Buddhabhumi Nepal Hydropower Returns to Profit as Revenue Rises and Debt Burden Eases

Buddhabhumi Nepal Hydropower Company Limited (BNHC) returned to profit in the fiscal year 2025/26, helped by stronger electricity sales, improved operating efficiency and a decline in finance costs.

According to the company’s unaudited fourth-quarter financial statement, BNHC posted a net profit of Rs 12.07 million during the year. The company had reported a net loss of Rs 22.59 million in the previous fiscal year. This represents an improvement of about Rs 34.67 million in its annual bottom line.

Electricity sales remained the principal driver of the recovery. Revenue from power sales increased by 28.68 percent to Rs 185.02 million from Rs 143.78 million a year earlier. The rise indicates improved income generation from the company’s 4.99-megawatt Lower Todi Khola Hydropower Project.

Gross profit increased by 26.93 percent to Rs 172.93 million from Rs 136.24 million. However, gross profit grew slightly slower than electricity revenue, causing the gross profit margin to narrow marginally from about 94.76 percent to 93.47 percent. This suggests that costs directly associated with power generation and sales increased somewhat faster than revenue.

The company performed better at the operating level. Operating profit surged by 42.45 percent to Rs 90.53 million from Rs 63.55 million. Its operating margin consequently improved to approximately 48.93 percent from 44.20 percent in the previous year.

The stronger operating margin shows that BNHC generated more profit from each rupee of revenue after meeting its operating expenses. Based on the reported figures, expenses between gross profit and operating profit increased by around 13.35 percent, considerably slower than the growth in electricity sales. This points to improved operating leverage during the year.

A reduction in borrowing costs also supported the turnaround. Finance costs declined by 10.17 percent to Rs 78.64 million from Rs 87.54 million. In the previous year, finance costs were higher than operating profit, making it difficult for the company to report a net profit despite generating income from electricity sales.

Although the situation has improved, the interest burden remains substantial. Finance costs absorbed nearly 87 percent of the company’s operating profit during the latest fiscal year. This was significantly lower than approximately 138 percent in the previous year, but it shows that debt servicing continues to consume most of the earnings generated from operations.

BNHC’s net profit margin improved to about 6.53 percent from a negative margin of 15.71 percent a year earlier. The recovery is therefore meaningful, although the current profit remains modest compared with the company’s revenue, asset base and expanded share capital.

The company’s financial structure changed considerably following the issuance of right shares. Paid-up capital doubled to Rs 800 million from Rs 400 million. BNHC used part of the additional capital to repay bank loans, reducing long-term borrowings by around 19.30 percent to Rs 738.9 million from Rs 915.6 million.

The decline in debt appears to have contributed to the reduction in finance costs. However, the full benefit of debt repayment may take time to appear in earnings, depending on when the loans were repaid during the fiscal year and the interest rates applicable to the remaining borrowings.

The company’s retained earnings also showed a major improvement. It reported positive retained earnings of Rs 3.06 million at the end of the year, compared with an accumulated deficit of Rs 104.72 million in the previous year.

However, the Rs 107.78 million improvement in retained earnings is far greater than the company’s annual profit of Rs 12.07 million. The summarized quarterly statement alone does not explain this movement. Detailed notes to the financial statements would be required to determine whether the change resulted from prior-period adjustments, capital restructuring or another accounting treatment. It would therefore be inaccurate to attribute the entire elimination of accumulated losses solely to the current year’s profit.

Net worth per share rose to Rs 100.59 from Rs 77.14, reflecting the improvement in the company’s equity position. Earnings per share also turned positive at Rs 1.51, compared with a negative Rs 5.65 in the previous year.

Nevertheless, the doubling of paid-up capital has expanded the number of outstanding shares, meaning future earnings will have to grow substantially to generate a stronger return per share. At Rs 1.51, the latest earnings remain low relative to the company’s Rs 100 face-value share base.

The company reported a price-to-earnings ratio of 153.94 times. Such a high ratio indicates that the market price is significantly higher than the profit currently generated per share. It may reflect investor expectations of future earnings growth, but it also means the valuation is highly sensitive to any decline in generation, electricity sales or profitability.

BNHC’s total assets stood at approximately Rs 1.59 billion at the end of the fiscal year. The company has been commercially operating the Lower Todi Khola Hydropower Project since March 2022.

Overall, the latest financial report shows that BNHC has moved from financial stress toward gradual recovery. Revenue growth, improved operating margins, lower debt and reduced finance costs are positive developments. However, the company’s interest burden remains high, earnings per share are still limited and the sharp movement in retained earnings requires clarification through the detailed audited accounts.

The positive reserve position may eventually improve the company’s ability to distribute dividends. Still, a dividend should not be treated as certain. It will depend on audited profitability, distributable reserves, cash availability, debt obligations, regulatory requirements and the decision of the company’s board and shareholders.