Bhutan, World Bank sign $515 million deal for Dorjilung hydro project

The Royal Government of Bhutan and the World Bank have signed financing agreements worth $515 million for the 1,125 MW Dorjilung Hydroelectric Power Project on the Kurichhu River in eastern Bhutan. The project, with an estimated total cost of $1.7 billion, will be Bhutan’s largest hydropower project under a public-private partnership (PPP) model.

The project is expected to generate over 4,500 GWh of electricity annually. It aims to address Bhutan’s winter energy deficit while enabling exports to India during summer and the monsoon, with nearly 80% of output earmarked for supply to India. It is also projected to increase Bhutan’s GDP by 2.4% and reduce emissions by about 3.3 million tonnes of CO2 annually.

The financing package includes $300 million from the International Development Association (IDA), including $150 million as a grant, and $215 million from the International Bank for Reconstruction and Development (IBRD). The International Finance Corporation (IFC) has committed up to $300 million to Dorjilung Hydro Power Limited (DHPL), the project’s special purpose vehicle.

The structure is designed to limit sovereign exposure, with Bhutan’s direct credit exposure at $150 million. Over the 30-year IDA credit period, the country is expected to generate around $4 billion through taxes, free power, and equity returns. The arrangement is also expected to mobilise an additional $900 million in private investment.

DHPL is owned by Druk Green Power Corporation (DGPC) with a 60% stake and Tata Power with 40%. The agreements were signed by Dasho Leki Wangmo, Finance Secretary of Bhutan, and Jean Pesme, World Bank Division Director for Bangladesh and Bhutan.

Bhutan’s Prime Minister Tshering Tobgay stated that the project is central to the country’s 13th Five-Year Plan and supports its carbon-negative goals. Finance Minister Lekey Dorji noted that the financing structure reduces pressure on public finances. World Bank Vice President for South Asia Johannes Zutt said the model reflects a scalable approach to infrastructure financing. Tata Power CEO and Managing Director Praveer Sinha highlighted the project’s role in meeting India’s peak demand, while DGPC Managing Director Chhewang Rinzin stated that the project is designed to maintain environmental standards and provide grid flexibility.

Photo credit: Tata Power