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The Nepal Electricity Authority (NEA) has initiated the process of extending the Required Commercial Operation Date (RCOD) for 218 hydropower projects that have signed Power Purchase Agreements (PPAs) but failed to commence commercial electricity generation on time due to various reasons.

For the first time, the NEA has introduced a clear policy that classifies projects into four categories based on defined criteria. At its board meeting held on July 16 (Shrawan 32 as per the Nepali calendar adjustment), the NEA decided to categorize projects into four groups according to their physical construction progress, fulfillment of PPA obligations, and RCOD status.

Following this decision, the RCOD extension process has begun for projects classified under Group A and Group B.

During a discussion with hydropower developers on Wednesday, Minister for Energy, Water Resources and Irrigation Biraj Bhakta Shrestha clarified that the government's objective is not to create difficulties for the private sector but to facilitate the completion of under-construction hydropower projects through RCOD extensions.

He stated that such decisions would not be based on the preferences of any individual but would instead follow an institutional process. The minister emphasized that while the government is committed to protecting the dignity of the private sector and ensuring investment security, developers must also fulfill their responsibilities on time.

According to him, only through mutual accountability between the government and the private sector can Nepal's energy sector achieve the expected pace of development.

According to the NEA, 320 hydropower projects with a combined installed capacity of 8,292 MW are currently under construction. Of these:

- Group A: 150 projects with a total capacity of 4,491 MW.

- Group B: 68 projects with a total capacity of 1,420 MW.

- The remaining projects have been categorized under Groups C and D.

During the discussion, Uttam Blon, Senior Vice President of the Independent Power Producers' Association Nepal (IPPAN), argued that, based on the principle of natural justice, all projects should receive a final RCOD extension subject to specific conditions.

He suggested that all developers should be given equal opportunity, provided whose RCOD has expired but could not begin commercial operation because of delays by the NEA in constructing transmission lines or substations. This group also includes projects affected by force majeure or other Under these guidelines, physical progress includes substantial construction of key project components such as headworks, tunnels, pipelines, and they complete their PPAs within one year and begin construction within six months thereafter.

Classification Criteria

Group A

Projects whose RCOD has not yet expired and which have fulfilled key PPA obligations—such as obtaining a generation license, achieving financial closure, securing land, or still have time remaining under the agreement to complete these requirements.

Group B

Projects whose RCOD has expired but could not begin commercial operation because of delays by the NEA in constructing transmission lines or substations. This group also includes projects affected by force majeure or other circumstances beyond the developers' control that have received approval for an RCOD extension with supporting evidence, as well as projects that had achieved at least 25% physical progress before the RCOD expired.

Group C

Projects whose RCOD has not yet expired but have failed to meet essential obligations such as obtaining a generation license, securing financial closure, or acquiring land, or projects that had achieved less than 25% physical progress by the RCOD deadline.

Group D

Projects that, even after the RCOD expired, failed to fulfill mandatory requirements such as obtaining a generation license, securing financial closure, or completing land acquisition, as well as projects whose survey or generation licenses have already been revoked.

Monitoring and Enforcement

The NEA will assess physical progress using its 2014 implementation guidelines. Under these guidelines, physical progress includes substantial construction of key project components such as headworks, tunnels, pipelines, and powerhouses.

For solar projects, indicators of progress include signing panel procurement agreements, opening letters of credit (LCs), completing land acquisition, and beginning construction of mounting structures and foundations.

Projects classified under Group B will be monitored regularly. The NEA's Power Trade Department will issue necessary instructions to ensure timely completion, and compliance with those instructions will also be monitored.

If necessary, projects may be reclassified within a maximum period of six months.

Meanwhile, projects under Group C will be issued a Notice of Default in accordance with their PPAs. If developers fail to provide a satisfactory response or make sufficient improvements afterward, the NEA will proceed with terminating the agreement.