Nepal’s hydro stocks promise safe returns. But expiring licences, vanishing PPAs, and silent boards could leave investors holding worthless shares. Read more to learn how.

You’ve heard it. At a family gathering, from a banker, maybe from that one friend who suddenly became a stock market guru. If you’ve ever considered investing in Nepal, the advice comes swift and sure:

“Hydropower is the safest bet you can make.”

And why wouldn't you believe it? The logic seems bulletproof. Nepal is the land of rivers. The government is desperate for electricity. The projects are tangible; great big dams turning water into wealth. Best of all, they come with a golden ticket: a Power Purchase Agreement (PPA) with the Nepal Electricity Authority (NEA). Income is practically guaranteed, and the dividend history of some companies looks mighty tempting.

It’s sold as the perfect "buy-and-forget" investment. A bedrock for your portfolio.

But what if we told you this "safe haven" is sitting on a ticking time bomb?

Actually, two.

One is already close and the other is quietly waiting in the calendar.

Both have the power to blow a hole in your investment, especially if your plan is to just sit back and watch the dividends roll in for the next 20 years.

So, pull up a chair, and let's talk about what’s really going on behind the dam.

The Disappearing Guarantee: Why That NEA “Cheque” Might Not Be So Certain After All

Look, the whole sales pitch for hydro stocks is simple. You’ve heard it a million times. The Nepal Electricity Authority (NEA) always pays. The lights are always on. It’s a guaranteed business, stamped and approved by the government.

And for a long time, that was basically true.

The Golden Deal With a Hidden Catch

It was all thanks to two magic words in their contracts: ‘Take-or-Pay.’

Forget power grids for a second. Say you run a restaurant. Under a ‘take-or-pay’ deal, the NEA agrees to pay you for 100 plates of momo a day. The beautiful part? They pay you for all 100 plates even if they only have customers for 60. You literally get paid for momo that are never made or eaten.

You can see why the banks loved this. It's predictable cash flow. It’s how dams got built and how dividends got paid.

But there's a nasty bit of fine print in that 'golden' contract, a detail nobody likes to talk about. The price the NEA agrees to pay you for electricity? It’s fixed. For the entire 30-odd years. There is no adjustment for inflation.

The cost of replacing a turbine part isn't the same in 2025 as it was in 2005. Your employees will want raises. Everything gets more expensive. But your revenue per unit? It stays exactly the same. It's a slow, guaranteed margin squeeze, year after year.

The Day the Government Tried to Flip the Table

Then, in the 2082/83 budget, the government decided to try and flip the table.

They proposed a new rule for all future projects: ‘Take-and-Pay.’

Suddenly, the deal was off. The NEA would only pay for the momo people actually ate. If they needed 60, you got paid for 60. The guarantee; the very foundation of the industry's financial model, was about to disappear.

The industry had a collective heart attack.

The Independent Power Producers’ Association (IPPAN) started screaming from the rooftops, pointing out that this single change would kill 350 projects, freeze 17,000 MW of planned power, and vaporize Rs. 66 billion in investments.

The backlash was so huge that the government rolled it back real fast.

So the old rule stays, for now. Crisis averted. So why are we even talking about this?

Why is This a Big Deal?

Because the government showed its hand.

They want to get out of this deal. They know they can’t keep paying for massive amounts of wasted electricity, especially during the monsoon when the grid is overflowing. They’re looking at their own books, and they see a money pit.

So even if the company you’ve invested in has that golden contract today, you have to ask what happens when it expires in a few years. Do you honestly think the NEA will offer them the same deal again? What about all the new hydro companies trying to go public? Their entire business model is now built on a promise the government has already tried to break.

It just means the game has changed. You’re not betting on a government promise anymore. You’re betting on the people running the show. You’re betting they’re smart enough, and frankly, worried enough, to figure out a Plan B before it’s too late.

The Licence Cliff: When the River Still Flows But the Company Doesn’t Earn

Okay, forget the NEA for a second. The shaky promise of their cheque is one thing. This is worse.

You buy shares in a hydropower company. You think you own a piece of a dam.

You don't.

You own a rental agreement. And that agreement has an expiry date.

When you dig into the fine print, you find something called BOOT. It stands for Build, Own, Operate, and Transfer. That last word is the killer here. It means that after the company's licence is up (usually 35 years) they have to hand over the entire power plant to the government.

