Likhu -2

Summary

55 MW · operating · on the Likhu Khola · in Ramechhap and Okhaldhunga districts. Part of the Likhu Cascade (213 MW combined across 4 plants).

Specifications

Sources

• Likhu Cascade Research Compilation

Specifications (CARE Nepal data)

The Stranded Generation Case Study

Likhu-2 generated only ~146 GWh (60% of contracted energy) in its first full operating year (FY 2023/24). The COD was July 31, 2023 — two weeks into the fiscal year — making FY 2023/24 a full operating year. At 60% of contracted energy, Likhu-2 would appear in the bottom quartile of Nepal's private IPP generation performance data, alongside projects genuinely failing due to Q-Design Discharge optimism.

This appearance is misleading. CARE Ratings Nepal's analysis confirms that the cause was not hydrology, not Q-design failure, and not a turbine defect. It was a grid evacuation bottleneck at the NEA New Khimti substation.

The New Khimti substation — the single gateway connecting the Likhu basin to the national grid via the Khimti–Dhalkebar 220 kV backbone — was equipped with a single 100 MVA transformer when Likhu-2 commissioned. It had been sized to service Upper Tamakoshi (456 MW). As the Likhu cascade plants (combined ~213 MW) came online between 2021 and 2024, they saturated the node. When the substation cannot step up and push power down the 220 kV line, a run-of-river plant has one option: dump water. Likhu-2 effectively wasted 40% of viable contracted generation because the state transmission infrastructure was not ready for the private generation it had approved. See Buildability.

The Recovery — Grid Fixed, Plant Proved

In late 2023, NEA installed a new 200 MVA auto-transformer at New Khimti, raising total substation capacity to 300 MVA. The result was immediate:

Source: CARE Ratings Nepal (March 2026 issuer rating disclosure for GHAL).

91% of contracted energy in a fully operational year places Likhu-2 among the better-performing private IPPs in the sector — not an underperformer. The jump from 60% to 91% is not explained by improved hydrology (though that helped); it is explained by whether the state had built the transmission infrastructure to receive what the private plant was ready to generate.

This has a direct implication for how the Q-Design Discharge performance table should read Likhu-2. The FY 2023/24 figure is not evidence of design-energy overestimation. It is evidence of transmission planning failure.

Financial Architecture

The Likhu-2 SPV (GHAL) was originally budgeted at NPR 9,313 million. A capacity upgrade from 33.4 MW to 55 MW, combined with Interest During Construction, raised the final cost to NPR 10,968–11,246 million (~NPR 204 million/MW). Financing:

• Debt: NPR 8,534 million (~78% of capital)
• Equity: ~22%
• Debt consortium led by Machhapuchchhre Bank (MBL), with Mega Bank, Nepal SBI, Nepal Bangladesh Bank, Everest Bank, and Vibor Society Development Bank

The financial metrics in FY 2024/25 (post-recovery):

A 1.66x interest coverage ratio is thin but serviceable — typical for a highly leveraged first-decade IPP when generation is near contracted levels. The main ongoing risk is exposure to Nepal's floating interest rate environment: with NPR 8.5 billion in variable-rate debt, base rate movements can quickly erode the 1.66x cushion.

The Take-and-Pay Exposure

Approximately 25% of Likhu-2's contracted energy is on "take-and-pay" terms — NEA only purchases this tranche if the national grid requires it. During monsoon season, when all domestic RoR projects peak simultaneously and export channels to India are saturated, NEA actively curtails take-and-pay purchases. This structural revenue leakage is a persistent risk on top of the leverage ratio.

Likhu-1 (the larger MV Dugar project upstream) has better terms: 80% take-or-pay, 20% take-and-pay.

The Likhu Cascade

Likhu-2 is one of four projects in the Likhu cascade, all now fully operational:

Note: Butwal Power Company (BPC) has no equity stake in any cascade plant. BPC's subsidiary HCEL provided engineering consultancy only.

The MV Dugar Group secured Foreign Direct Investment from Mogha Energy DMCC, an energy investment firm based in the UAE. This FDI model — a Nepali conglomerate pairing with foreign capital for a cluster of simultaneous projects — is a structural development in Nepal's IPP financing beyond the traditional domestic bank consortium.

All four plants share the New Khimti evacuation corridor. Following the 2023 transformer upgrade, NEA secured export approvals from India's Central Electricity Authority (CEA) to wheel power from Likhu-4 and Likhu-2 across the Dhalkebar–Muzaffarpur 400 kV interconnector into the Indian day-ahead market — transforming the same corridor that caused stranded generation in 2023 into an export pathway by 2024/25.

Likhu-4 — A Different Story in the Same Cascade

Likhu-4 (52.4 MW, Green Ventures Ltd) was originally designed as a 120 MW export-oriented project, intended to wheel power directly to India. A dispute over cross-border transmission wheeling charges caused GVL to abandon the export model entirely — redesigning and downscaling to 52.4 MW for the domestic grid. The project commissioned November 2021 but suffered a structural collapse of a desanding basin wall on the eve of production testing (May 2021), publicly blamed on the Indian civil contractor SSNR Projects. Green Ventures currently carries a CARE-NP BB rating, constrained by high capital costs and the legacy of its commissioning failures. See Buildability.

Limitations & Controversies

Grid evacuation bottleneck. Likhu-2 generated only ~60% of contracted energy in FY 2023/24 because the New Khimti substation transformer was undersized (100 MVA) for the cascade load. This is a state transmission planning failure, not a project failure — but the revenue loss fell entirely on the private developer.

Take-and-pay exposure. ~25% of contracted energy is on take-and-pay terms, exposed to NEA curtailment during monsoon peaks when export channels are saturated. This structural revenue leakage persists even after the transformer upgrade.

Thin interest coverage. A 1.66x interest coverage ratio is serviceable but vulnerable to Nepal's floating interest rate environment. With NPR 8.5 billion in variable-rate debt, base rate movements can quickly erode the cushion.

Single-corridor dependency. All four Likhu cascade plants share the New Khimti → Khimti–Dhalkebar 220 kV evacuation route. A single substation or line failure returns all four plants to stranded-generation status.

See also

• Buildability — transmission planning failure as a structural IPP risk
• Q-Design Discharge — why Likhu-2's 60% PLF in FY23/24 should not be read as design-energy failure
• Availability-Declaration Penalties — take-and-pay curtailment risk and the AD penalty interaction
• PPA Pricing — the wet/dry tariff structure and its effect on Likhu-2's revenue profile
• Koshi Basin — the Likhu Khola drains to the Sun Koshi
• Upper Tamakoshi — the 456 MW plant that shared the New Khimti bottleneck