World Bank Approves $815m Financing Package for Bhutan’s Dorjilung Hydropower Project

Dorjilung will help eliminate the need for winter energy imports and enable the export of excess power to India when domestic demand is low.

The World Bank Group’s Boards of Executive Directors have approved an $815 million financing package to support the development of the 1,125 MW Dorjilung Hydroelectric Power Project, a landmark investment set to significantly expand Bhutan’s hydropower capacity, boost regional clean energy trade, and create jobs.

Located on the Kurichhu River in eastern Bhutan, the Dorjilung project will generate more than 4,500 gigawatt-hours (GWh) of clean electricity annually. Once operational, it is expected to increase Bhutan’s total energy production by 40% and energy exports by 42%, strengthening the country’s position as a regional supplier of renewable power.

Closing Bhutan’s Seasonal Energy Gap

The project will play a critical role in addressing Bhutan’s seasonal electricity imbalance. During winter months, Bhutan often relies on costly energy imports due to lower hydropower output, while surplus electricity is generated during the summer and monsoon seasons.

Dorjilung will help eliminate the need for winter energy imports and enable the export of excess power to India when domestic demand is low. According to the World Bank, the resulting savings and export revenues will create additional fiscal space for social spending and development investments that directly benefit Bhutan’s population.

“The Dorjilung Hydroelectric Power Project is a national priority and will be transformational for Bhutan,” said Lyonpo Lekey Dorji, Finance Minister of the Royal Government of Bhutan.

“It will deliver clean electricity, spur economic growth and advance 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,” he said.

Public–Private Partnership Model

Dorjilung will be Bhutan’s largest hydropower project developed under a public-private partnership (PPP), marking a strategic shift toward a more sustainable and diversified financing model for hydropower development.

The World Bank Group’s $815 million financing is expected to mobilise approximately $900 million in private investment, paving the way for greater private sector participation in Bhutan’s hydropower sector and reducing reliance on sovereign borrowing.

“The World Bank Group is bringing the full strength of its institutions—IDA, IBRD and IFC—to support the Dorjilung Hydroelectric Power Project,” said Xavier Furtado, World Bank Group Country Manager for Bhutan.

“We have worked closely with the Royal Government of Bhutan to structure a financing package that keeps sovereign borrowing to a minimum, catalyses private sector engagement and balances risks between public and private partners. This approach can serve as a model for future sustainable hydropower development in Bhutan and beyond,” he said.

Jobs, Local Development and Infrastructure Upgrades

The project is expected to create thousands of jobs during both the construction and operational phases, while stimulating local enterprise development and supporting livelihoods in Mongar and Lhuentse districts. These regions experience higher levels of poverty, unemployment and out-migration than the national average.

In addition to employment benefits, the project will include road upgrades and infrastructure improvements, enhancing access to markets, essential services and economic opportunities for surrounding communities.

Detailed Financing Structure

The World Bank Group financing package includes:

• $150 million grant and $150 million credit from the International Development Association (IDA) to the Government of Bhutan;

• A $15 million enclave loan from the International Bank for Reconstruction and Development (IBRD) to the Government of Bhutan;

• A $200 million IBRD enclave loan and a $300 million A loan from the International Finance Corporation (IFC) to Dorjilung Hydro Power Limited (DHPL).

DHPL is a special purpose vehicle jointly owned by Druk Green Power Corporation (60%) and Tata Power (40%), India’s largest private integrated power company.

Advancing Clean Energy and Economic Growth

The Dorjilung Hydroelectric Power Project aligns with Bhutan’s long-standing commitment to environmental sustainability and carbon negativity, while also strengthening regional energy integration and long-term economic resilience.

World Bank officials said the project demonstrates how innovative financing and public–private collaboration can unlock large-scale clean energy investments in developing economies, delivering climate, economic and social benefits simultaneously.