Myagdi Hydropower Limited (MHL) has come under heightened credit pressure after a landslide completely halted operations at its 14 MW Ghaar Khola Hydropower Project in Myagdi, Gandaki Province.

The landslide occurred on August 11, 2026, burying the project’s powerhouse and submerging critical equipment, including turbines and generators. The damage forced the run-of-river project to completely suspend power generation.

Following the incident, ICRA Nepal placed MHL on “Watch with Negative Implications” and revised its issuer rating to [ICRANP-IR] B@, indicating a high risk of default in timely debt servicing.

The rating agency also placed the company’s NPR 2.315 billion long-term loan limits at [ICRANP] LB@ and its NPR 130 million short-term loan limits at [ICRANP] A4@, both under negative watch.

While the powerhouse suffered major damage, MHL officials said other key project structures remain intact. The company has notified the Nepal Electricity Authority (NEA) of the incident under the force majeure provision of its Power Purchase Agreement (PPA).

MHL has also formally initiated the insurance claim process. However, the full extent of the physical damage, financial losses and expected recovery period is still being assessed.

ICRA Nepal said the company’s credit profile will remain under close monitoring until there is greater clarity on the cost and timeline of repairing or rebuilding the powerhouse, as well as the extent to which insurance proceeds can cover lost revenue and repair costs.

The project was commissioned in August 2023 at a total cost of around NPR 3.058 billion. Even before the landslide, the company faced financial pressure, with the project generating only around 64% of its contracted energy during FY2025.

MHL currently has NPR 926 million in paid-up capital, fully backed by promoters, and had been preparing to raise an additional NPR 475 million through an Initial Public Offering (IPO).

The shutdown could therefore have broader implications for the company’s financial position and planned IPO. Its recovery will depend on how quickly the powerhouse can be restored, the amount and timing of insurance compensation, promoter support, and potential agreements with lenders on debt restructuring or loan rescheduling.

For investors, the key variables going forward will be reconstruction costs, insurance recovery, debt servicing capacity and the timeline for restarting electricity generation.