The dam, the land, the turbines. Everything.

And suddenly, the company you invested in is suddenly left with zero assets and zero income.

Let’s stop being theoretical. Look at Chilime (CHCL). Its licence runs out in 2104. This might seem like some far-off date in a sci-fi movie; but it's just over two decades away. Picture buying that stock in 2102. You might get a dividend cheque. Maybe two. And then, nothing. The company's only money-maker is gone. You’re left holding a piece of paper for a company that effectively no longer exists.

And this isn't some rare exception. It's the business model for most of them.

You’d think the market would price this in, that the stock price would slowly fade as the end gets closer. But this is Nepal. Don't count on it.

And the truly insane part is that SEBON has no rule forcing these companies to delist after they hand over their project. The stock could just keep trading. A zombie stock. Technically alive, but worthless.

So the next time someone tells you to “buy and hold hydro for 20 years,” you need to ask them a very simple question:

“Will the company even have a business in 20 years?”

The Ones in Charge Will Figure it Out, Right?

Okay, so the company’s main asset disappears in 20 years. That's a problem for 20 years from now, right? The people in charge will figure it out.

But who are the people in charge?

You probably assume it’s the original founders, the ones with the vision and skin in the game. It’s a bad assumption.

If you're not familiar, here’s how the game is really played in the hydro sector: The promoters, the ones who start the company, are only legally required to hold their shares for three years after the IPO.

Just three years.

After that, they cash out. They take their profits and go build the next hydro project to sell to the next batch of investors. It’s a fantastic business model for them.

So who are you left with? A board of directors.

If you've ever sat through one of their Annual General Meetings, you know exactly what I'm talking about. It’s all about the dividend for this year. Nobody is having a serious conversation about what the company is going to do in 2047. That’s a problem for some future board, some future CEO. It's not their headache.

The clock is ticking down on the company’s only asset, and the people who should be building a lifeboat have already abandoned ship.

So you, the investor, have to be the paranoid one. You have to dig through the annual reports yourself. Are the original promoters still major shareholders, or did they dump their stock and run years ago? Can you find the words "new project" or "reinvestment plan" anywhere in their last five years of meeting minutes? Is there any evidence of a Plan B?

If you can’t find a plan for the future, it's probably because there isn't one.

So, What Can You Do If Things Go South? (And Why It’s Not So Easy)

Let’s say you wake up one day and find out your hydropower company is a mess. The promoters are gone, the licence is winding down, there's no reinvestment plan, and the board hasn't even called an AGM in two years.

As a shareholder, an owner, you're not entirely powerless. The law actually gives you some powerful tools to fight back.

The Shareholder's Toolkit: What the Law Says You Can Do

On paper, under the Companies Act, 2063 and the Insolvency Act, 2063, you have real options to hold the management accountable.

So, you have options. But now for the dose of reality

Why It's a Long Shot

Each of these rights comes with a hurdle, a minimum shareholding requirement that is almost impossible for a small retail investor to meet.
Just look at the numbers. To sue the board on behalf of the company, you need to rally shareholders who own 5% of the paid-up capital of company, but if you want to proceed individually, you must hold at least 2.5% of the comapny's paid-up capital. To force that special meeting, you need 10%. And to go for that nuclear option of liquidation, you need 5%.
And us, with our 50 or 100 kitta? We're basically a drop in the ocean. Getting thousands of disconnected small investors organized to meet these thresholds is a logistical nightmare. So while the rights exist, they're designed for big institutional players, not for small-scale investors.

The Real Problem: The Watchdogs are Asleep

Okay, so fighting the company yourself is a long shot. This is where you'd expect the regulators (SEBON, NEPSE), to step in. After all, protecting investors is their job.

But this is where the system truly fails.

There is a massive regulatory void. There are no specific rules to protect you from a hydro company simply running out of road. There's no rule to stop promoters from cashing out and walking away with no succession plan. There is no rule to punish a board for ignoring reinvestment until it’s too late.

Worse, there is no rule that forces a hydro company to:

• Create a sinking fund to save money to return to investors.
• File a mandatory plan for what happens after its licence expires.
• Delist from the stock market after it hands over its only project.

