National
Over half of licensed hydropower projects in Nepal show weak progress
Of 274 approved projects, 178 are below 25 percent completion, raising concerns over financing delays and regulatory compliance.Seema Tamang
The 139.5 MW Lower Manang Marsyangdi Hydropower Project obtained its production license in 2018. Its Power Purchase Agreement (PPA) was signed in 2023, according to the Department of Electricity Development. However, the promoter, Butwal Power Company, has not yet been able to manage the investment required for the construction of the project.
Uttar Kumar Shrestha, chief executive officer of the company, stated that financial closure is currently underway in accordance with the approval of the department.
"We will complete the financial closure this year; our permitted timeline is also remaining," he said. Promoters point out that there is a regulatory provision allowing up to five years after receiving a production license to secure investments. Section 14 of the Directives on licensing of hydropower projects 2018 states that electricity production licenses can be issued under the condition that the PPA and financial closure must be completed within two years.
Sub-section 1 of Section 16 of the directive mentions that if financial closure cannot be completed within the designated two years, and the promoter submits an application prior to the expiration of the deadline, an extension of an additional one year can be granted based on necessity and justification, counting from the previous period. If the work is still not completed within that period, an additional extension of up to two years can be granted based on the promoter's efforts and progress. However, it is also specified that the promoter must deposit an amount equivalent to the capacity royalty of the project's installed capacity at a rate of Rs100 per kilowatt per year.
Furthermore, the same sub-section states that for projects with a capacity exceeding 100 MW, an additional period of up to two extra years can be extended under special provisions. Whether it takes place before or after the PPA, the financial closure period applies from the exact date the license was issued.
Similar to the Lower Manang Marsyangdi, financial closure has also stalled for the 440 MW Tila-1 and 420 MW Tila-2 hydropower projects. Both projects received their licenses in 2018 and completed their PPAs in 2024, yet financial closure remains incomplete. According to the License Performance Dashboard made public by the department, 20 companies covering a capacity of 1,651.44 MW have failed to secure investments despite holding production licenses and signing PPAs.
According to data released by the department, some projects remain unable to raise investment even after concluding their PPAs. The PPA for the 9.14 MW Super Ghalemdi Hydropower Project was signed in 2018. It secured its production license in 2023, but has not yet raised investment.
The 5 MW Seplikhola Hydropower Project, which obtained its production license in 2021, had its PPA signed in 2020. However, financial closure has not been achieved. The 63 MW Chhujung Khola Hydropower Project concluded its PPA in 2022 and subsequently obtained its production license, but due to the inability to raise investment, its physical progress stands at zero percent.
Energy Minister Biraj Bhakta Shrestha directed the establishment of a publicly accessible License Performance Dashboard to be updated on a monthly basis, according to the department. The dashboard is required to include project-wise milestone progress, compliance status, and details of regulatory actions. While the Ministry of Energy directed monthly updates, the department noted that details are being updated based on the progress reports submitted by the promoters.
The government has pointed out that the work of 108 hydropower and solar energy projects that received production licenses is unsatisfactory. Out of 274 total projects that received production licenses, 178 projects show a physical progress of less than 25 percent, the department stated. There are 65 projects with progress between 25 and 80 percent, and only 32 projects have crossed the 80 percent completion mark.
Reasons for unsatisfactory physical progress include lack of management capacity of promoters, issues with transmission lines and substations, delays due to court cases and litigation, absence of cascade agreement for other projects, submergence issues in reservoir-based projects, delays in access road construction, delays in forest clearance, land acquisition and right-of-way and tree felling, restrictions from protected areas and national parks, and halt due to various other reasons.
Among those where construction work was deemed unsatisfactory, there are 42 projects up to 10 MW, 42 projects between 11 and 50 MW, 10 projects between 51 and 100 MW, and 14 hydropower projects above that capacity.
Projects showing unsatisfactory progress also include the Upper Modi ‘A’ Hydropower Project of a Nepal Electricity Authority subsidiary, which has only nine percent physical progress. The Upper Modi Hydropower Cascade Project has just 0.50 percent progress. The Tamakoshi V Hydropower Project, promoted by another subsidiary of the authority, has recorded only 5.20 percent physical progress.
The 120 MW Rasuwa Bhotekoshi Hydropower Project, being developed by a company led by former energy minister Deepak Khadka in partnership with a Chinese company, has also not shown satisfactory progress. Its physical progress stands at 27 percent.
Badri Kuinkel, spokesperson for the department of electricity department, said the physical progress figures are based on submissions made by promoters up to mid-January. “We have updated the physical progress submitted by promoters. Financial closure data has been updated based on information received up to mid-June.
Meanwhile, the Nepal Electricity Authority issued a notice on June 20, instructing projects under power purchase agreements (PPAs) to submit progress reports within seven days. The notice states that if progress reports are not submitted to the Electricity Trade Department, action will be initiated under the PPA terms. Hydropower and solar projects are required to submit progress reports to the authority at least every four months.
Prakash Chandra Duwal, vice-president of the Independent Power Producers’ Association Nepal, said developers are allowed up to five years to complete financial closure after obtaining production licences, including extensions with capacity royalty payments. He said projects are initially given two years to complete either PPA or financial closure, with a possible one-year extension, followed by an additional two years on payment of capacity royalty.
He said projects within these timelines cannot be labelled as unsatisfactory solely on progress status. According to him, financial closure and preparation can take an additional two to three years, making a total project development period of seven to eight years normal, while large projects may take up to ten years. He added that delays in tree felling, local obstruction and transmission line construction also contribute to slow physical progress.




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