The World Bank Group has approved an $815m financing package to support development of Bhutan’s 1,125MW Dorjilung hydropower project, a large-scale scheme on the Kurichhu River in eastern Bhutan that is expected to significantly expand the country’s generation capacity and electricity exports.
The Dorjilung project is designed to produce more than 4,500GWh of electricity annually, increasing Bhutan’s total power generation by 40% and boosting energy exports by 42%. The project is also expected to strengthen regional clean energy trade and contribute to job creation and economic growth.
“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 Lyonpo Lekey Dorji, Finance Minister, Royal Government 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 will be Bhutan’s largest hydropower development implemented under a public-private partnership model. It represents a shift toward private sector participation in the country’s hydropower sector. The World Bank Group will provide $815m in financing, which is expected to mobilize an additional $900m from private investors.
“The World Bank Group is bringing the full strength of its institutions – IDA, IBRD and IFC – to support the Dorjilung Hydropower Project in Bhutan,” said Xavier Furtado, the World Bank Group’s Country Manager for Bhutan. “We’ve worked with the Royal Government of Bhutan to put together a financing package designed to keep sovereign borrowing to a minimum, catalyse private sector engagement, and carefully balance risks among public and private stakeholders. This approach can serve as a model for future sustainable hydro development in Bhutan and other countries.”
During construction and operation, the project is expected to create thousands of jobs and support local businesses. It will also include upgrades to roads and improved access to markets and essential services in Mongar and Lhuentse districts, areas with higher poverty, unemployment, and out-migration rates than the national average.
The financing package consists of a $150m grant and a $150m credit from the International Development Association (IDA), a $15m enclave loan from the International Bank for Reconstruction and Development (IBRD) to the Government of Bhutan, and a $200m IBRD enclave loan along with a $300m A loan from the International Finance Corporation (IFC) to Dorjilung Hydro Power Limited (DHPL).
DHPL is a special purpose vehicle jointly owned by Bhutan’s Druk Green Power Corporation, which holds a 60% stake, and Tata Power, India’s largest private integrated power company, which owns the remaining 40%.
