Executive Summary
Sanima Mai Hydropower owns and operates 29 MW of run-of-river hydropower in Ilam — Mai (22 MW) and Mai Cascade (7 MW) — under 30-year PPAs with NEA at the standard two-tier seasonal tariff (SHPC Annual Report FY 2081/82, Note describing the company's principal activity). Beyond the operating asset, SHPC carries promoter stakes in four other Sanima Group hydropower projects, recorded on the standalone balance sheet as Investments in Associates (Rs. 1,123.7M, Note 4.10) and Other Investments at FVTOCI. FY 2081/82 was the weakest of the last five years on PAT (Rs. 325.1M standalone vs. peak ~Rs. 546M in FY 2078/79) due to two consecutive force-majeure events on Mai Khola (the Ashwin 2081 transmission tower damage and the Ashwin 2082 headworks flood). Mai project debt amortises by Ashad 2083 and Mai Cascade by Chaitra 2083, after which the operating asset is effectively debt-free.
Investment Portfolio (Sanima Group Stakes)
Source: SHPC Annual Report FY 2081/82 — Note 4.10 (Investments in Associates) and Note 4.11 (Other Investments at FVTOCI).
| Investee | Stake | Capacity | Status | Promoter Cost (Rs. M) | Fair Value (Rs. M) |
|---|---|---|---|---|---|
| Sanima Middle Tamor (SMTHL) | 16.0% | 73 MW | Operational | ~533 | 2,759.5 |
| Swet-Ganga Hydropower (SGHCL — Tallo Likhu) | 28.25% | 28.1 MW | Operational | ~565 | 1,785.7 |
| Mathillo Mailung (MMKJL) | 23.75% | 14.3 MW | Operational | ~340 | 1,406.2 |
| Sanima Jum (SJHL) | 33.81% | 56 MW | Under construction (Dolakha) | ~787 | 1,123.7 (carried at equity method) |
| Bavari Construction | 8.0% | n/a | Service company | 20 | 20 |
| Total | ~2,245 | ~7,094 |
Standalone carrying value: Investment in Associates Rs. 1,123.7M + Other Investments at FVTOCI Rs. 2,779.5M = Rs. 3,903M (~Rs. 104 per share on 37.4M shares outstanding). At fair-value mark including SMTHL's traded value, the embedded portfolio is ~Rs. 161 per share. At the May 2026 share price of Rs. ~520, this implies roughly 31% of the share price is attributable to the investment portfolio before any value is assigned to the operating asset.
Financial Scorecard (5-Year, NPR Million, Standalone)
Source: SHPC Annual Reports FY 2077/78–FY 2081/82.
| Metric | FY 77/78 | FY 78/79 | FY 79/80 | FY 80/81 | FY 81/82 |
|---|---|---|---|---|---|
| Revenue | 850 | 935 | 764 | 759 | 685 |
| Total Income | 862 | 978 | 823 | 811 | 695 |
| PAT (Standalone) | 410 | 546 | 407 | 410 | 325 |
| Net Profit Margin | 48.2% | 58.4% | 53.3% | 54.0% | 47.5% |
| EPS (Rs.) | 14.58 | 17.68 | 13.17 | 12.06 | 8.70 |
| Net Worth/Share (Rs.) | 124.17 | 130.15 | 162.28 | 178.09 | 177.35 |
| ROE | 14.6% | 17.7% | 13.2% | 12.1% | 8.7% |
| ROCE | 8.6% | 11.4% | 9.2% | 9.3% | 7.5% |
| D/E | 0.71 | 0.55 | 0.44 | 0.29 | 0.15 |
| Bonus + Cash Dividend (%) | 10.5 / 0.55 | 0 / 5.26 | 10 / 0.53 | 10 / 0.53 | 0 / 0 |
FY 2081/82 standalone Net Profit was Rs. 325,113,441 (SHPC AR FY 2081/82, Statement of Profit & Loss, standalone column). FY 2080/81 standalone Net Profit was Rs. 409,711,905.
