Reading a hydropower company

Hydropower is NEPSE's other large sector and it works nothing like a bank. A project takes years to build, costs a great deal up front, and then produces revenue for decades.

What to look at

• Is it generating yet? A company still building has costs and no revenue. Its accounts look bad and that may be normal.
• Installed capacity and actual generation. Capacity is the maximum; generation is what the river delivered.
• Seasonality. Flow varies enormously between wet and dry season, so quarters are not comparable to each other — compare a quarter to the same quarter last year.
• The power purchase agreement. Who buys the electricity, at what price, for how long. This is the revenue line.
• Debt. Construction is debt-funded. Interest cost against generating capacity is the key ratio.