Everyone wants a piece of Nepal’s hydropower boom. But behind those Rs. 100 shares lies a rigged system of inflated contracts, proxy boards, and quiet exits. This isn't just an IPO, it's a blueprint for legalized looting.

Read at your own risk. Not for the IPO lovers proudly gambling Rs. 1,000 for 10 shares; because the real gamble might be our entire financial system. And like it or not, we’re all contributing to this loot.

It always starts with a river.

A pristine cascade, hidden in a remote district, soon marked in someone’s name.

Before a single dam is built or a turbine installed, the first signatures are inked, and the game begins.

You know the rest.

A new hydropower IPO drops and suddenly every family group chat turns into a financial think tank.

"Applying?"

"How many kitta?"

"Any inside info?"

Even your local momo pasal guy is dishing out stock tips.

It feels like a gold rush, but with a patriotic glow. Because this isn’t just any IPO. It’s hydro. It’s clean energy. It’s the dream of lighting up Nepal and selling surplus to India. A dream we’ve heard so many times, it’s become our economic bedtime story.

So when you're allotted 10 shares and the price doubles on listing day, it feels like more than just a win, it feels righteous.

But here’s the part no one tells you:

That IPO? It’s often the final act of a multi-stage heist.

A theatrical exit for insiders who already made their money long before your form was submitted.

It’s not investing. It’s underwriting someone else’s escape.

The shares? They're just receipts.

Proof that, once again, the public is left holding the bag.

And don’t just take our word for it.

Even those inside the system are ringing the alarm.

"Hydros and hotels issuing IPOs risk running away like cooperatives," warned Honorable MP Dr. Swarnim Wagle.

But the real story? It goes deeper. And it’s only getting started. 

How We Got Here: The Crisis That Turned Into a Business Model

If you lived in Nepal a decade ago, you remember the drill. You didn’t check the time, you checked the load-shedding schedule. No light? Fine. Charge your phone at the office. Fridge not working? Cook only what you’ll eat today. Everything ran on backup; diesel generators, inverters, and a whole lot of patience.

Then came 2016.

The government rolled out an urgent action plan to fix the power mess. At the heart of it was one big promise: if you generate electricity, NEA will buy it. Guaranteed. Whether it needs it or not. This “take or pay” model was meant to fast-track hydropower projects and end the blackout era for good. And even converted from “take and pay” PPAs to “take or pay”. 

But what is “Take or Pay” and “Take and Pay” in Hydropower Agreements?

When a hydropower company signs a Power Purchase Agreement (PPA) with the Nepal Electricity Authority (NEA), the agreement is essentially a promise:

“You generate electricity, and we’ll pay you.”

But how this promise is structured changes everything. PPAs can be based on two models:

1. Take or Pay (The Current Model in Nepal)

   This is the model most hydropower companies in Nepal operate under. NEA agrees to pay for all the electricity the company produces, even if the NEA doesn’t use it. So even if there’s no demand, the hydro company still gets paid in full.

2. Take and Pay (Proposed in the Budget For FY 2082/83)

   This is what the government proposed in this year’s budget, and then rolled back after intense lobbying.

   NEA would only pay for the electricity it actually uses. This means if your hydropower plant produces more than NEA needs at that time, you won’t get paid for the excess.

And the “take or pay” worked, kind of.

The crisis eased. Power came back. But so did profit hunters! Suddenly, hydropower was less about electricity and more about paperwork. A survey licence, generation license, and a PPA; that combo was gold. You didn’t need to build a plant. 

Just get the approvals, inflate the numbers, pull in investors, and maybe, if you played it right, exit through an IPO.

The lights came on. But no one thought to rewrite the rules.

So while we moved past the energy crisis, we seem to have quietly fuelled a new business model, maybe a ponzi scheme. One where electricity generation is almost secondary. The real game seems to be to flip the project. Pass the cost. Go public. And let the public buy in when all the real money’s already been made.