Operational Scorecard (FY 2081/82)
Source: SHPC Annual Report FY 2081/82, Operations and Director's Report sections.
| Metric | FY 81/82 | Contracted | Achievement |
|---|---|---|---|
| Mai (22 MW) generation | 92.54 GWh | 128.30 GWh | 72% |
| Mai Cascade (7 MW) generation | 27.26 GWh | 38.42 GWh | 71% |
| Total generation | 119.80 GWh | 166.72 GWh | 72% |
| Days offline | ~145 (Ashwin 2082 flood) + 37 (Ashwin 2081 transmission tower) | 0 | Force majeure |
| Headcount | 61 | — | — |
| Auditor | S.A.R. Associates | Clean unqualified opinion | Pass |
Trade Debtors – NEA: Rs. 422.9M at FY 2081/82 close (broadly stable YoY).
The Bull Case
1. The 2027 free-cash-flow inflection. Mai project loan (Rs. 339M outstanding) amortises by Ashad 2083 (~July 2026) and Mai Cascade loan (Rs. 238M) by Chaitra 2083 (~April 2027). Annual debt-service savings of approximately Rs. 80–100M flow to free cash flow.
2. Normalised earnings power. FY 2081/82 lost ~145 days of generation across both plants from headworks flood damage. A normalised run-rate based on the FY 2077/78–FY 2080/81 average is PAT of ~Rs. 440M (EPS ~Rs. 12). At a Rs. 520 share price, normalised P/E is ~43x; stripping the embedded portfolio at fair value (~Rs. 161/share) leaves an operating-only P/E of ~30x.
3. Sanima Jum (56 MW) commissioning. SHPC owns 33.81% of Sanima Jum Hydropower, currently under construction in Dolakha. Once commissioned, the standalone P&L will reflect its share of profit at the equity method without additional capital outlay from current shareholders (the equity investment of ~Rs. 787M is already on the balance sheet).
4. Sanima Group ecosystem. Engineering services through Sanima Hydro & Engineering (FY 2081/82 related-party transaction Rs. 6.7M), banking through Sanima Bank, and insurance through Shikhar/Siddhartha. The insurance structure responded after the Ashwin 2082 flood with an advance to fund repairs ahead of final claim settlement.
5. Founder-owned operator. Chairman Khem Raj Lamichhane personally holds 21,26,567 shares (SHPC AR FY 2081/82, shareholder disclosure). At Rs. 520, that is approximately Rs. 11 crore.
The Bear Case
1. Mai Khola hydrology risk. Two force-majeure-grade events in 24 months — Ashwin 2081 (transmission tower damage, 37 days offline) and Ashwin 2082 (headworks flood, ~145 days offline). If extreme-rainfall events on Mai Khola become more frequent, the structural availability factor declines, and revenue compresses commensurately. Each 5% drop in PLF reduces revenue by approximately Rs. 35M and PAT by approximately Rs. 25M (~Rs. 0.65/share).
2. Real-tariff erosion plus tax-holiday wind-down. PPA tariff is the standard NEA two-tier (Rs. 4.80/kWh wet, Rs. 8.40/kWh dry, with 3% escalation every 5 years capped at 9 escalations total). Most of the escalation lifecycle is behind both plants. Mai's 10-year 100% tax holiday ended Falgun 2081 (now 50% for 5 years); Mai Cascade's tax holiday ends Magh 2082. The combination compresses real after-tax tariff over the next 3–5 years.
3. Capital-allocation discipline. SHPC declared zero dividend in FY 2081/82, breaking a four-year streak. Management's framing is reinvestment into associates. The Annual Report does not disclose an explicit IRR threshold for capital deployed into associate investments. Forward-looking signals to monitor: Sanima Jum commissioning cost vs. budget, related-party transaction growth, and dividend resumption.
Moat Assessment
Verdict: Narrow.
- Regulatory licences. 35-year generation licence, 30-year PPA at locked-in tariffs. New entrants face multi-year licensing and financing cycles.
- Group ecosystem. Sanima Group banking, engineering, and insurance integration provides cost and execution advantages that standalone IPPs do not have.