Legally, a hydro company can operate for 35 years, hand its only asset to the government, and leave its shareholders with absolutely nothing. The system doesn’t just allow it to happen; it has no mechanism to prevent it. Nobody owes you a life jacket.

So What Does This All Mean for You?

It means you have to be the regulator. You have to be the watchdog. You have to stop looking at just the glossy dividend history and start asking the questions that matter before you invest.

How many years are left on the licence? Is the original promoter still a major shareholder? What exactly is the plan for when the government takes the keys? Has the board announced a single new project? What will they do when the income stops?

Because in this game, being early is everything. If you're late (even by a few years) you could be left holding a share certificate for a company that technically exists, but has no income, no project, and no plan.

Are There Any Lifelines? Or Does the Ship Just Sink?

Alright, enough doom and gloom. We’ve talked about the shaky NEA cheque, the ticking clock on the licences, and the empty driver's seat. It sounds hopeless.

So, is there any way out of this mess? Is there anything that could actually save public investors?

Yes. But the solutions are either stuck in bureaucratic mud or depend on companies having the foresight most of them seem to lack.

Lifeline 1: Ending of NEA’s Monopoly 

There’s one plan that gets talked about a lot: what if hydropower companies had another customer besides the NEA?

This is exactly what IPPAN (the Independent Power Producers’ Association) has been pushing for years. They want to create an Independent Power Trading Company. The logic is simple and sound: this new company would act as a buyer of last resort. It would purchase all the surplus electricity from private producers; especially during the monsoon, and export it to places like India or Bangladesh.

It’s the perfect Plan B. It would solve the NEA’s problem of paying for wasted power and give private companies a new, vital revenue stream.

Sounds great, right? So where is it?

The catch is, the trading licence is still stuck. Despite years of discussion and the growing urgency, the government hasn't cleared it. It's a fantastic solution on paper, but for investors whose companies are on a countdown, a plan sitting in a government file cabinet is no plan at all.

Lifeline 2: What About Companies Saving Themselves?

Okay, so we can't wait for the government. What about the companies themselves? Can't they just reinvest their profits and build a second project to avoid falling off the cliff?

A few smart ones are trying. A company like Butwal Power Company (BPCL) is a rare example of a team that looked ahead. They've acquired and invested in multiple projects. When one of their older plants reaches its expiry date, they will have other sources of income to keep the company alive.

But here’s the uncomfortable truth: BPCL is the exception, not the rule.

Most of the hydropower companies that went public between 2010 and 2020 are one-trick ponies. They have one dam, and one dam only. No second plant. No joint venture. No plan for life after their licence expires. They built a house on a cliff and have never once bothered to check how close they are to the edge.

Lifeline 3: What if We Knew What Happens at the End of the Story?

This brings us to the biggest, most obvious lifeline of all. The entire investment is based on a story that has a beginning and a middle, but the last chapter is just a blank page.

The law says that after 35 years, the project must be "transferred" to the government. But what does "transfer" actually mean?

• Does the government start running it themselves?
• Do they lease it back to the company for a fee?
• Do they pay the company for the asset they built?
• Or is the current interpretation correct: they just take the keys and say thank you?

Nobody knows. And the government isn't talking. For an investor, this uncertainty is terrifying. You're putting your money into a business without knowing how it's allowed to end.

When you look outside Nepal, you realize that this level of ambiguity is globally bizarre. The BOOT model is used everywhere, but other countries provide a clear rulebook for the final chapter.

You look at the United States. Their licences last 30-50 years, but the whole system is built around relicensing, not seizure.

Go north to Canada. They have an even simpler rule:  if the government wants your plant after 30 years, they can take it. But they have to give you 12 months' notice, and they have to pay you fair market value for it, plus a bonus. Simple and fair.

The rest of the world has figured this out, too.

• France grants long extensions, with some plants running for 75 years.
• Brazil offered 30-year one time renewals with the condition that the government-set electricity tariffs had to be accepted.

The point is, these countries balance public ownership with investor clarity. They have systems for renewal, for compensation, for orderly transitions. They give investors a roadmap.

Nepal gives us a law that says "transfer," and then a wall of silence.

What Actually Needs to Happen

We're not saying every company is doomed. We are saying that investors are being forced to gamble because the rules of the game are dangerously incomplete. Fixing this isn't rocket science. It's about demanding the basic clarity and investor protection that is standard practice in any modern economy.

