Securitisation of Hydropower Receivables- A First for the Kingdom of Bhutan

DGPC is of strategic importance to the Royal Government of Bhutan (RGoB) as it meets the entire domestic power demand of Bhutan and contributes almost a fourth of the Government’s own revenues by way of royalty, taxes and dividend.

June 20, 2026. By News Bureau

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SBI Capital Markets Limited

Royal Government of Bhutan

Druk Green Power Corporation

Hydropower generation

Bhutan’s economy

Tala Hydropower Plant

Druk Green Power Corporation (DGPC) is the sole hydropower producer in the Kingdom of Bhutan and is responsible for development of hydropower projects to harness the vast hydropower resources of the Country. Bhutan’s installed hydropower generation capacity is 3,490 MW at present, with multiple new projects in the pipeline. DGPC generates ~ 10,900 million units annually (last 3 years annual Avg), of which, domestic consumption is about 30-40 percent and the balance is typically exported to India. India and Bhutan have a strategic relationship, with hydropower being one of the key exports from Bhutan to India.

Going forward, Bhutan’s total domestic energy requirement is projected to increase significantly to 3500 MW by 2034¹. To meet the rising domestic demand and leverage on export revenues, Bhutan plans to achieve a total installed capacity of ~25,000 MW by 2040.

DGPC is of strategic importance to the Royal Government of Bhutan (RGoB) as it meets the entire domestic power demand of Bhutan and contributes almost a fourth of the Government’s own revenues by way of royalty, taxes and dividend. It is also the biggest source of foreign exchange for the country contributing about 31 percent of total forex earning (last 3 years annual Avg). Owing to this, hydropower has been identified as a key development area by the RGoB in Bhutan.

Bhutan’s domestic banking sector has been geared towards meeting the growing credit requirement of priority sectors like housing, tourism, production and manufacturing, etc. Availability of domestic funds is a challenge for the large scale of capital goods required for hydro projects going forward. Accordingly, the country has been financing its projects so far through government partnerships as well as support from Multilateral Development banks. However, given the strong credit profile of DGPC, access to commercial credit from banks will help to meet the financing needs of future projects. Apart from this, due to the BTN (Bhutanese currency) being linked to the INR, INR based project funding would be particularly attractive, in order to avoid risks of currency depreciation.

With the goal of monetising DGPC’s robust project cashflows, taking into account the preferred currency, the SBICAPS team suggested securitisation as a tool, allowing DGPC to avail funds without requirement of a sovereign guarantee of RGoB. As a 1^st step, the cash flows of the 1020 MW Tala project were monetised, raising Rs 1400 cr (~USD 165 million), setting up a template for future deals. The transaction has set many benchmarks. It is the first ever hydropower receivables cross-border securitisation transaction of Bhutan, creating an alternative and commercial funding route to support the hydropower development journey of the country and reduce the reliance on the government-to-

government channel for setting up new hydro plants. The funding will also support the renovation/modernisation of its existing operational hydropower plants.

The transaction won two awards – “Green Project of the Year” from The Asset Triple A and “Market Impact Deal of the Year” from IJGlobal.

Deal Details:

Economy

The Kingdom of Bhutan, situated in the south-eastern region of the Himalayas, with the majority of the trade with India and its currency is pegged with the India Rupee at parity. (1 INR=1 BTN)

Bhutan’s economy is mainly based on agriculture, forestry, and hydroelectricity. As of June 2025, of the total GDP, the service sector (i.e. hotels & restaurants, communication, entertainment & recreation services, and whole trade and retail services, etc.) had the highest share at 57.40 percent. Non- electrical Industry contributed about 17.50 percent followed by the agriculture, life stock & forestry contributing 12.20 percent. The hydropower sector contributed~12.80 percent to the GDP, however, it has the highest contribution to the country’s export revenue.

Bhutan is rich in hydro resources. It is gearing up for an ambitious energy transformation over next 15 years by aiming to add 15,000 MW of hydropower, 5000 MW of solar power and 28 MW of wind power by 2040. The country’s overall hydropower potential is estimated at ~30,000 MW out of which 23,765 MW is economically feasible. Several of these projects are underway.

Hydro power exports is a key source of foreign exchange for the country. While the share of Hydro power in the total exports has been declining due to industrialisation and increase in domestic demand, however, with the commissioning of new projects like Nikacchu (118 MW) in January 2025 and Punatshangchhu-II (1020 MW) in November 2025, the share of hydropower in exports is expected to rise going forward, thereby bolstering the exports earnings of Bhutan.

	FY 2022	FY 2023	FY 2024	FY 2025
Hydro Export	23,710	20,590	15,037	19,680
Total Export	59,490	56,800	55,939	65,448
Share of Hydro Exports in the Total	40%	36%	27%	30%

Source: RMA annual report FY2025. Figures are in million BTN. 1 BTN= 1 INR

2.Tala Project

Tala Hydropower Plant (THP) is a run-of-the-river type hydropower project on the Wangchu river in Chukha district, Bhutan. With an installed capacity of 1020 MW, Tala Plant was commissioned in 2007. The Plant was funded by Govt of India through a mix of 60 percent grant and 40 percent loan.

