The Royal Government of Bhutan and the World Bank have signed financing agreements worth $515m for the 1125MW Dorjilung hydropower project, a major infrastructure development aimed at expanding the country’s energy capacity and exports.
The project, to be built on the Kurichhu River in eastern Bhutan, is expected to generate more than 4500GWh of electricity annually. It will help address seasonal power shortages in winter and allow surplus energy exports to India during summer and the monsoon season.
“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 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 plant is expected to increase Bhutan’s GDP by 2.4% and create jobs, while supporting sectors such as manufacturing, tourism and small businesses through more reliable electricity supply. Revenues from energy exports are expected to fund services including health, education and infrastructure.
“The project involves an innovative financing model, which brings together public and private capital and sets a new standard for sustainable infrastructure development in Bhutan,” said Johannes Zutt, World Bank Vice President for the South Asia Region. “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.”
Officials said the project will also have a regional impact by reducing carbon emissions by an estimated 3.3 million tons annually and strengthening cross-border energy trade.
“The Dorjilung hydropower project is a national priority and will be transformational for Bhutan – delivering clean electricity, spurring economic growth and advancing our carbon-negative commitment,” said 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.”
The project is being developed by Dorjilung Hydro Power Limited, a joint venture between Bhutan’s Druk Green Power Corporation and India’s Tata Power.
“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 Chhewang Rinzin, Managing Director of Druk Green Power Corporation. “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 in 2026, the World Bank Group approved $300m concessional financing from the International Development Association, including $150m in grants, and $215m from the International Bank for Reconstruction and Development. Up to $300m in additional support is expected from the International Finance Corporation.
Dr Praveer Sinha, CEO and Managing Director of 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 1125MW Dorjilung project. Today’s signing of $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% 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 total cost of the project is estimated at $1.7bn. Officials said the financing structure is designed to limit Bhutan’s borrowing while attracting about $900m in private investment. Over a 30-year period, the project is expected to generate around $4bn in revenues through taxes, dividends and power exports.
“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, World Bank Group 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.”
Last month it was announced that major tunnelling and infrastructure works were awarded to Indian and Bhutanese contractors as Bhutan advances the flagship scheme.