The River Grab: How Hydro Project Heist Starts

Let’s rewind to where the hydropower story actually begins. And no, it doesn’t start with flashy IPOs or construction photos. It starts with a few sheets of paper. Because in Nepal, the real game always begins with licenses. Ever heard the term “झोलामा खोला?” (in English: “river in the bag”) in public discussions? Yes, that’s exactly what we are talking about. It’s a widely used metaphor in Nepal’s political and hydroelectric sectors. It criticizes the malpractice where influential individuals or companies obtain licenses for hydropower or natural resource projects, particularly river-based ones, merely to hoard or trade them, rather than actually developing the project or investing adequately. And here is how it all begins. 

Heist Number 1: Survey License

If you want to build a hydropower project above 1,000 kilowatts, you must get your hand on a Survey License first. This license lets you study a specific stretch of river for up to five years. The goal with this is to assess whether building a hydro project there is even possible. Think of feasibility studies, environmental checks, technical designs, basically all the groundwork.

But most companies that apply for a license aren’t even interested in electricity generation. They don’t care about meeting the 38,000 MW energy production target. What they really want is the license itself. Because once you have it, especially on a promising river segment, you’re holding something valuable. Something finite. So, you wait. You do just enough work to keep it active. And then you sell it. Sometimes for 5x or even 10x what you put in. The river doesn’t change. The site isn’t developed. But the paper itself is worth gold.

Heist Number 2: Generation License 

Once your surveys are done and you can prove the project is viable, you get the Generation License. This is where things get even juicier. This license allows you to build the project and operate it for 35 years. However, pursuant to section 5(2) of  Electricity Act, maximum permissible term can extend up to 50 years. With this in hand, your project now looks more real, even if you haven’t laid a single brick

And just like the survey license, this one too can be flipped. A generation license, especially one attached to a good site, makes your project look incredibly promising on paper. And buyers, local investors, foreign investors, everyone is willing to pay a premium for a ready-to-go package like that. Again, no concrete, no construction, just another layer of paperwork being sold for profit. 

Heist Number 3: Power Purchase Agreement (PPA)

This is where things get really interesting.

Once you have the generation license, there’s one more document that takes your project from “maybe” to “money machine.” It’s called the Power Purchase Agreement, or PPA.

This agreement means Nepal Electricity Authority (NEA) has agreed to buy all the electricity your hydropower project will produce. Every single unit, no matter what season it is, no matter what the demand is. This is basically the “take or pay” model. And as the only offtaker of electricity in Nepal, NEA has to purchase whatever is produced. 

This piece of paper removes all the risk from the project. You no longer have to worry about finding a buyer for your electricity. NEA is locked in. The moment that agreement is signed, your project becomes extremely attractive to banks and investors.

Think about it: You’ve got the licenses, you’ve got a guaranteed buyer, and all you need now is money to build. Banks are happy to lend because the revenue is basically guaranteed. Investors are happy to join in because the risk is low and the returns look secure.

Again, coming back to the heist, some promoters don’t even want to build the plant, they just want to resell the project.

With all licenses handled, a guaranteed buyer in hand, the project itself becomes a hot commodity. You can then sell the whole company to someone else.

All of this before the construction even begins. Let’s all think about that for a second. 

You don’t even need to lay down a single brick to make money. You’ve created value just by collecting the right approvals. The project is now “bankable,” not because it's producing power, but because the paperwork says it will someday.

Then comes the next heist: the construction.

Heist Number 4: The Financial Closure

You’ve got your generation license. You’ve got your PPA. Now all you need is money to build. But don’t worry, you’re not spending your own.

Because the moment NEA agrees to buy your electricity under the take or pay model, banks are ready to open their wallets. They see guaranteed income and happily offer loans to cover most of the project cost, often up to 80%.

This is what’s called financial closure: when your project officially secures funding. And just like that, your hydro company is full of borrowed money, backed by public guarantees.

Now construction can begin, and so can the next chapter of the playbook: how to turn those loans into personal profit before the plant even switches on.

Heist Number 5: Construction Game

Now that the paperwork's in place and the banks are lining up to hand over loans, it’s time for actual construction to begin. On the surface, everything looks legit. Excavators move. Roads are built. A ribbon-cutting ceremony or two makes it to the local news. Drone footage is proudly shared on Facebook.

But behind the scenes, the real hustle begins.

The main trick is to inflate the construction cost. On paper, the company will report spending a fortune on this; say, around Rs. 20 crore per megawatt. It sounds official. It sounds expensive.

