This report provides a general overview of rationale behind development of small hydropower in Nepal, potentials of hydropower development, power markets, enabling environments (e.g., legal provisions, etc), current situation of hydropower sector and its scope for further development. With a case study of Upper Dordi Hydropower Project (UDHP), this report also highlights the methodology of performing pre-feasibility study of a small hydropower projects. In particular, it highlights on the techniques for hydro-meteorological analysis, alignment selection, alternative schemes development and selection of the preferred one, design consideration of all the structures relevant to the project, environmental impact assessment, project planning and scheduling, and economic analysis.