Here’s how you fix it. Not with vague promises, but with specific, mandatory rules.

1. Force It onto Page One: The Unmissable Disclosure Rule

Yes, the licence expiry date is technically public information, but you’ll only find it if you’re willing to look for it, and that’s a ridiculous standard. The information needs to be where investors actually look. The fix is simple: you mandate a "Licence Expiry" box on the very first page of every IPO prospectus and annual report. It should state in big, bold letters: “This company’s main business, the [Project Name] plant, operates on a licence that expires in [X] years on [Date]. The government has not yet defined what will happen after this date.” No more hiding it in the footnotes. SEBON and NEPSE could make this a rule as soon as tomorrow.

2. Mandate a "Post-Licence Survival Plan"

Right now, a board's official plan for what happens when their only asset disappears can literally be "we'll figure it out later." That's not a plan; that's negligence. So you mandate it. Require every single-project hydro company, once its licence has less than 15 years left, to publish a formal "Post-Licence Survival Plan." It has to be part of their annual report, and it must detail their concrete strategy for either reinvesting in a new asset, diversifying their business, or conducting an orderly wind-down to return capital to shareholders. They need to show you they're thinking beyond the next dividend cheque.

3. Create a Mandatory Capital Repayment Fund

Talk is cheap. A real plan needs real money. The government needs to legislate a "Sinking Fund." It’s simple: once a project is within 20 years of expiry, the company must put a set percentage of its annual profit; say, 5 or 10 percent, into a protected trust. That money can only be used for two things: building or buying a new project, or being paid back to shareholders when the original licence ends. This forces them to either invest in the future or save for the day they have to give the money back. No more bleeding the company dry with dividends while the cliff gets closer.

4. End the Ambiguity: Define the "Transfer"

This is the big one. The government's silence on what "transfer" means is the biggest source of risk. They need to publish a clear, predictable rulebook. Will it be a re-leasing model, where the company pays a fee to keep operating the plant? Will it be a fair-value buy-out, where the government pays for the asset it's taking? Or will it be a competitive re-bidding process open to everyone? Frankly, the specific choice matters less than the act of choosing. Just tell everyone the rules of the game so people can invest with their eyes open.

5. Incentivize Survival Through Mergers & Acquisitions

Our market is flooded with dozens of small, fragile, single-project companies. We need fewer, stronger, more diversified ones that can actually weather a storm. The government should actively encourage them to merge. You could offer a capital gains tax break or other incentives for hydro companies that acquire other hydro assets. Reward the ones that are trying to build real, lasting businesses, not just one-off projects. This would create a healthier industry that isn't built on a house of cards.

We’re not asking for miracles here. We're talking about basic investor protection that should have been in place from day one.

Conclusion: The River Will Flow. But Will the Money?

The rivers aren't going anywhere. The dams will stand, and the turbines will spin. Hydropower is part of Nepal's story, and that's not going to change.

But the idea that you can just buy a piece of it, sit back, and get paid forever?

That was a story we told ourselves. And that story is ending.

The entire hydropower boom was built on two convenient assumptions that are now falling apart: the promise of a guaranteed cheque from the government, and the illusion that you were buying a permanent asset.

We now know the truth. The cheque is no longer guaranteed. And the asset was never owned; it was rented, and the lease is expiring.

Making it all so much worse is the human failure at the heart of it. The promoters who should have had a long-term vision cashed out years ago. The boards who should be planning for the future are often just keeping the seats warm. And the regulators who should be protecting you have left you completely on your own.

So no, this isn't an article telling you to panic-sell and run for the hills.

It’s an article telling you to wake up.

Stop listening to your cousin, the banker, or the market gurus repeating old, tired advice. From this moment on, you have to be the cynic in the room. You have to be the one asking the uncomfortable questions.

You check the licence expiry date before you even glance at the dividend history. You demand to know if there is a Plan B, a second project, anything beyond the single dam they're running into the ground. You read the AGM minutes, not because you want to, but because you have to assume no one else is.

The river will keep flowing. That’s a fact of nature.

But whether your investment survives? That’s no longer a safe bet. That's a fight. And right now, you’re in it by yourself.

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