Bhutan and World Bank seal $515 million deal to power landmark Dorjilung Hydropower Project

THEBUSINESSBYTES BUREAU

THIMPHU, MAY 6, 2026

In a major boost to clean energy and economic growth, the Royal Government of Bhutan and the World Bank have signed financing agreements worth $515 million for the ambitious 1,125 MW Dorjilung Hydroelectric Power Project. Set to account for nearly one-third of Bhutan’s total energy generation, the project is poised to transform the nation’s energy landscape, strengthen regional energy security, and create significant employment opportunities.

Located on the Kurichhu River in eastern Bhutan, the project will generate over 4,500 GWh of clean electricity annually. It is expected to bridge Bhutan’s seasonal energy shortages during winter while enabling surplus power exports to India during summer and monsoon months, reinforcing cross-border energy cooperation.

"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 Dasho 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.”

Beyond energy generation, the project is expected to increase Bhutan’s GDP by 2.4 per cent while catalyzing growth across sectors such as manufacturing, tourism, and small businesses through reliable and affordable electricity. It will also create direct and indirect employment opportunities and support entrepreneurial ventures, with export revenues earmarked for reinvestment in health, education, and infrastructure.

Significantly, the project will have a strong environmental impact, displacing an estimated 3.3 million tons of CO₂ annually and contributing to regional clean energy trade.

"The Dorjilung Hydroelectric Power Project is unique for Bhutan and the World Bank Group. The innovative financing model, which brings together public and private capital, sets a new standard for sustainable infrastructure development,” said Johannes Zutt, World Bank Vice President for the South Asia Region. “The benefits will be far reaching for Bhutan and South Asia. Bhutan will be able to reduce costly energy imports and earn revenues from energy exports, while South Asia will reduce carbon emissions and diversify its energy sources.”

 “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 H.E. Lyonpo 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."

"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 Dasho Chhewang Rinzin, Managing Director of the Druk Green Power Corporation. "It is designed to provide critical grid flexibility, allowing us to manage seasonal shortfalls while maximizing export revenues. We are deeply committed to the project’s rigorous environmental standards and maintaining Bhutan’s standing as a carbon-negative country."

Earlier this year, the World Bank Group approved a comprehensive financing package that includes $300 million in concessional funding from the International Development Association (IDA) — half of which is a grant — along with $215 million from the International Bank for Reconstruction and Development (IBRD). Additionally, up to $300 million will be mobilized from the International Finance Corporation (IFC) to Dorjilung Hydro Power Limited (DHPL), a special purpose vehicle jointly owned by Bhutan’s Druk Green Power Corporation (60 per cent) and Tata Power (40 per cent).

Tata Power CEO & MD Dr. Praveer Sinha said, “We thank the Royal Government of Bhutan, the World Bank Group, and Druk Green Power Corporation for their partnership in advancing the 1,125 MW Dorjilung project. The signing of $515 million in financing agreements marks a momentous milestone for a project that will contribute nearly one-third of Bhutan’s electricity generation. This landmark project will strengthen regional energy security and deepen India–Bhutan clean energy cooperation. With nearly 80 per cent 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.”

With an estimated total cost of $1.7 billion, the project adopts an innovative public-private partnership model designed to minimize sovereign borrowing. The financing is expected to attract an additional $900 million in private investment, enabling Bhutan to manage the project with just $150 million in direct credit exposure while potentially generating around $4 billion in revenues over 30 years through taxes, free power, and dividends.

The financing agreements were formally signed by Dasho Leki Wangmo, Finance Secretary of Bhutan, and Jean Pesme, World Bank Division Director for Bangladesh and Bhutan, representing their respective sides.

 “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 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.”