Sanima Mai Hydropower Limited (NEPSE: SHPC) — Investment Report

Executive Summary

Sanima Mai Hydropower Limited (NEPSE: SHPC) owns and operates 29 MW of run-of-river generation in Ilam — the Mai Hydropower Plant (22 MW, commissioned 2071/11/14 BS ≈ February 2015) and Mai Cascade Hydropower Plant (7 MW, commissioned 2072/10/29 BS ≈ February 2016) — under power purchase agreements with Nepal Electricity Authority (NEA) (Source: SHPC Annual Report FY2081/82, Note 1.1 — Primary). Beyond the operating plants, SHPC holds equity-method associate stakes and FVTOCI investments in four other Sanima Group hydropower companies, making it a generation-plus-holding structure rather than a pure single-asset IPP. FY2081/82 was shaped by two consecutive force-majeure events on the Mai Khola river — a transmission-tower failure (Ashwin 2081) and a headworks flood (Ashwin 2082) that shut both plants for roughly 4.5 months — and standalone PAT fell 20.6% year-on-year even as the company cut total borrowings by 41.7%. The analytical tension in SHPC today is the gap between a BOOT-concession asset with a finite 30-year life and a share price that, on its associate-stake-adjusted basis, implies a substantially higher multiple on the operating plants than their remaining cash flows support.

Business Overview

SHPC is a NEPSE-listed public limited company (registration 1331/068/069) that directly owns and operates two run-of-river hydropower plants in Ilam district under 30-year power purchase agreements with NEA (Source: SHPC Annual Report FY2081/82, Note 1.1 — Primary). The plants are accounted for as service concession arrangements under IFRIC 12: the built infrastructure is carried as an intangible asset (NPR 2,995.9 million at FY2081/82 year-end) and amortized over the 30-year concession period, after which it reverts to NEA, the grantor (Source: SHPC Annual Report FY2081/82, Notes 5.5–5.5.1 — Primary).

Economically, SHPC is not a pure single-asset generator. It also holds three equity-method associate stakes and two FVTOCI investments in other Nepali hydropower companies within the Sanima Group (see Capital Allocation & Governance, below), all generation-adjacent revenue for the business beyond its own 29 MW. The company's auditor, S.A.R. Associates (Sunir Kumar Dhungel), issued an unmodified/unqualified opinion on the FY2081/82 financial statements, with revenue recognition under the NEA PPA flagged as the key audit matter (Source: SHPC Annual Report FY2081/82, Independent Auditor's Report — Primary).

Financial Performance

Only FY2080/81 and FY2081/82 have audited, text-recoverable annual reports on record; FY2076/77–FY2079/80 annual reports are scanned-image PDFs with no extractable text and cannot be independently verified (Source: SHPC Annual Report data-availability review — Primary). Figures below are therefore limited to the two audited years, shown on both Group (consolidated) and Company (standalone) bases.

Source: SHPC Annual Report FY2081/82, Statement of Financial Position / Profit or Loss (image-verified, Group and Company columns) — Primary. EPS is bonus-adjusted per Note 5.36 (restated FY2080/81: Group 9.47, Company 10.96).

Company-basis net profit exceeded Group-basis net profit in both audited years because the associate stakes were dilutive on the equity method over this period; this reverses in FY2082/83 as the associates turn accretive (see Quarterly Snapshot, below). Earlier (pre-FY2080/81) annual-report figures used in prior public commentary on SHPC — revenue around NPR 850–935 million and PAT around NPR 407–546 million for FY2077/78–FY2079/80 — originate from scanned annual reports that could not be independently re-verified from primary text in this update and should be treated as directional context only, not as audited data.

Quarterly Snapshot — FY2082/83 (unaudited, cumulative)

Source: SHPC quarterly financial disclosures Q1–Q3 FY2082/83 (SEBON Annexure-14 filings), unaudited — Primary.

Two developments stand out in the nine-month data. First, the Ashwin 2082 flood is visible directly in the cumulative numbers: standalone Q2 booked essentially zero incremental revenue, with amortization and administrative costs accruing against minimal output; both plants were shut from the flood date and restarted on Falgun 10, 2082 (Source: SHPC Q2/Q3 FY2082/83 disclosures — Primary). Second, the Q2-to-Q3 total-assets decline of roughly 25% is an accounting reclassification rather than an operating loss: SHPC moved its 16% Sanima Middle Tamor stake from FVTOCI (fair-value) to equity-method associate accounting in Q3, replacing a roughly NPR 2.39 billion fair-value carrying amount with a roughly NPR 0.63 billion cost/equity carrying amount — a non-economic book-value reduction of approximately NPR 1.86 billion that also moved NAVPS from 169.00 to 133.39. SHPC's underlying shareholding in Sanima Middle Tamor (5,332,000 shares) was unchanged (Source: SHPC Q3 FY2082/83 disclosures — Primary).

