Kathmandu: Upper Tamakoshi Hydropower Limited, which remained in losses for four consecutive years after completing construction and beginning electricity generation, is now on track to return to profitability in the current fiscal year. Improvements in power plant operations, better water availability in the Tamakoshi River, a reduction in hydrology penalties, and the successful lowering of interest rates on long-term loans have improved the company’s financial position.
According to Purna Gopal Ranjit, Chief Executive Officer of Upper Tamakoshi, the company is now in a position to earn a profit of around Rs 1 billion in the current fiscal year FY 2025/26.
Ranjit said that after taking over as Acting CEO in January/February 2026, the company carried out necessary technical upgrades at the power plant and operated it at higher efficiency. The impact of these improvements has been reflected in the company’s revenue, he said.
The company’s latest financial statements also show an improvement in operating income. By the third quarter of the current fiscal year, the company had generated more than Rs 711.8 million in revenue from electricity sales. Such revenue stood at around Rs 607.6 million in the previous quarter, compared to around Rs 427.1 million during the corresponding period of the previous fiscal year.
However, despite the increase in electricity sales revenue, the company’s large debt burden remains a major challenge. According to the financial statements up to mid-April 2026, the company’s financial expenses stood at more than Rs 405.2 million. As a result, a significant portion of its operating income continues to go toward interest and other financial expenses.
No hydrology penalty this year brings major relief
The fact that Upper Tamakoshi has not had to pay a hydrology penalty this year has also played an important role in its financial improvement.
In previous years, the company had been paying hydrology penalties to its parent company, Nepal Electricity Authority (NEA), when it failed to generate electricity according to the amount of water available in the Tamakoshi River. In FY 2021/22, the company paid a hydrology penalty of Rs 3.3 million.
The burden increased significantly thereafter. The company paid Rs 530 million in hydrology penalties in FY 2022/23, Rs 250 million in FY 2023/24, and Rs 220 million in FY 2024/25.
Thus, the company spent around Rs 1 billion on hydrology penalties over four years alone. However, it has not had to pay any such penalty in the current FY 2025/26.
According to Ranjit, one reason for this is the more efficient operation of the power plant, while another is the improved availability of water in the Tamakoshi River. He said that improvements in plant operations and favorable water flows have enabled the company to make more effective use of the available water for electricity generation.
This change represents more than just a routine improvement for Upper Tamakoshi. In previous years, while the company was trying to increase revenue, a substantial amount was simultaneously being spent on hydrology penalties. The elimination of this expense this year is therefore directly contributing to improved profitability.
Interest rate cut to save Rs 750 million annually
Another major achievement in Upper Tamakoshi’s financial improvement has been the reduction in the interest rate on its long-term loans.
According to Acting CEO Ranjit, the company has successfully reduced the interest rate on its long-term debt from 8.25 percent to 6.75 percent. He said the reduced interest rate will remain fixed for at least three years.
As a result, the company is expected to save around Rs 750 million annually in interest expenses. Over three years, the saving in financial costs is expected to reach approximately Rs 2.25 billion, Ranjit said.
For Upper Tamakoshi, which was built with a substantial debt burden, the reduction in interest rates will have a direct impact on profitability. Along with increasing revenue from electricity sales, reducing interest expenses could improve the company’s cash flow and debt-servicing capacity.
In other words, Upper Tamakoshi’s financial turnaround is not limited to increased electricity generation and sales. Improvements have been made on two fronts simultaneously: increasing revenue while reducing the interest costs that account for a significant share of the company’s expenses.
Four years of losses, now turning toward profit
After the Upper Tamakoshi Hydropower Project came into operation, the company was unable to achieve the expected profitability immediately. Its large investment, heavy debt obligations, interest expenses and hydrology penalties kept the company in losses for four consecutive years.
The situation, however, is changing in the current fiscal year. Revenue from electricity sales has increased, the company has not had to pay a hydrology penalty, and the interest rate on its long-term debt has also been reduced.
As a result, Ranjit claims that the company is now in a position to earn around Rs 1 billion in profit during FY 2025/26.
However, the company’s unaudited financial statements up to the end of mid-April 2026, show a net profit of around Rs 28.7 million through the third quarter.
Therefore, the projected annual profit of around Rs 1 billion should not yet be considered the company’s final profit. Rather, it should be understood as an estimate or projection by the company’s management. The final annual financial statements will determine whether the company achieves the projected profit.
Reconstruction of flood-damaged structures underway
While Upper Tamakoshi’s financial position is improving, the project is also facing another major challenge: the reconstruction of structures damaged by floods.
According to Acting CEO Ranjit, tenders have already been invited to begin the procurement process required for the reconstruction of the damaged structures.
This will add new challenges in terms of expenditure and operational management in the coming days. However, if the damaged structures can be reconstructed and the power plant brought back to full capacity, it could further improve the company’s revenue.
The company has also stated in its financial statements that work is underway to repair flood-damaged structures and restore the power plant to full capacity. It has also mentioned that repair work on the right settling basin and landslide prevention measures are progressing.
Institutional work advances alongside management improvements
Ranjit said that after assuming the responsibility of Acting Chief Executive Officer, the company has advanced institutional work alongside improvements in plant operations.
He said the company’s 16th and 17th Annual General Meetings, which could not be held in previous years due to special circumstances, were successfully conducted on April 12, 2026.
He said necessary coordination and management were carried out to facilitate the meetings.
Debt challenge remains
Although Upper Tamakoshi is turning toward profitability, its biggest challenge remains its debt burden.
The company’s financial statements show that its long-term debt stood at more than Rs 67 billion as of the mid-April 2026. Servicing the principal and interest on such a large debt will remain a major component of the company’s financial planning for years to come.
Therefore, while the reduction in interest rates provides significant relief, it does not eliminate the company’s underlying debt burden. In the coming years, the company will have to simultaneously maintain sufficient revenue from electricity sales, repay principal and interest, carry out regular maintenance, and reconstruct flood-damaged structures.
The latest situation at Upper Tamakoshi indicates an important shift: after suffering losses for four consecutive years, the company is now moving toward increasing revenue, reducing its financial burden and improving the operational efficiency of its power plant.
The elimination of hydrology penalties, a 1.5 percentage-point reduction in the interest rate, and the improvement in electricity sales revenue have begun to change the company’s financial outlook.
The key question now is how sustainable this improvement will be and whether Upper Tamakoshi can maintain long-term financial health while gradually reducing its heavy debt burden.
Jalasarokar