THIMPHU : The Royal Government of Bhutan and the World Bank today signed financing agreements totaling $515 million for the 1,125 MW Dorjilung Hydroelectric Power Project, which will account for about one-third of the Kingdom’s total energy generation, drive economic growth through access to affordable electricity and clean energy exports, and create new jobs.
"The Dorjilung
Hydroelectric Power Project is a cornerstone of Bhutan’s 13th
Five-Year Plan and will be the Kingdom’s largest hydropower project developed
under a public-private partnership. This transformational investment will
supply clean energy, spur economic growth, and advance our carbon-negative
commitment," said Dasho Tshering Tobgay, Prime
Minister of Bhutan. "This project is a testament to our strong
partnership with the World Bank Group and our shared vision for a sustainable
and prosperous future for Bhutan’s people.”
The project,
located on the Kurichhu River in eastern Bhutan, will generate over 4,500 GWh
of clean electricity annually, closing Bhutan's seasonal energy gap during the
winter months and providing surplus power for export to India in the summer and
rainy seasons.
The
hydropower plant is expected to increase Bhutan’s GDP by 2.4%. It will generate
economy-wide benefits, create direct and indirect jobs as well as
entrepreneurial opportunities for Bhutan. It will boost manufacturing, tourism,
and small businesses by supplying reliable and affordable electricity, with the
revenues from energy exports available for reinvestment in essential services
such as health, education, and infrastructure. It will also have an important
regional impact by displacing 3.3 million tons of CO2 annually and
facilitating clean energy trade.
"The Dorjilung Hydroelectric Power Project is unique for Bhutan and the World Bank Group. The innovative financing model, which brings
together public and private capital, sets a new standard for sustainable
infrastructure development,” said Johannes Zutt, World Bank Vice
President for the South Asia Region. “The benefits will be far‑reaching
for Bhutan and South Asia. Bhutan will be able to reduce costly energy imports
and earn revenues from energy exports, while South Asia will reduce carbon
emissions and diversify its energy sources.”
“The
Dorjilung Hydroelectric Power Project is a national priority and will be
transformational for Bhutan—delivering clean electricity, spurring economic
growth and advancing our carbon‑negative
commitment,” said H.E. Lyonpo Lekey Dorji, Finance Minister of Bhutan.
“Its innovative financing structure ensures that this project does not unduly
burden public finances, allowing us to continue investing in our people."
"This project
marks a transformative shift in Bhutan’s energy sector and opens the door for scaling
this financing model across the hydropower sector," said Dasho
Chhewang Rinzin, Managing Director of the Druk Green Power Corporation. "It
is designed to provide critical grid flexibility, allowing us to manage
seasonal shortfalls while maximizing export revenues. We are deeply committed
to the project’s rigorous environmental standards and maintaining Bhutan’s
standing as a carbon-negative country."
Earlier this
year, the World Bank Group’s Board of Executive Directors approved $300
million in concessional financing from the International Development
Association (IDA), of which $150 million is a grant; $215 million in financing
from the International Bank for Reconstruction and Development (IBRD); and up
to $300 million from the International Finance Corporation (IFC) to Dorjilung Hydro Power Limited
(DHPL), which is a Special Purpose Vehicle entity jointly owned by Bhutan’s
Druk Green Power Corporation (60 percent) and Tata Power (40 percent), India’s
largest private integrated power company. The Project will
boost clean energy cooperation between India and Bhutan and strengthen regional
energy security.
Dr
Praveer Sinha, CEO&MD Tata Power said,
“We thank the Royal Government of Bhutan, the World Bank Group, and Druk Green
Power Corporation for their partnership in advancing the 1,125 MW Dorjilung
project. The signing of $515 million in financing agreements marks a momentous
milestone for a project that will contribute nearly one-third of Bhutan’s electricity
generation. This landmark project will strengthen regional energy security and
deepen India–Bhutan clean energy cooperation. With nearly 80% of its 4,500 GWh
annual generation supplied to India, it will help meet rising peak demand
especially in summer while enabling Bhutan to expand clean energy exports for
shared economic benefit.”
The
estimated $1.7 billion project is structured as an innovative public-private
partnership to minimize sovereign borrowing. The financing is expected to
catalyze an additional $900 million in private sector financing. This unique
financing structure enables Bhutan, with only $150 million direct credit
exposure, to cover the $1.7 billion project cost and cumulatively earn about $4
billion of revenues through taxes, free power, and equity dividends over the
30-year IDA credit period.
Today, Dasho
Leki Wangmo, Finance Secretary, Royal Government of Bhutan and Jean
Pesme, World Bank Division Director for Bangladesh and Bhutan signed
the $300 million IDA financing and $215 million IBRD financing on behalf of Bhutan and the World Bank, respectively.
“Amid
global fuel supply disruptions, the Dorjilung Hydroelectric Power Project
represents a model for building energy security that is clean, sustainable and
resilient,” said Xavier
Furtado, the World Bank Group’s Country Manager for Bhutan. “The World Bank Group brought together
IDA, IBRD, and IFC to deliver an innovative financing package that enables a
project of this scale while protecting Bhutan’s debt sustainability.”