Bhutan Secures $515M World Bank Deal for Hydropower Megaproject Set to Transform Economy

The project, located on the Kurichhu River in eastern Bhutan, is poised to become the kingdom’s largest hydropower development and one of the most significant infrastructure investments in the country’s history.

Bhutan has signed a massive $515 million financing agreement with the World Bank Group for the construction of the 1,125 MW Dorjilung Hydroelectric Power Project, a transformative clean energy megaproject expected to reshape the country's economy, strengthen regional energy security, and reinforce Bhutan's global leadership in carbon-negative development.

The project, located on the Kurichhu River in eastern Bhutan, is poised to become the kingdom's largest hydropower development and one of the most significant infrastructure investments in the country's history.

Once completed, the Dorjilung project will generate more than 4,500 gigawatt-hours (GWh) of clean electricity annually — enough to account for approximately one-third of Bhutan's total electricity generation capacity.

The development is expected to play a central role in Bhutan's 13th Five-Year Plan by expanding domestic energy supply, reducing seasonal electricity shortages, increasing clean energy exports to India, and accelerating long-term economic growth.

"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," said Bhutan Prime Minister Dasho Tshering Tobgay.

"This transformational investment will supply clean energy, spur economic growth, and advance our carbon-negative commitment."

The project comes at a critical moment for South Asia's energy transition as countries across the region face rising electricity demand, volatile fuel markets, climate pressures, and increasing urgency to shift toward low-carbon energy systems.

Bhutan, which already generates nearly all of its electricity from hydropower and remains one of the world's few carbon-negative nations, is positioning the Dorjilung project as both a national economic engine and a major regional clean energy asset.

According to the World Bank, the hydropower plant is expected to increase Bhutan's GDP by approximately 2.4 percent while generating broad economic spillover effects across multiple sectors including manufacturing, tourism, and small business development.

Reliable and affordable electricity from the project is expected to support industrial growth, stimulate private investment, and improve energy security during Bhutan's winter months, when seasonal energy shortages currently force the country to import electricity.

At the same time, surplus electricity generated during the summer and monsoon seasons will be exported to India, creating a major long-term revenue stream for Bhutan.

Officials estimate the project will displace approximately 3.3 million tonnes of carbon dioxide emissions annually by replacing fossil fuel-based electricity generation elsewhere in the region.

"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," said Johannes Zutt, World Bank Vice President for South Asia.

"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."

One of the project's most notable aspects is its financing structure, which combines concessional development finance, public-private partnership mechanisms, and private sector investment to reduce pressure on Bhutan's sovereign debt.

Earlier this year, the World Bank Group approved:

• $300 million in concessional financing from the International Development Association (IDA), including $150 million in grants

• $215 million from the International Bank for Reconstruction and Development (IBRD)

• Up to $300 million from the International Finance Corporation (IFC) for Dorjilung Hydro Power Limited (DHPL)

DHPL, the special purpose vehicle established for the project, is jointly owned by Bhutan's Druk Green Power Corporation (60 percent) and India's Tata Power (40 percent), one of India's largest integrated power companies.

The overall project cost is estimated at approximately $1.7 billion.

The financing package is expected to mobilize an additional $900 million in private sector investment, creating what officials describe as one of the most innovative infrastructure financing models ever undertaken in Bhutan.

Importantly, the structure allows Bhutan to maintain relatively limited direct sovereign credit exposure — approximately $150 million — while still participating in a project expected to generate nearly $4 billion in cumulative revenues over the 30-year IDA credit period through taxes, free electricity allocations, and equity dividends.

Bhutan Finance Minister H.E. Lyonpo Lekey Dorji said the financing model was specifically designed to protect fiscal sustainability while enabling transformational infrastructure investment.

"Its innovative financing structure ensures that this project does not unduly burden public finances, allowing us to continue investing in our people," he said.

Druk Green Power Corporation Managing Director Dasho Chhewang Rinzin described the project as a "transformative shift" for Bhutan's energy sector that could establish a scalable financing template for future hydropower developments across the country.

The project also carries major geopolitical and regional significance by deepening energy cooperation between Bhutan and India.

India is expected to purchase nearly 80 percent of the project's annual electricity generation, helping meet growing peak electricity demand, particularly during summer months.

Tata Power CEO and Managing Director Dr Praveer Sinha said the initiative would strengthen regional energy security while expanding clean energy trade between the two countries.

"This landmark project will strengthen regional energy security and deepen India–Bhutan clean energy cooperation," Sinha said.

World Bank officials also highlighted the project's strategic importance in the context of rising global energy insecurity and fuel supply disruptions.

"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, the World Bank Group's Country Manager for Bhutan.

The signing ceremony was attended by Bhutanese government leaders and senior World Bank officials, marking what many observers view as a landmark moment for Bhutan's economic future and South Asia's broader clean energy transition.