Bhutan Government and World Bank Signs USD 515 Million Deal for Dorjilung Hydropower Project

The Royal Government of Bhutan and the World Bank has signed financing agreements totaling USD 515 million for the 1,125 MW Dorjilung Hydroelectric Power Project, which will account for about one-third of Bhutan’s total energy generation, drive economic growth through access to affordable electricity and clean energy exports and create jobs.

Dasho Tshering Tobgay, Prime Minister of Bhutan, said, "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. 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 season.

The hydropower plant is expected to increase Bhutan’s GDP by 2.4 percent. 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 carbon dioxide  annually and facilitating clean energy trade.

Johannes Zutt, World Bank Vice President for the South Asia Region, said, “The Dorjilung Hydroelectric Power Project involves an innovative financing model, which brings together public and private capital and sets a new standard for sustainable infrastructure development in Bhutan. Besides providing affordable and reliable power to support growth and job creation, the project will reduce energy import costs and increase energy export revenues for Bhutan, while also lowering carbon emissions and diversifying energy sources across the South Asia region.”

H.E. Lyonpo Lekey Dorji, Finance Minister of Bhutan, said, “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. Its innovative financing structure ensures that this project does not unduly burden public finances, allowing us to continue investing in our people."

Dasho Chhewang Rinzin, Managing Director of the Druk Green Power Corporation (DGPC), said, "This project marks a transformative shift in Bhutan’s energy sector and opens the door for scaling this financing model across the hydropower sector. This project is designed to provide critical grid flexibility, allowing us to manage seasonal shortfalls while maximising 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 USD 300 million in concessional financing from the International Development Association (IDA), of which USD 150 million is a grant; USD 215 million in financing from the International Bank for Reconstruction and Development (IBRD); and up to USD 300 million from the International Finance Corporation (IFC) to Dorjilung Hydro Power (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 and 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. Today’s signing of USD 515 million in financing agreements marks a momentous milestone for a project that will contribute nearly one-third of Bhutan’s generation. This landmark project will strengthen regional energy security and deepen India–Bhutan clean energy cooperation. With nearly 80 percent 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 USD 1.7 billion project is structured as an innovative public-private partnership to minimise sovereign borrowing. The financing is expected to catalyze an additional USD 900 million in private sector financing. This unique financing structure enables Bhutan, with only USD 150 million direct credit exposure, to cover the USD 1.7 billion project cost and cumulatively earn about USD 4 billion of revenues through taxes, free power and equity dividends over the 30-year IDA credit period.

Xavier Furtado, the World Bank Group’s Country Manager for Bhutan, said, “Amid global fuel supply disruptions, the Dorjilung Hydroelectric Power Project represents a model for building energy security that is clean, sustainable and resilient. 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.”