Banking News – The government is preparing to extend the Required Commercial Operation Date (RCOD) for hydropower projects based on their physical construction progress, aiming to facilitate projects delayed despite having signed Power Purchase Agreements (PPAs).

The decision was endorsed by the Nepal Electricity Authority (NEA) Board on Asar 32 (mid-July), which approved a framework to classify under-construction hydropower projects into four categories based on physical progress, RCOD status and compliance with obligations outlined in their PPAs.

According to Energy, Water Resources and Irrigation Minister Biraj Bhakta Shrestha, the government will evaluate the overall status of each project and provide the necessary facilitation to help viable projects move toward commercial electricity generation.

Projects whose RCOD has not expired and that have fulfilled key obligations such as generation licenses, financial closure and land acquisition will be placed in Group ‘A’.

Group ‘B’ will include projects whose RCOD has expired but could not begin commercial operation because transmission lines or substations required for grid connection were not completed by the NEA. These projects may receive an RCOD extension if they satisfy conditions set by the NEA Board.

Projects affected by force majeure events during the RCOD period, supported by documentary evidence and official approval, will also be considered. Projects that had achieved more than 25 percent physical progress before the RCOD deadline may qualify for additional support.

Group ‘C’ will consist of projects that failed to meet major contractual obligations—such as obtaining generation licenses, securing financial closure or completing land acquisition—or had achieved less than 25 percent physical progress.

Group ‘D’ will include projects that failed to fulfill key obligations even after the RCOD expired, including those whose survey or generation licenses have already been revoked.

The NEA said physical progress will be measured under its 2071 Physical Progress Guidelines, considering the construction status of major infrastructure such as headworks, tunnels, penstocks and powerhouses. For solar projects, indicators such as panel procurement agreements, letters of credit, land acquisition, and the commencement of mounting structure and foundation works will also be recognized.

Projects classified under Group ‘B’ will be closely monitored and directed to complete construction within specified timelines, with the Electricity Trading Department authorized to issue necessary instructions. Their classification may be reviewed within six months.

Meanwhile, Group ‘C’ projects will receive a Notice of Default under PPA provisions, and agreements may be terminated if developers fail to provide satisfactory explanations or make sufficient progress.

The new classification system is expected to distinguish genuinely progressing projects from stalled developments, while improving transparency, accountability and overall management of Nepal’s hydropower sector.