Nepal hydropower projects stall on weak investment progress

Nepal's hydropower sector is experiencing significant delays, with over half of licensed projects showing weak progress. According to the Department of Electricity Development, 20 companies holding production licenses for projects totaling 1,651.44 MW have failed to secure the necessary investments.

The 139.5 MW Lower Manang Marsyangdi Hydropower Project, which received its production license in 2018 and signed a Power Purchase Agreement (PPA) in 2023, is still struggling to manage the required investment for construction. Uttar Kumar Shrestha, CEO of Butwal Power Company, stated that financial closure is underway and expected within the year, citing remaining permitted timelines.

Promoters often point to regulatory provisions that allow up to five years after obtaining a production license to secure investments. Directives on licensing hydropower projects from 2018 stipulate that PPAs and financial closure must be completed within two years. However, extensions can be granted for up to three additional years based on necessity and justification, and even longer for projects exceeding 100 MW under special provisions, provided promoters deposit royalty fees.

Similar issues plague other major projects. The 440 MW Tila-1 and 420 MW Tila-2 hydropower projects, both licensed in 2018 and completing PPAs in 2024, have yet to achieve financial closure. The 9.14 MW Super Ghalemdi Hydropower Project, licensed in 2023 after its PPA in 2018, also hasn't raised investment. The 5 MW Seplikhola Hydropower Project, licensed in 2021, had its PPA signed in 2020 but also faces stalled financial closure.

These persistent delays in securing financial closure raise concerns about the effective development and realization of Nepal's substantial hydropower potential, impacting both energy security and economic growth.

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We will complete the financial closure this year; our permitted timeline is also remaining.