KATHMANDU: The 456 MW Upper Tamakoshi Hydropower Project, which remained in losses for four consecutive years after starting power generation, is on track to turn a profit in the current fiscal year.

Purna Gopal Ranjit, acting chief executive officer of Upper Tamakoshi Hydropower Ltd., said improved power plant operations, lower hydrology penalties and a reduction in long-term loan interest rates have significantly improved the company’s financial position.

The company is expected to post a profit of around Rs 1 billion this fiscal year, Ranjit said. Higher electricity generation and sales, along with lower hydrology penalties and financing costs, have strengthened its financial performance.

In previous years, the company had to pay hydrology penalties to the Nepal Electricity Authority when it failed to generate electricity in line with the water available in the Tamakoshi River. The penalty stood at Rs 3.3 million in fiscal year 2021/22 before rising to Rs 220 million in FY 2024/25.

The company paid around Rs 1 billion in hydrology penalties over four years. However, it did not have to pay any such penalty in the last fiscal year, Ranjit said.

A reduction in the interest rate on the company’s long-term loans has provided another major boost to its finances. The interest rate has been reduced from 8.25 percent to 6.75 percent, with the new rate fixed for at least three years.

The lower rate is expected to save the company around Rs 750 million annually in interest costs, amounting to approximately Rs 2.25 billion over three years, according to Ranjit.

Although the company spent around Rs 250 million on rebuilding project structures damaged by floods last year, it is still on track to become profitable after accounting for all expenses, he said.

The improved operational performance, higher electricity revenue and lower financial costs have helped put the country’s largest hydropower project on a stronger financial footing after years of losses.