Solu Hydropower Limited is about to issue its public shares. Before you consider investing, here’s a simple overview of what the company and the project are about.
What the company does
Solu Hydropower Limited is the developer and operator of the Lower Solu Hydroelectric Project in Solukhumbu, eastern Nepal.
The plant is a run-of-river project with an installed capacity of 82 megawatts. It is now connected to the national grid and began commercial generation in July 2025.
IPO basics
The Securities Board of Nepal (SEBON) has approved the company’s IPO.
The public issue includes 20,000,000 shares, each priced at Rs. 100, totaling Rs. 2 billion.
After the issuance, the public will hold 20%, and promoters will retain 80% ownership.
Nabil Investment Banking and Himalayan Capital are managing the issue.
Ownership and leadership
The promoter group includes leading business houses such as Triveni Group, Vishal Group, Rathi Group, Baidya Group, and other institutional investors.
The board is led by experienced professionals with decades of industry experience.
How the project earns
The company has a 30-year Power Purchase Agreement (PPA) with the Nepal Electricity Authority (NEA).
Under this agreement, NEA purchases power at:
Rs. 4.80 per kWh during the dry season
Rs. 8.40 per kWh during the wet season
with 3% annual escalation for the first nine years
History and financing
The company was originally established as a joint venture between Essel Infraprojects Ltd (India) and Clean Developers Pvt. Ltd (Nepal) under the name Essel Clean Solu Hydropower Pvt. Ltd.
In 2014, the project secured USD 142.5 million financing from domestic and international lenders.
Major international development finance institutions — FMO (Netherlands), DEG (Germany), and BIO (Belgium) — provided key funding support.
Challenges and recovery
The project suffered major setbacks due to penstock alignment failures and complex geological conditions.
To help the project recover, the foreign lenders provided extraordinary financial support, including:
a significant write-off of USD-denominated loans,
waiver of interest during construction from 2020 until COD, and
potential further conditional forgiveness on the remaining debt.
These steps reduced financial pressure and helped the project reach completion.
Project and performance overview
Installed Capacity: 82 MW
Estimated Project Cost: ~Rs. 16.3 billion
Debt–Equity Ratio: ~39:61
Credit Rating: IRN BB+ (Infomerics Nepal)
Paid-up Capital: Rs. 10 billion
Expected Generation: between 320–425 GWh annually, depending on river flow
Expected Annual Revenue: around Rs. 2.0–2.2 billion, based on NEA tariffs
Bottom line
Solu Hydropower’s IPO offers an opportunity to invest in a proven, operational hydropower project backed by reputed business groups and international lenders.
It has overcome major technical and financial challenges, entered commercial operation, and now generates consistent revenue.
However, like all hydropower projects, its performance depends on water flow, tariff stability, and long-term maintenance.
🔹 Key Rating Strengths (According to Infomerics Nepal)
Strong and Experienced Promoters & Management Team
The company is promoted by well-established business groups such as Triveni Group, Vishal Group, Goyal Group, Rathi Group, Baidya Group, and Jain Group.
The Board of Directors is chaired by Mr. Subhash Chandra Sanghai (over 45 years of experience) and includes Vishal Agrawal, Vijay Singh Baidya, Trilokachand Agrawal, and Aaditya Sanghai — all senior professionals with decades of business experience.
SHL benefits from financial flexibility and a diverse management team with a long history in industry and finance.
Low Offtake and Evacuation Risk
SHL has signed a 30-year Power Purchase Agreement (PPA) with the Nepal Electricity Authority (NEA) from its Commercial Operation Date (COD).
The tariff rate is fixed at Rs. 4.80 per kWh (dry season) and Rs. 8.40 per kWh (wet season) with a 3% escalation on base tariff five times after every 12 months from COD.
About 55% of total billing is denominated in USD at a fixed exchange rate of NPR 98.68 per USD for the first 10 years, helping SHL manage foreign currency loan repayments.
Power evacuation will be done through a 4.123 km long 132 kV transmission line to NEA’s Lamane substation — ensuring low evacuation bottleneck risk.
Strategic Penstock Redesign and Debt Restructuring
The project earlier suffered major financial losses due to unstable geological conditions that damaged the penstock alignment.
SHL undertook a complete redesign of the penstock, and through successful negotiations:
40% of the total USD-denominated debt was written off.
An additional 19.75% of the USD debt will be written off at loan maturity.
Interest During Construction (IDC) for both senior and subordinated loans was waived from January 2020 until COD.
These measures helped the project recover from financial stress and progress to ~89% completion by mid-January 2024, with expected completion by September 2025.
Project Cost Secured and Adequate Funding Structure
The total estimated project cost is NPR 15.81 billion (around NPR 193 million per MW).
The financing mix is Debt : Equity = 37 : 63.
Promoters have already injected 80% of the equity, with the remaining 20% (Rs. 2 billion) to be raised through an IPO at par.
The company has loan agreements with both local and international lenders since 2014.
Improving Power Demand and Government Support
The rating also factors in increasing national power demand and ongoing Government of Nepal (GoN) support for the power sector, which benefits projects like SHL.
🔻 Key Rating Weaknesses (According to Infomerics Nepal)
Execution and Stabilization Risks
The project has faced major cost and time overruns due to the unstable penstock alignment and redesign.
Completion is now expected by September 2025, compared to the original RCOD of February 14, 2022.
Any further delay could cause:
Loss of one tariff escalation, as the number of escalations depends on the actual COD.
Reduction in project life, since the generation license expires in March 2050.
Timely completion without further cost increase and license extension will be key monitoring factors.
Hydrology Risk
The project is a run-of-river (ROR) type, meaning generation depends directly on river flow.
The Solu River has a catchment area of 411 km² and a design discharge of 19.85 m³/s at 40% probability of exceedance.
Insufficient rainfall or dry periods could reduce generation and revenue, and the absence of a deemed generation clause in the PPA means SHL won’t be compensated during low-flow periods.
Exposure to Natural Calamities
Being located in the mountainous Solukhumbu region, the project is prone to landslides, floods, and earthquakes.
Such events could cause construction delays, damage to infrastructure, or temporary shutdowns, affecting financial performance.
Regulatory Delays in IPO and Financing Pressure
Delay in receiving SEBON approval or IPO subscription could impact liquidity and increase interest during construction (IDC).
The company has already relied on short-term local borrowing to manage cash flow.
Disclaimer
This article is refined with the help of AI and prepared for informational purposes only.
All financial figures, generation estimates, and restructuring details are based on publicly available sources, company filings, and rating reports as of November 2025.
Prospective investors should carefully review the official IPO prospectus filed with SEBON and the company’s latest credit rating report before making any investment decision.
The author and publisher do not provide investment advice or any assurance of future returns.