But the real cost is often less than half of that. Maybe Rs. 10 or 12 crore.

So where does the other half; that Rs. 8-10 crore per megawatt vanish?

Well, it doesn't vanish. It gets rerouted.

Legally, major contracts have to be awarded through an open bidding process. And yes, on paper, they follow the rules. Tenders are published in newspapers. Bids are collected. A winner is chosen. It all looks clean, professional, and above-board.

But in reality, it's a carefully staged play. The companies "competing" for the contract to build that access road or conduct that survey? They often belong to the promoter’s close connections, or a shell company they control. The bidding is just for show. The winner was decided long ago over a cup of tea.

So, the promoter’s company pays an inflated invoice to their “tight-knit” construction firm. The money leaves the project's bank account (which is full of that big bank loan) and lands right back in the promoter's extended circle.

Think about that. By the time you’re lining up to apply for the IPO, thinking you’re getting in on the ground floor, the promoters have already pulled their initial investment out. And then some.

The promoters have already paid themselves back through inflated contracts. Their initial risk is gone and now comes the final, most profitable phase of their plan: the exit.

The Final Heist: IPO 

Let’s say you’re a promoter of a hydropower project. You’ve got the licenses, the PPA, the bank loans, and the construction underway. You’ve already recovered most of your investment, maybe even made a profit through inflated construction contracts.

Now, it’s time for the final move: the IPO.

You offer shares to the public at Rs. 100 each. People rush to apply, thinking they’re investing in Nepal’s clean energy future. The IPO is oversubscribed, the shares get listed, and within months the market price jumps to Rs. 300, maybe even Rs. 400.

And you? You’re sitting on a mountain of shares that have tripled in value.

But there's a minor inconvenience here. You can’t sell them yet.(we’ll talk about that shortly)

Now let’s flip the script and look at this from the investor’s perspective.

By the time the IPO hits the market, the real money has already been made. Not by the company. By the promoters.

The survey license that originally cost Rs. 3 crore was sold to the company at Rs. 7 or 8 crore.
The generation license, acquired for Rs. 15 crore was billed at Rs. 20 crore or more. Construction contracts were  awarded to close connections. What should have cost Rs. 10 crore is billed at Rs. 20 crore. And the surplus? Well, it gets quietly siphoned off.

All this before a single turbine turns, before a single bulb lights up, before a single rupee of revenue is earned.

But these inflated costs are now baked into the company’s books.  They shape the numbers you see. They inflate the asset base. They pad the project cost. They help justify the IPO price.

So when you buy that Rs. 100 share, you’re not investing in future cash flows. You’re buying into a bloated structure built on markup and margin; value that may never materialize.

That share you’re left holding, might not even be worth a rupee.

But it feels safe. After all, the company has a power purchase agreement. NEA will buy the electricity whether it needs it or not. Your investment seems protected.

But that safety net; the “take or pay” model, is not permanent.

Eventually, Nepal will move to a “take and pay” regime. In that world, NEA only pays if it actually uses the power. No guaranteed payments. No certainty of revenue.

And when that day comes, what exactly are you left holding?
What kind of asset did you really buy?

Now back to what happens after the IPO hits the market, and how promoters turn this IPO to open another shop for personal heist.

The Bigger Heist Post IPO

Well, the promoters cannot sell their shares immediately after IPO, thanks to the following regulations: 

1. The 3-Year Lock-In

By law (Rule 38(1) of the Securities Regulation), promoter shares are locked for three years. That means you can’t sell your shares right after the IPO.

So what do you do?

You wait.

Three years is just the right amount of time. By then, the project is done, the company is generating electricity, and the income is flowing in. On paper, everything looks perfect. Investors are happy. The share price is high. And now, your lock-in period is over.

And there’s another one, Rule 38(1)(a), which says:

“The Director, Chief Executive, Auditor, Company Secretary or the person directly involved in management... shall not buy or sell... the securities of the concerned institution... while in such a position or for one year after retirement.”

Sounds pretty strict, right? But in practice, it’s more like a suggestion. Promoters resign from their official positions, wait for the clock to run out, and start selling their shares anyway.