Market Position & Competitive Landscape

SHPC is a sub-scale (29 MW direct capacity), pre-2025-vintage run-of-river IPP selling exclusively to NEA, Nepal's single sovereign offtaker. NEA itself has posted six consecutive profitable years, including PAT of NPR 6.4 billion in FY2024/25, cut system losses from 25.8% to 12.3%, and became a net power exporter in FY2023/24 (Source: NEA Annual Report FY2081/82 — Primary). However, NEA's net margin has fallen to 5.1% from 18.7% in FY2019/20 as take-or-pay IPP purchase costs have grown roughly 28% per year against roughly 8% revenue growth, with consumer tariffs frozen since 2018 (Source: NEA Annual Report; +16 Capital Nepal Hydropower Industry Report — Secondary, citing primary NEA data).

Within this system, SHPC's plants sit on the standard run-of-river PPA tariff structure — NPR 4.80/kWh (wet season) and NPR 8.40/kWh (dry season), escalating 3% every five years for up to nine escalations (Source: Electricity Regulatory Commission tariff schedule; SHPC facility agreement reference, 2071 BS — Primary/Secondary). Because both plants were commissioned in 2015–16, they are relatively early in NEA's purchase-cost stack and are structurally cheaper power for the grid than newer-vintage plants — a position the Nepal hydropower sector generally treats as lower curtailment risk in periods of generation surplus. The offsetting factor is that most of each plant's tariff-escalation lifecycle is already behind it, so nominal tariffs are close to flat going forward while real tariffs erode with inflation.

Against a comparable listed peer, Sahas Urja Limited (86 MW, single plant), SHPC carries materially lower leverage (borrowings/equity 8.9% vs. a project-debt-to-equity ratio above 100% at Sahas Urja) and a higher net margin (46.8% vs. 33.8%), but a lower return on equity in the flood-affected year and lower revenue per installed megawatt, reflecting its older plant vintage and FY2081/82 outages (Source: company verified financial files, both companies — Primary).

Regulatory & Macro Context

SHPC's plants operate under IFRIC-12 service concession accounting: the 30-year contractual concession period runs from commercial operation date, after which the built infrastructure reverts to NEA at no further consideration (Source: SHPC Annual Report FY2081/82, Notes 5.5–5.5.1 — Primary). A generation royalty (payable to the Government of Nepal) plus 0.05% of net profit as a Government Fee apply under the hydropower licensing framework (Source: SHPC Annual Report FY2081/82 — Primary).

Under the Income Tax Act 2058, Section 11(3)(Gha), hydropower generation is 100% tax-exempt for the first ten years of operation and taxed at 50% of the standard 25% rate for the following five years. The Mai plant (22 MW) has exhausted its ten-year holiday and is now in the five-year 50%-concession window (effective rate approximately 12.5%); Mai Cascade follows roughly a year later (Source: SHPC Annual Report FY2081/82, tax note — Primary). This is a locked-in, rising tax headwind for both plants into the FY2029–2031 period as the concession windows expire and the full 25% rate applies — a structural fact that compresses after-tax margins independent of operating performance.

Governance & Capital Allocation

Board and management. Khem Raj Lamichhane serves as Chairman, with six other directors including one independent director, Mahesh Ghimire; Grishma Ojha serves as General Manager. Total shareholders stood at 30,969 as of Ashadh end 2082 (Source: SHPC Annual Report FY2081/82, Note 4.19 — Primary). A promoter-versus-public shareholding split, and any individual director's personal shareholding, was not located in the extracted primary text of the annual report for this update and should be treated as not disclosed.

Related-party transactions. Key management personnel compensation (including the GM) totaled approximately NPR 5.15 million and directors' fees approximately NPR 0.86 million in FY2081/82 — modest relative to revenue. Related-party service and rent flows included Sanima Hydro & Engineering (NPR 6.7 million), Bavari Construction, an 8%-owned entity with common directors (NPR 3.1 million), and Sanima Bank deposit balances (NPR 2.3 million) (Source: SHPC Annual Report FY2081/82, Note 4.27 — Primary). These operating-service related-party flows are small relative to SHPC's revenue base; the larger related-party exposure is capital allocated into Sanima Group associate companies, discussed below.

Dividend record. The audited Statement of Changes in Equity shows a 10% bonus share distribution plus a small cash dividend paid during both FY2080/81 and FY2081/82 (NPR 16.3 million and NPR 17.9 million cash respectively) (Source: SHPC Annual Report FY2081/82, Statement of Changes in Equity — Primary). The proposed distribution for FY2081/82 results specifically was not located in the extracted text.

The associate/investment book. SHPC's capital allocation beyond its own plants runs through stakes in four Sanima Group hydropower companies:

Source: SHPC Annual Report FY2081/82, Note 4.10 (Investments in Associates) and Note 4.11 (Other Investments at FVTOCI); Q3 FY2082/83 disclosure for the Tamor reclassification — Primary. All associate shares are pledged to the respective projects' consortium lenders.

