Hydropower continues to dominate large-scale investments in Nepal, and some climate activists say funding has continued despite known disaster risks.
The Upper Trishuli-1 project, which has been virtually destroyed after last week’s floods, was one of Nepal’s largest foreign direct investments, valued at around $647 million. Its sponsors include the Asian Development Bank (ADB) and the International Finance Corporation (IFC).
Upper Trishuli 3A, which was also severely affected, was financed by the Export-Import Bank of China.
Himanshu Thakkar, coordinator of the South Asia Network on Dams, Rivers and People, says international lenders were “acutely aware of the extreme danger to which they were exposing thousands of workers, officials, residents, rivers, infrastructure and landscape.”
“Their own reporting repeatedly highlighted this. But they took no preventative measures, did not demand strict checks and balances, nor were they prepared for a calamity they knew could occur,” he says.
The ADB and IFC told the BBC that the design of the Upper Trishuli-1 project “reflected the findings of independent technical assessments that analyzed the flood and landslide risks affecting the project site, using studies of glaciers and glacial lakes and historical evidence available at the time.”
The project’s early warning system was strengthened following a flood in 2024, they said, and further work was carried out to assess risks after another flood in 2025.
“The precise causes of the August 2026 disaster, the magnitude of the damage, the performance of the Project design and the protective measures, including the early warning system, are being collected and still need to be verified and evaluated.”
The BBC has contacted the Export-Import Bank of China for comment.
History has already shown that the Trishuli river basin is volatile, says Thakkar, pointing out how it had been hit by floods in the last two years. In September 2024, an unprecedented storm over the Trishuli and Bhote Koshi river basins caused flash flooding in Rasuwa, Nuwakot and Dhading, riverside settlements that were also among the worst affected by last week’s floods.
Then, in July 2025, a glacial lake in Gyirong County, Tibet, burst and swept this same stretch of river into Nepal, killing at least 11 people. That flooding damaged critical infrastructure and halted trade along the busy Nepal-China corridor. The border crossing was closed for almost six months and did not reopen until January 1 of this year.
Dhakal of the Nepal Electricity Authority admits that even if climate risk assessments had been done correctly, “the design of the plants might not have been done accordingly.”
“Clearly we will need to improve the way we build and operate our hydroelectric plants,” he adds.
Private operators are already feeling the financial impact. Insurers have paid out about $40 million in flood-related damage to more than 20 privately owned plants over the past three years, according to Uttam Bhlon Lama of the Nepal Independent Power Producers Association.
It warns that insurance premiums are rising significantly and the cost of doing business is “unviable”.
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