Breathing Room for Genuine Developers: NEA Extends Operation Deadlines for 27 Hydropower Projects Under New Grading System

In a significant policy shift aimed at rescuing stranded investments in the energy sector, the Nepal Electricity Authority (NEA) has granted a lifeline to 27 under-construction hydropower projects by extending their Required Commercial Operation Date (RCOD). The first phase of this extension covers projects with a combined generation capacity of 540.47 megawatts, offering them much-needed breathing room to complete their construction without the looming threat of contract termination.

However, this is not a blanket pardon for all delayed projects. Historically, deadline extensions in Nepal’s hydropower sector have been criticized as ad-hoc, often driven by political connections or discretionary favors. Breaking away from this flawed tradition, the NEA’s latest move—spearheaded by the Ministry of Energy, Water Resources, and Irrigation—is anchored in a rigorous, evidence-based evaluation of each project's actual groundwork.

The decision stems from an NEA board meeting held on July 16 (Asar 32), which introduced a stringent four-tier categorization system (Groups A, B, C, and D) to separate genuine developers facing systemic hurdles from "license-holding squatters" who have shown little to no progress on the ground. The RCOD extension has only been granted to projects falling under the 'A' and 'B' categories, following a thorough assessment of their physical progress and their adherence to the Power Purchase Agreements (PPA).

Under the new metric, Group 'A' comprises projects that have diligently fulfilled all basic obligations. Group 'B' includes projects that have achieved at least 25 percent physical progress, or those that suffered delays due to unforeseeable circumstances (force majeure)—most notably, delays caused by the NEA itself in constructing the necessary transmission line infrastructure. By accommodating Group 'B', the government is essentially acknowledging its own institutional bottlenecks that have hampered private developers.

The scale of this categorization highlights the massive volume of investments currently in limbo. According to NEA data, a staggering 320 hydropower projects, boasting a cumulative capacity of 8,292 MW, are currently in various stages of development. Of these, 150 projects (4,491 MW) have secured their spot in Group 'A', while 68 projects (1,420 MW) have been placed in Group 'B'. The 27 projects receiving the immediate deadline extension were selected from these two performing tiers after submitting verified documentation of their progress.

Conversely, the state has adopted a zero-tolerance policy for non-performers. Projects in Group 'C'—those lacking financial closure, generation licenses, land acquisition, or those with less than 25 percent physical progress despite their RCOD expiring—have been sidelined. The lowest tier, Group 'D', houses projects that have outright failed their mandatory obligations or have already had their licenses revoked.

Minister for Energy, Water Resources, and Irrigation Biraj Bhakta Shrestha has been a vocal proponent of this systematic overhaul. According to the Ministry, the primary objective is to institutionalize the facilitation process, ensuring that state support is driven by clear metrics rather than individual whims. While emphasizing the government's sensitivity towards protecting private sector investments, the Minister has made it clear that developers must also hold up their end of the bargain, advocating for a culture of "mutual accountability."

Looking ahead, the NEA has attached strict conditions to this relief measure. The RCOD extension is designed as a strategic facilitation tool, not an excuse for further complacency. The NEA’s Power Trade Department has been tasked with aggressively monitoring the day-to-day progress of the Group 'B' projects.

In a move that signals the government's seriousness, the NEA has reserved the right to re-evaluate and potentially downgrade a project's category within six months if the developers fail to demonstrate satisfactory momentum. For Nepal’s energy sector, this policy intervention marks a critical step toward ensuring that private investments yield actual megawatts rather than just paperwork.