The objectives of the Power Sector Reform and Sustainable Hydropower Development Project for Nepal are to: (a) strengthen the capacity of the power sector agencies to plan and prepare hydropower and transmission line projects following international standards and best practices; and (b) improve the readiness of the power sector agencies for regulatory and institutional reforms. There are three components to the project, the first component being Preparation of Hydropower and Transmission Line Investment Projects. It will support preparation of two hydroposer projects, Upper Arun Hydropower Project (UAHEP) (335 MW) and Ikhuwa Khola Hydropower Project (IKHP) (30 MW), as proposed by the GoN, and priority high voltage transmission line projects to be identified by the on-going Transmission System Master Planning supported under the on-going Nepal India Electricity Transmission and Trade Project (NIETTP), in line with international standards and the Bank's safeguard policies. The second component is the studies and preparation for policy recommendations and sector reform. It will address critical power sector issues. It will support preparation, prioritization, and sequencing of recommendations for policy and reform actions, and build consensus and capacity. Finally, the third component is the capacity building for safeguard management and hydropower development. It will support improvement of the environmental and social safeguard management system in Nepal and associated capacity building. It will support the following activities: conducting a Strategic Environmental and Social Assessment (SESA) as part of the integrated river basin planning under component B; preparing recommendations for environmental and social guidelines for hydropower development; safeguard capacity building for management of transmission line RoW issues; and project management.