The encyclopedia · Finance & Accounting · Financial decision · 2011–2022
Nepal's power utility cleared its balance sheet twice, then ended 14-hour daily blackouts
Two financial restructurings cleared NEA's losses and ended Nepal's 14-hour blackouts; profit hit US$123.5M in FY2022.
Nepal Electricity Authority (NEA)
The solution
Between 2007 and 2017 Nepal's electricity grid shed load for up to 14 hours a day; a World Bank study put the crisis's cost at about 6% of GDP. The state utility NEA was losing money, leaking power, and unable to fund the projects it needed.
The naive fix was to borrow for more generation while the leaks and arrears continued. NEA instead went through two financial restructurings—FY2011 and FY2017—that wrote off accumulated losses, rationalized tariffs, lowered borrowing costs, and collected long-overdue arrears.
Under Managing Director Kul Man Ghising, the utility completed overdue projects, cut losses and gained government backing. Load-shedding formally ended; revenue grew at 12% a year over four years; and FY2022 profit after tax reached NPR 16 billion (about US$123.5 million), up 164% from FY2021.
ICRA Nepal assigned an AA+ issuer rating in February 2022. In FY2021 alone NEA added 735 MW—more than the whole system's capacity a few years earlier—and shifted from survival to planning energy exports.
Why it worked
- Financial restructuring removed old losses, so new revenue funded operations instead of past debt.
- Tariff rationalization and arrears collection made income reflect what the utility actually delivered.
- Cutting leaks and finishing stalled projects raised output without new borrowing.
- A clean balance sheet earned the AA+ rating, letting NEA borrow on its own guarantee.
What can be applied
A bankrupt utility cannot expand its way out. Fix pricing, debt and collections first; once the balance sheet is clean, growth pays for itself and lenders trust the entity.
Aftermath
With its AA+ rating NEA can raise funds on its own institutional guarantee and has discussed an IPO; ADB energy lending is roughly 30% of its Nepal portfolio. Risks remain—dry-season imports from India, foreign-exchange exposure, and the need for markets to absorb 5,000+ MW of planned surplus.
Sources
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