Over the two audited years, the equity-method carrying values of the two operational associates (Swet Ganga, Mathillo Mailun) remained below their original cost, even though their NEPSE-listed market values are substantially higher — a gap between accounting carrying value and market mark that matters for any valuation exercise built on the associate book. The major use of retained cash in FY2081/82 was a fresh equity injection of approximately NPR 393.4 million into Sanima Jum, which remains pre-commissioning (Source: SHPC Annual Report FY2081/82, Cash Flow Statement — Primary). Associate equity income, having been negative in both audited years (−NPR 55.7 million FY2080/81, −NPR 4.7 million FY2081/82), turned positive in FY2082/83, reaching +NPR 106.3 million over the first nine months as the operational associates matured (Source: SHPC quarterly disclosures Q1–Q3 FY2082/83 — Primary).

Key Risks

The concession is finite; the market's price does not obviously treat it that way. Both plants operate under 30-year concessions that revert to NEA at the end of the term — roughly 19 years of remaining life for Mai. A finite-life asset's cash-flow-supportable value is mechanically lower than the same cash flows valued as a perpetuity, and any valuation exercise that does not account for the reversion risks materially overstating the operating plants' worth.

The associate book's market value is itself a NEPSE hydro-sector mark. The listed-market valuations of Swet Ganga, Mathillo Mailun, and Sanima Middle Tamor in the table above reflect current NEPSE prices for comparable small hydro names. If broader sector sentiment for listed Nepali hydropower cools, those marks — and by extension SHPC's own perceived asset backing — would compress at the same time, independent of the underlying projects' operating performance.

Single-river concentration and a rising tax burden have coincided. Two force-majeure-grade events on the Mai Khola river inside roughly 24 months (Ashwin 2081 transmission-tower damage; Ashwin 2082 headworks flood, approximately 4.5 months of lost generation) point to a recurring hydrological exposure rather than a one-off. This coincides with Mai's tax holiday having ended and the plant now in its 50%-concession tax window, with the full 25% rate due by approximately 2029 — a combination of generation risk and margin compression that is already locked into the forward outlook regardless of future weather.

Valuation Context

At the NEPSE closing price of NPR 498.5 (2026-08-07 reference date), SHPC's market capitalization was approximately NPR 18.63 billion (derived: 37,379,937 shares outstanding × NPR 498.5) (Source: NEPSE market data; SHPC shares outstanding, Annual Report FY2081/82 — Primary/Derived). On FY2081/82 audited results, trailing P/E was approximately 57–58x (Company-basis EPS NPR 8.70) and price-to-book was approximately 2.88x on pre-reclassification NAVPS (NPR 172.97) or 3.74x on the post-Tamor-reclassification Q3 FY2082/83 NAVPS (NPR 133.39).

A defensible valuation of SHPC has to separate two very different assets: a finite-life, 29 MW concession whose cash flows are well-defined but time-limited, and a basket of minority, pledged, and partly illiquid stakes in other Nepali hydropower companies whose carrying values on SHPC's own books are below the stakes' NEPSE market prices. Because the operating plants revert to NEA at the end of their concession and cannot be valued on a perpetuity basis, and because the associate book's market value depends on sector-wide NEPSE sentiment for small hydro names rather than only on the underlying projects' cash flows, any single fair-value figure for SHPC is highly sensitive to the discount rate and sector-multiple assumptions used — materially more sensitive than for a going-concern business with an indefinite asset life. Readers should treat any fair-value estimate for SHPC as a function of those assumptions rather than a fixed target.

What We're Watching

1. Mai Khola monsoon performance (Ashwin–Kartik 2083 / September–November 2026). A clean monsoon season would support the view that the recent flood events were cyclical rather than a structural deterioration in the river's flood risk; a third event in three years would strengthen the case that single-river concentration is a persistent operating risk.
2. Debt amortization and deleveraging completion. The Mai project loan is scheduled to mature around Ashad 2083 (~July 2026) and the Mai Cascade loan around Chaitra 2083 (~April 2027); confirmation in the FY2082/83 annual report that borrowings have fallen toward zero would validate the deleveraging trend already visible in the FY2080/81–FY2081/82 data.
3. Sanima Jum commissioning and associate earnings durability. Whether the 56 MW Sanima Jum project reaches commercial operation on budget, and whether the recently positive associate equity income (+NPR 106.3 million over nine months of FY2082/83) persists through a full fiscal year, will determine whether the associate book's economic value is converging toward or diverging from its current NEPSE-based market marks.

References

1. SHPC Annual Report FY2081/82 — Sanima Mai Hydropower Limited, audited financial statements (Statement of Financial Position, Profit or Loss, Cash Flows, Changes in Equity, Notes 1.1, 4.10, 4.11, 4.19, 4.27, 5.5, 5.30, 5.34–5.37), S.A.R. Associates (auditor), accessible via company/SEBON filings. Primary.
2. SHPC Quarterly Financial Disclosures, Q1–Q3 FY2082/83 — SEBON Annexure-14 filings, unaudited, company self-reported. Primary.
3. Nepal Electricity Authority, Annual Report FY2081/82 — nea.org.np. Primary.
4. Electricity Regulatory Commission, Nepal — PPA tariff schedules, erc.gov.np. Primary.
5. NEPSE Market Data — nepalstock.com.np, share price reference 2026-08-07. Primary.
6. +16 Capital, Nepal Hydropower Industry Report — internal sector analysis citing primary NEA and ERC data. Secondary.

Last updated: August 9, 2026.