- Owner-operator alignment. Chairman's personal shareholding aligns long-term decision-making with minority shareholders.
The moats are real but not wide individually; they compound to give SHPC a durable cost-and-execution edge for as long as the group structure remains.
Management
| Indicator | Detail |
|---|---|
| Chairman | Khem Raj Lamichhane, 21,26,567 personal shares (SHPC AR FY 2081/82, Note 4.25 — top shareholder disclosure) |
| Board | 7 members, 1 independent director (Mahesh Ghimire) |
| GM | Grishma Ojha |
| GM total compensation FY 2081/82 | Rs. 51,52,000 (short-term benefits Rs. 47,86,000 + post-employment Rs. 3,66,000; SHPC AR FY 2081/82, Note 4.27) |
| Board meeting expenses FY 2081/82 | Rs. 8,62,000 |
| Related-party transactions | Sanima Hydro & Engineering Rs. 6.7M, Bavari Construction Rs. 3.1M, Sanima Bank deposits Rs. 2.3M (Note 4.27) |
| Auditor | S.A.R. Associates, Chartered Accountants — clean unqualified opinion (signed January 4, 2026) |
| Dividend history | Steady deleveraging; reinvestment in associates; zero dividend FY 2081/82 |
The Annual Report does not disclose an explicit IRR hurdle for associate investments.
Valuation
Sum-of-the-parts (illustrative)
| Component | Value (Rs. M) | Per share (Rs.) |
|---|---|---|
| Operating business (Mai + Mai Cascade), normalised PAT ~Rs. 440M × 25× | ~11,000 | ~294 |
| Embedded investment portfolio at fair value (per Note 4.10/4.11) | ~6,000 | ~161 |
| Net cash by 2027 (post-debt amortisation) | ~100 | ~3 |
| Total | ~17,100 | ~458 |
Earnings yield and book value (at Rs. 520)
| Metric | Value |
|---|---|
| Normalised earnings yield (Rs. 12 EPS / Rs. 520) | 2.3% |
| 10-year Government of Nepal yield (reference) | ~6% |
| P/B (Book value per share Rs. 177.35) | 2.93× |
| Trailing P/E (FY 2081/82 EPS Rs. 8.70) | 59.8× |
The trailing P/E is elevated because of the FY 2081/82 force-majeure earnings impairment; on normalised earnings the multiple is materially lower. The P/B of 2.93× is at the upper end of the historical range for a maturing hydro holding company; some of this premium is justified by the embedded investment portfolio being recorded at carrying value below fair value.
Key Variables to Monitor
- Mai Khola monsoon performance Ashwin/Kartik 2083 (Sept–Nov 2026) — clean monsoon validates the climate-risk-is-cyclical view; another flood revisits the structural-risk thesis.
- Mai project loan retirement Ashad 2083 (~July 2026) — confirms the debt-amortisation schedule.
- Mai Cascade project loan retirement Chaitra 2083 (~April 2027) — completes the debt-free transition.
- Sanima Jum (56 MW) construction milestones and COD — drives the equity-method earnings step-up.
- FY 2082/83 dividend declaration — resumption signals capital-allocation discipline.
- Insurance recovery flow-through in FY 2082/83 P&L — quantifies the LOP cover effectiveness from the Ashwin 2082 event.
- NEA receivables (Rs. 422.9M at FY 2081/82 close) — stable or shrinking is a healthy sector signal.
Sources
- SHPC Annual Reports FY 2077/78–FY 2081/82. Primary financial source. Key citations from AR FY 2081/82: Note 4.10 (Investments in Associates), Note 4.11 (Other Investments at FVTOCI), Note 4.23 (Share Capital), Note 4.25 (Shareholder Disclosure), Note 4.27 (Related Party Transactions and Key Management Compensation).
- Nepal Electricity Authority Annual Report FY 2081/82 — PPA framework and offtaker context.
- Electricity Regulatory Commission Nepal — PPA tariff schedules.
- NEPSE Market Data — share price reference.
- Auditor: S.A.R. Associates, Chartered Accountants.
Research date: May 10, 2026.