So, the initial 3 to 5 years IPO seems to just wait and watch for the promoters but in the background, they are already moving pieces for an even bigger heist. 

2. The Conversion Loophole

Here’s where it gets interesting. In banks, promoter shares stay promoter shares forever. Even after three years, you can’t quietly sell them without disclosing it.

But in hydropower, there’s no such restriction.

After the lock-in, the promoter shares get converted into ordinary shares, the same kind regular people like you and me buy in an IPO. Once converted, the promoters can sell them to anyone, anytime, without raising red flags.

And that’s exactly what many promoters do.

The shares look like they’re coming from the public, but they’re not. They’re the promoters cashing out. Legally, but silently.

And since the share price has already tripled, they walk away with massive profits.

A Real-World Example: Himalayan Hydropower

Take Himalayan Hydropower Limited. Their three-year lock-in ended on Friday, July 11. And guess what? On Sunday, July 13, the stock saw its highest-ever trading volume since being listed on NEPSE.

Coincidence?

You decide.

Because that’s exactly how this game works: wait, convert, sell, and disappear quietly.

And just like that, the people who were supposed to steer the company toward growth? They’ve left the building. Bank accounts full, job done, on to the next one probably.

Do they care if the company struggles now?

But Wait...

Now, you might be thinking: so what? Isn’t it fair for promoters to sell their shares? Don’t investors want to sell when the price is high?

Sure. In theory, there’s nothing wrong with it.

But the real question is: who’s left running the company after they leave?

Because that’s where things get even murkier.

Let’s talk about that next. 

Right Share and New Loan For Investing in New Project

By the time a promoter is preparing to exit, Company A looks like a textbook success. The project is up and running. Electricity is flowing. Revenue is stable, thanks to the “take or pay” model. IPO funds have helped pay down the loans. Everything looks clean.

But before they leave, the promoter initiates one last move, a right share issuance.

Not to improve the current project, but to fund their next venture.

They propose an equity investment in a new hydropower company, Company B, which, surprise, they’ve also founded. Now, by law, this should be a problem. Section 97(6) of the Companies Act clearly states that:

“Any director who has any personal concern or interest in any matter to be discussed in a meeting of the board of directors shall not be entitled to take part in such discussion and vote on the matter.”

But here’s the play: the promoter floats the idea while still on the board, then resigns before the official decision is made. Their proxies, handpicked and obedient, stay back to give the final approval.

And just like that, public money raised through right shares is invested into Company B. That investment makes Company B “bankable,” which unlocks more loans from banks. Together, right share funds and new bank loans (both public money) finance the new project. The promoter’s personal contribution? Zero.

This time, when construction costs are inflated, it’s not to recover their investment. it’s pure profit.

The cycle begins again.

Who Runs The Company After Promoters Leave?

You might assume that once a promoter resigns from the board and sells their shares, they’re done. Out of the picture. New leadership takes over, right?

Well, not quite.

Right before the lock-in ends, they resign from the board and hand the steering wheel to someone else. A nephew, a long-time employee, anyone who would quietly follow their orders. 

And legally, that’s allowed.

Let’s look at the Companies Act, 2063 (Section 89), which outlines who can’t be on a public company’s Board:

• Below 21 years
• Mentally unsound
• Convicted of corruption or theft
• Insolvent
• Already a major player in a rival firm
• Or someone who hasn’t paid for their shares

Did you notice what’s missing? The Company Act doesn’t ask if you know finance, understand electricity, or can read a balance sheet. To become a director of a multi-crore hydro company, all you need is to be over 21 and not a criminal. That’s it.

So the promoter hops on the backseat. Their proxy takes the wheel. And the show goes on.

So what you end up with is crores worth of public money being managed by people who may not understand the project’s technical, financial, or operational risks. And if something goes wrong, say, a landslide hits transmission lines, or NEA delays payments, the board has neither the independence nor the expertise to navigate the storm.

The board becomes a rubber stamp. They’re just there to sign what they’re told to sign, and approve what they’re told to approve.

What follows is a spree of new hydropower companies from the same group of promoters with equity investments from the companies they’ve technically exited.

Rinse and Repeat: How IPO Money Funds the Next Exit

This is a well planned playbook.

