Hydro investors to reap profits

HIMALAYAN NEWS SERVICE

KATHMANDU: Investors of hydropower stocks can expect handsome dividends as the profit of the listed hydropower companies has recorded steady growth.

Three among the four listed hydropower companies at Nepal Stock Exchange have registered

a 22.18 per cent growth in the third quarter in comparison to the second quarter, according

to the unaudited financial results of Arun Valley Hydropower Company, Butwal Power Company and Chilime Hydropower Company.

National Hydropower Company –– the fourth listed hydro company at Nepse –– last published its quarterly financials till the third quarter of the last fiscal year.

Arun Valley Hydropower Company, Butwal Power Company and Chilime Hydropower Company earned a total of Rs 994.45 million as net profit this fiscal year while in the previous quarter their profit stood at Rs 813.9 million.

“Hydropower stocks have been registering good growth and

the future is also good because the hydro companies earn assured income from selling electricity,” said share analyst and managing director of the Securities Research Center and Services Rabindra Bhattarai.

Hydropower subgroup at Nepse has appreciated by 34.5

per cent in the last one month along with the capital market’s rally since mid-April.

Arun Valley Hydropower Company, Butwal Power Company and Chilime Hydropower Company had distributed attractive dividends to its investors from last fiscal year’s profit.

Chilime Hydropower Company was one of the highest dividend payers among the listed companies at Nepse with a 30 per cent cash dividend and 40 per cent stock dividend.

Likewise, Butwal Power Company and Arun Valley Hydropower Company distributed 25 per cent and 15 per cent cash dividend, respectively.

Dividends are one of the important features that a non-speculative investor regards before purchasing a stock. Moreover, empirical studies also show that companies that pay dividends are usually historically stable.

“Hydro companies can turn bad in the event of a natural disaster that completely destroys their infrastructure or in the case of bad corporate governance,” pointed out Bhattarai. National Hydropower is such an example.

The company that was earning well enough at one time has become a cause of concern for many shareholders.

The company has not even conducted the annual general meeting (AGM) of the last two fiscal years. Shareholders had to exert pressure through the regulator just to make the company announce its annual general meeting. After much discussions with the shareholders, National Hydropower Company is going

to hold its annual general meeting on June 7.

Despite the stable performance of the hydro companies, their share in total market capitalisation of Nepse is small.

That is why the good performance of hydropower companies is limited only to maintaining their prices and is not reflected in the overall market.

The market capitalisation of hydropower companies at Nepse only stands at Rs 18.05 billion, making only 4.8 per cent of the total market capitalisation.