Maintaining the operability of a hydroelectric power station at a scale originally designed is being compromised by continuous reservoir sedimentation. The underlying factors include a complex mix of landscape alterations owing to natural and anthropogenic activities around dam areas, such as gully erosion, landslides, floods triggered by heavy rainfall, climate change, and construction activities. The hydropower projects in the low-to-mid mountain regions of Nepal are witnessing a combination of these phenomena, affecting their optimal performance in meeting long-term sustainable power supply targets. This paper presents a combination of geo-spatial analysis and field evaluations to identify the trends from Kulekhani-I, one of the oldest storage-type hydropower projects in Nepal, using long-term time series remote sensing satellite imagery from 1988 to 2020. Our analysis shows an expansion of the surface water content area over time, attributed mainly to high sedimentation deposition owing to multiple factors. This study has identified an urgent need for addressing the following two key contributory factors through an effective control mechanism to avoid rapid sedimentation in the reservoirs: natural—landslides and floods leading to mainly silt deposition during heavy rainfalls; and anthropogenic—road construction materials dumped directly in the reservoir. Effective implementation of a remote sensing monitoring scheme can safeguard future damages to dam environments of more recently built storage-type hydropower projects.