Company A raises public money. Once it’s operational and “safe,” it issues right shares. That money is used to invest in Company B. Company B uses that equity investment to secure more bank loans. All public money.

Then Company B follows the same path: approvals, loans, inflated contracts, IPO, cash out. Company C is next. Then D. And on it goes.

They never start multiple projects under the same company. Because that would ruin the clean, simple exit that an IPO allows. Each company is built like a one-time-use product. Get approvals, raise money, cash out, move on.  It’s a cycle of rinse and repeat. Every new hydropower project is wrapped in a fresh company, like disposable packaging.

The money is public. The risks are public. The exits are private. Actual gains are private

Déjà Vu: The Cooperative Crisis, Repackaged

If all this feels eerily familiar, that’s because it is.

We’ve lived through this kind of collapse before.

Remember the cooperative crisis?
Thousands of Nepali families lost their life savings; money meant for school fees, medical bills, retirement, because a handful of insiders played fast and loose with public deposits. There were rules. But no one enforced them. No one stepped in until it was too late.

It was a national tragedy. And we still haven’t recovered.

Now look at the hydropower IPO market.

Different sector. Different branding. But the same dangerous formula:

• Public money
• Private control
• Regulators who look the other way

In cooperatives, people were promised high returns. In hydropower, we’re sold a dream of “nation-building.” But underneath both is the same flawed structure: insiders take the winnings, and the public is left with the risk.

And if any of these hydro companies begin to wobble, it won’t be the promoters who take the hit. They’ve already cashed out. They’ve moved on.

It’s us who’ll be left behind the IPO investors, mutual fund holders, insurance policyholders., pension fund contributors.

All of us whose savings have been funneled into these companies, directly or indirectly.

And if the collapse comes, the papers we hold; shares, statements, policies, may end up just as worthless as those cooperative passbooks.

This is exactly what Dr. Swarnim Wagle is warning us about.

SEBON’s Role: Regulator or Doorman?

This brings us to the most frustrating question of all: How is this allowed to happen? Isn’t there supposed to be a referee?

That job belongs to SEBON, the Securities Board of Nepal. They are meant to be our guard dog, the ones who stand at the gate of the capital market. They're supposed to look at every company that wants our money and ask the tough questions: Are your numbers real? Is your project viable? Are you here to build a business or just to cash out and run?

When you fill out that IPO form, you do it with the faith that SEBON has already done this homework for you.

But what happens when the guard dog is accused of asking for a treat just to open the gate?

Recent, deeply disturbing allegations have surfaced against SEBON's own leadership, accusing them of demanding huge commissions (through back channels, of course) to greenlight IPOs. We're talking about millions, even crores of rupees, allegedly changing hands just to get an official stamp of approval.

If even a part of this is true, it means the entire system is compromised. It means getting an IPO approved may have less to do with the quality of your project and more to do with who you know and how much you're willing to pay. 

And that’s the final, terrifying piece of the puzzle. The banks lend because the government guarantees the revenue. The promoters play their games because the rules let them. And now, if the one body meant to protect us is itself compromised, there’s nobody left.

The system has no brakes.

So when we, the public, are asked to invest in the next "nation-building" project, we have to ask ourselves: If the referee is playing for the other team, who exactly is protecting our money?

When the watchdog starts wagging its tail for the looter, the public is the one that gets bitten!

"Okay, But Why Should I Care?”

At this point, you might be thinking, "This is fascinating, but I don’t invest in IPOs. This isn't my problem."

Oh, but it is. This isn't just a story for stock market nerds. This is a story about all of us.

Think about it.

Even if you’ve never bought a single share, your money is in this game. It’s in the bank deposits that are being loaned out to fund these projects. It’s in your pension fund, your insurance policy, or the mutual fund your parents invested in, which almost certainly holds hydropower stocks. You are connected to this system whether you like it or not.

If this house of cards comes tumbling down, it won’t just be a few shareholders who lose their money. It will send shockwaves through our entire financial system; the banks we trust, the insurance we rely on, the retirement funds we’re counting on.

But beyond the money, there's something much bigger at stake here: our national hope.

