ICRA Nepal has reaffirmed the credit ratings of Niko Energy Limited, while highlighting significant execution risks caused by delays in the company’s flagship hydropower project.

According to ICRA Nepal’s surveillance report published on August 20, 2026, the agency has maintained Niko Energy’s long-term loan rating at [ICRANP] LB+ and reaffirmed its short-term loan rating at [ICRANP] A4.

The ratings come amid slow progress on the company’s 9 MW Mathilo Bhurundi-A Hydropower Project, a run-of-the-river project located across Kaski and Parbat districts of Gandaki Province.

Slow Project Progress Raises Execution Risk

As of mid-July 2026, the project had achieved only around 15% financial progress, although this was an improvement from 7% recorded in March 2025.

Construction activity so far has largely focused on land acquisition, access road construction and preliminary excavation at the headworks, powerhouse and penstock sites.

The project’s estimated cost has also increased. The revised total project cost stands at approximately NPR 1,857 million, or around NPR 206 million per MW, representing a 3% increase from the previous estimate.

Equity Funding Remains a Key Concern

Niko Energy has already achieved financial closure for the project’s NPR 1,300 million debt component. However, the company still needs to complete the required equity contribution.

The project follows a 70:30 debt-to-equity structure. Promoters have so far injected around 64% of the required equity, equivalent to approximately NPR 358 million, leaving the remaining 36% to be raised.

The project’s required Commercial Operation Date (RCOD) is October 23, 2027, leaving the developer with a limited timeframe to accelerate construction and complete the remaining work.

Further delays could also create financial pressure under the project’s power purchase agreement (PPA). Delays extending beyond six months from the RCOD could result in the loss of annual tariff escalation benefits.

Long-Term PPA Provides Some Support

Despite the execution risks, the project has several structural protections.

Niko Energy has a 30-year take-or-pay PPA with Nepal Electricity Authority (NEA). Under the agreement, the base tariff is set at NPR 4.8 per kWh during the wet season and NPR 8.4 per kWh during the dry season.

The agreement also provides for a 3% annual tariff escalation for eight years following commercial operation.

Power evacuation risk is also partly mitigated by the proposed connection to the operational NEA Modi Substation.

ICRA Nepal said future rating actions will depend largely on Niko Energy’s ability to close the remaining equity funding gap, contain further cost increases and maintain construction progress to meet the late-2027 commercial operation deadline.