Bhutan, World Bank and Tata Power Advance $515 Million Deal for 1,125 MW Dorjilung Hydropower Project

The Royal Government of Bhutan and the World Bank have signed financing agreements worth a total of $515 million to support the 1,125 MW Dorjilung Hydroelectric Power Project. Once completed, this project will generate about one-third of Bhutan’s total electricity, strengthen economic growth through affordable and reliable power, expand clean energy exports, and create new jobs across the country.

Prime Minister Dasho Tshering Tobgay described the Dorjilung project as a key part of Bhutan’s 13th Five-Year Plan and the largest hydropower project the country will develop under a public-private partnership. He noted that the project will provide clean energy, support long-term economic growth, and reinforce Bhutan’s commitment to remaining carbon-negative.

He also emphasized that the project reflects the strong and ongoing partnership between Bhutan and the World Bank Group.The Dorjilung project is located on the Kurichhu River in eastern Bhutan and is expected to generate more than 4,500 GWh of clean electricity each year. This will help Bhutan address its winter energy shortages, while allowing the country to export surplus electricity to India during the summer and monsoon seasons.

Economically, the project is projected to increase Bhutan’s GDP by 2.4 percent. It will generate both direct and indirect employment, create opportunities for local entrepreneurs, and support sectors such as manufacturing, tourism, and small businesses by providing stable and affordable energy. Revenue from electricity exports will help fund essential public services including health, education, and infrastructure.

At the regional level, the project is expected to reduce carbon emissions by approximately 3.3 million tons annually and strengthen clean energy cooperation.Johannes Zutt, the World Bank’s Vice President for South Asia, highlighted that the Dorjilung project uses an innovative financing model that combines public and private capital. He noted that this approach sets a new benchmark for sustainable infrastructure development and will bring long-lasting benefits to both Bhutan and the region.

By reducing costly energy imports and increasing export revenues, Bhutan will strengthen its energy security, while South Asia benefits from cleaner and more diversified power sources.Bhutan’s Finance Minister, Lyonpo Lekey Dorji, stated that the project is a national priority and will significantly advance Bhutan’s clean energy goals.

He emphasized that the financing structure ensures that the project does not place excessive pressure on the country’s public finances. The Managing Director of Druk Green Power Corporation, Dasho Chhewang Rinzin, added that the plant will provide better grid stability, help manage seasonal power shortages, and maintain Bhutan’s environmental standards, including its carbon-negative status.

Earlier in the year, the World Bank Group’s Board approved a financing package consisting of $300 million from the International Development Association (including a $150 million grant), $215 million from the International Bank for Reconstruction and Development, and up to $300 million from the International Finance Corporation.

These funds will be provided to Dorjilung Hydro Power Limited, a special-purpose company jointly owned by Druk Green Power Corporation (60 percent) and Tata Power (40 percent). This partnership is expected to strengthen clean energy cooperation and deepen regional energy security between India and Bhutan.

Tata Power CEO and Managing Director, Dr. Praveer Sinha, noted that the Dorjilung project will support India’s peak electricity demand—especially during summer months—since nearly 80 percent of its annual generation will be exported to India. He emphasized that the project marks a major milestone for both countries and supports shared clean energy goals.

The total estimated cost of the project is $1.7 billion. It has been structured as a public-private partnership to minimize Bhutan’s sovereign borrowing while encouraging private sector participation. Around $900 million in additional private financing is expected to be mobilized. Despite the project’s large scale, Bhutan’s direct credit exposure will be limited to $150 million, while the country is projected to earn around $4 billion over the 30-year IDA credit period through taxes, free power, and dividends.

The IDA and IBRD financing agreements were signed by Finance Secretary Dasho Leki Wangmo on behalf of the Royal Government of Bhutan and Jean Pesme, Division Director for Bangladesh and Bhutan, on behalf of the World Bank.World Bank Country Manager for Bhutan, Xavier Furtado, stated that the Dorjilung project serves as a model for building clean, sustainable, and resilient energy systems amid global fuel supply challenges. He noted that the World Bank Group brought together IDA, IBRD, and IFC to create a financing package capable of supporting a project of this scale while maintaining Bhutan’s debt sustainability.