Power generated from THP is first supplied to Bhutan Power Corporation Ltd (a sister concern company of DGPC) to meet the domestic demand which includes 15 percent of Royalty energy to RGoB, and the balance is exported to India under a long term PPA with PTC India Limited (PTCIL). At present the cash flows from this project were unencumbered and provided a good opportunity for monetisation.

3.Transaction structure

The transaction was conceptualised based on the aim of monetisation / leveraging the existing robust cashflows of DGPC for new project development, without requirement of any support from its sponsor. A financial feasibility analysis was carried out and it was observed that the existing cashflows were able to sustain a substantial loan. Due to the long-term offtake contract with PTCIL, presence of assured cashflow stream originating from India, it was a logical choice to raise securitisation financing from Indian lenders. The clean/green nature of the new projects envisaged to be set up with the loan proceeds also helped the lender to support this structure.
Within this overall framework, the first loan tranche of INR 1400 Cr was planned based on securitisation of the 1020 MW Tala project cashflows.

The project assets and entire cash flows of Tala project are charged to the lender as security for the proposed term loan. The loan will be disbursed in INR and to be repaid in 13 years in quarterly structured installments. This was calculated based on the residual tenor of the PPA, leaving some tail period at the end. The cross border cashflow risks were addressed by using separate escrow mechanism for each currency.

Key features of the facility are as below:

Particulars	Details
Facility	Green Term Loan of INR 1400 Crore
Purpose of Facility	Repair & maintenance of existing hydropower projects New greenfield projects (Small Hydro and Solar)
Funding Structure	Securitisation of cashflows (Run-of-river Hydropower receivables)
Security	Escrow of Bhutanese cashflows Escrow of India cashflows Charge over project assets Ringfencing of Tala project specific documents and assets
Financial Closure	13^th October 2024
Sole Green Lender	State Bank of India

Since the key security for this loan was the project revenues, it was imperative to ringfence them (both Indian & Bhutanese) for the comfort of the lender.

Accordingly, for the security mechanism, all the cash flows from Tala project were separately identified & routed through two TRA accounts- one with SBI in INR in India (“INR TRA”) wherein revenue from export of power to India from the Tala project was to be deposited and second with a bank in Bhutan in BTN (“BTN TRA”) where domestic revenue from sale of power from Tala project in Bhutan was to be deposited. Lender to have charge on both these TRA accounts.

4.Key Challenges of the Deal

Bank lending in INR to a foreign company in Bhutan: While the erstwhile Reserve Bank of India (RBI) circular dated May 2000 allowed lending in INR to a Bhutanese entity, this was revoked vide a series of later circulars. Hence specific approval had to be sought for this transaction.

To create security over an INR a/c in India: Royal Monetary Authority (RMA) of Bhutan does not typically allow a Bhutanese entity to open a Bank account in India. However, specific approval was sought for the same, allowing for security creation and debt servicing, thereby strengthening the security structure.
Two trustee model for project assets security in a foreign country: The facility is secured by way of first charge over project assets (movable and immovable) located in Bhutan and project cashflows from India & Bhutan. It was critical to ensure security creation over all the project assets in favour of the Indian lender. Based on legal opinions and factoring the operational convenience, a two-Trustee model was designed. An Indian security Trustee would secure the project cashflows from India whereas a Bhutanese security trustee was utilised for security creation and perfection of assets and cashflows located in Bhutan.

5.Uniqueness of the Deal

First Hydropower Receivables Securitisation deal in Bhutan: The structure allowed the company to monetise its existing future cashflows by ring fencing a single project- opening the door to similar structures for its other projects in future. This allowed for raising of non-recourse financing against the operational project cashflows.
Dual TRAs: Two different currency cashflows were captured through 2 separate TRAs, with a suitable shortfall mechanism between these 2 accounts. The RMA of Bhutan acted as an enabler for this structure by giving specific approvals for this deal.
Cashflow Ringfencing: Tapping of 2 lines of cashflows at their respective source (Indian and Bhutanese) whose mix may vary over time, to ensure no leakage of project revenues- added to the strength of the security available to the lender.
Natural hedge: In the absence of suitable currency hedging products, INR loans were a preferred option, to avoid escalation in foreign currency debt servicing. It had been seen that benefits of concessional foreign project funding can get wiped out due to local currency depreciation. Additionally, the revenue from export of power to India is in INR - this would provide the company with a natural currency hedge for the repayment of the same.
Sustainable Financing : This green loan shall support SDG Goal 7 (access to affordable, reliable, sustainable & modern energy) and Goal 9 (build resilient infrastructure, promote sustainable industrialisation and foster innovation).
Two Trustee model – Bhutanese laws : Two security trustees were appointed to secure project assets in their respective countries. Security structure for lenders is designed after taking into consideration local laws in Bhutan.

The unique features and structures evolved for the transaction are expected to go a long way in establishing a template funding structure for other upcoming Bhutanese power projects. This will also help the upcoming projects to access finance on commercial terms which is expected to give a boost to the hydropower and solar sectors in Bhutan.

6.SBICAPS Role

SBICAPS structured the monetisation of DGPC’s cashflows, suggested feasible structures and worked with DGPC to come up with tailor made solutions. As a part of our financial advisory and syndication

practice, we could provide end-to-end service helping DGPC with deal structuring, financial model creation, due diligence, managing the loan approval process requirements, documentation and disbursement. Our role was appreciated as instrumental in unlocking a new type of financing for the country.