://bajarkochirfar.com. It has been translated with the help of AI. For the best understanding and accurate facts, we recommend reading the original Nepali version.