For generations, hydropower has been the one story we all believed in. It was our path to energy independence, to industrial growth, to becoming a modern, prosperous nation. It was the one thing we thought we were finally getting right.

If this, too, turns out to be just another scam, another story of insiders enriching themselves at everyone else's expense, then what’s left to believe in?

We won't just lose money. We’ll lose something far more precious: faith. Faith in our institutions, faith in our leaders, and faith in the very idea of "nation-building." And that’s a loss we can’t afford.

So, How Do We Fix This Mess?

It's easy to feel hopeless after reading all this. But pointing out the problems isn't enough. If hydropower is truly going to be our national engine, and not our next national scandal, it needs a serious tune-up. 

Let’s make one thing clear though: the hydropower crisis isn’t going to explode next week. Or even next year. Like the cooperative crisis, which quietly built up from the 1990s before it finally burst, this one will unfold slowly. Quietly. Over the next decade or so.

And that’s exactly why we need to act now.

Because if we don’t, we’re setting ourselves up for another national tragedy. One where the warning signs were all there, and we still looked away.

But the good news is, this isn’t some complex economic riddle. The solutions are actually pretty straightforward. What we need is political will, and a public that refuses to stay in the dark.

The good news is, the fixes aren't complicated. They just require political will.

Here’s a simple, common-sense starting point:

1. Regulate Hydropower Like Banks. These companies are playing with billions in public money, just like banks do. So let's make them follow the same rules. No more installing your driver on the board of directors. Board members should have to pass a real "fit and proper" test to prove they know what they're doing.
2. Kill the "Magic" Contracts. The whole game starts with inflated costs. The solution? Mandate independent, third-party valuations for all major pre-construction work. No more awarding a Rs. 15 crore road-building contract to your cousin when it really costs Rs. 7 crore. Shine a light on the numbers, and the magic trick disappears.
3. End the 3-Year Getaway. The loophole allowing promoters to convert and sell all their shares after three years is a disaster waiting to happen. In banking, promoter shares stay promoter shares and you can’t just cash out quietly. So why should hydropower be any different? These are national infrastructure projects, not trading cards. If you're going to lead a project that runs for 35 years, you shouldn't vanish after three. Promoters should be required to maintain a minimum promoter-to-public shareholding ratio for the entire life of the project, along with board representation.

These aren't radical ideas. They're basic principles of good governance, designed to protect the public's money and the nation's future.

The Dream Is Real. The System Is Broken.

Nepal’s hydropower potential isn't a lie. The roaring rivers, the steep gorges, the sheer, untapped power, that is all breathtakingly real. We have what other countries can only dream of. A clean, renewable, and endless source of energy.

The dream is real. But the system we’ve built to achieve it is broken.

It's a system that has been twisted to benefit a few insiders at the expense of everyone else. A system where:

• Promoters get their money out before the public even puts theirs in.
• "Accountability" means installing a puppet on the board.
• And the national vision of "clean energy" is used as a cover for a dirty game.

Does this look like nation building? Of course not. It’s a mirage. It looks like a shining lake of prosperity from a distance, but when you get closer, you realize it’s just cracked earth and distorted air.

If we let this continue, the consequences will be devastating. We’re looking at another financial crisis that wipes out savings and shatters trust in our banks. And if that happens, we will watch the very idea of "progress" in Nepal turn into a punchline. The next time a politician stands up and talks about building our future, the silence from the crowd will be deafening. Because if hydropower, that we all take so much pride in, can be so easily hijacked, then what's left to trust?

Our future needs to be built on solid ground. And it’s high time we demand a foundation of transparency and accountability that we can all stand on.

If we let this continue, it won’t just bankrupt our banks.

It’ll bankrupt our belief that progress is even possible.

Once trust collapses, no IPO can rebuild it.

No right share can redeem it.

And no hydro turbine, no matter how grand, can turn in a system rigged from the start.

Additional Resources:

• Nepal Rastra Bank Unveils Monetary Policy For FY 2082/83!
• Nepal Budget 2082/83: How IRD Nepal and Parliament Shape the Process
• Shark Tank Nepal: Reality Behind the Startup Reality Show
• Is Nepal Electricity Authority Risking Rs. 66B in Hydropower?