NEA moves to extend RCOD for hydropower projects, Classifies 320 projects into four groups

KATHMANDU: The Nepal Electricity Authority (NEA) has initiated the process to extend the Required Commercial Operation Date (RCOD) for hydropower projects that have already signed power purchase agreements (PPAs) but have failed to begin commercial generation within the stipulated deadline.

The NEA has introduced a new policy to classify such projects into four groups based on clear criteria for the first time. A meeting of the NEA Board of Directors held on July 16 decided to categorize projects into groups ‘A’, ‘B’, ‘C’ and ‘D’ based on their physical progress, fulfillment of obligations under PPAs and the status of their RCOD.

In line with the decision, the authority has begun the process of extending the RCOD of projects classified under groups ‘A’ and ‘B’ in the first phase.

Minister for Energy, Water Resources and Irrigation Biraj Bhakta Shrestha, speaking during a discussion with hydropower developers, said the government was moving to extend RCODs with the objective of facilitating projects under construction rather than creating difficulties for the private sector.

He said the government was committed to establishing a system in which such decisions are made through institutional mechanisms rather than based on the preferences of individuals.

Minister Shrestha also said the government was sensitive to the dignity of the private sector and the security of investments, while emphasizing that developers must also fulfill their responsibilities on time.

He said the energy sector would achieve the expected pace of development only when the government and private sector maintain mutual accountability.

According to the NEA, 320 hydropower projects with a combined capacity of 8,292 MW are currently at various stages of construction. Of these, 150 projects with a combined capacity of 4,491 MW have been classified under group ‘A’, while 68 projects with a combined capacity of 1,420 MW have been placed in group ‘B’.

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), said all projects should be granted a final RCOD extension with certain conditions based on the principle of natural justice.

He urged the government to provide equal opportunities to all projects based on a commitment to complete PPAs within one year and commence construction within six months thereafter.

Criteria for Four Categories

According to the criteria prepared by the NEA, group ‘A’ includes projects whose RCOD has not expired and those that have fulfilled obligations specified in their PPAs, including obtaining generation licenses, completing financial arrangements and managing land, or still have time remaining to fulfill such obligations under the agreement.

Group ‘B’ includes projects whose RCOD has expired but have been unable to commence operation due to delays in the construction of transmission lines or substations by the NEA.

Projects affected by circumstances beyond their control and granted RCOD extensions with necessary evidence are also included in this category. Similarly, projects that have achieved at least 25% physical progress by the time their RCOD expires have been placed in group ‘B’.

Group ‘C’ consists of projects whose RCOD has not expired but have failed to fulfill basic obligations such as obtaining generation licenses, completing financial arrangements or managing land. Projects with less than 25% physical progress by the time their RCOD expires will also fall under this category.

Meanwhile, group ‘D’ includes projects that have failed to fulfill mandatory obligations such as obtaining generation licenses, completing financial arrangements and managing land even after their RCOD has expired. Projects whose survey or generation licenses have been revoked will also be classified under group ‘D’.

The NEA has used the 2014 procedure as the basis for measuring physical progress. Under the criteria, significant progress in the construction of major project structures, including headworks, tunnels, pipelines and powerhouses, will be considered physical progress.

For solar projects, indicators such as signing panel purchase agreements, opening letters of credit (LCs), completing land management, and beginning construction of mounting structures and foundations will also be recognized as evidence of physical progress.

Projects classified under group ‘B’ will be subject to regular monitoring. The NEA’s Electricity Trade Department will issue necessary instructions to ensure timely completion of construction and monitor compliance with those directives.

The authority has also made provisions for projects to be reclassified, if necessary, within a maximum period of six months.

For projects classified under group ‘C’, the NEA will issue a ‘Notice of Default’ in accordance with the PPA. If the project fails to demonstrate satisfactory improvement or provide a convincing response following the notice, the authority will initiate the process of terminating the agreement.