Khorlochhu Hydropower Project Secures ₹58 Billion Loan from India's Power Finance Corporation

Landmark Financing for Bhutanese Hydropower

The Khorlochhu Hydropower Project in Bhutan has successfully secured a substantial loan package totaling ₹58 billion from India's Power Finance Corporation (PFC). This financing agreement, signed recently in Thimphu, represents a significant milestone as it is PFC's first cross-border financing venture in Bhutan. The total loan comprises a primary term loan of ₹48.29 billion, with an additional ₹9.5 billion allocated as a standby credit facility to cover potential cost overruns or unforeseen expenses.

The project is being developed by Khorlochhu Hydro Power Ltd (KHPL), a joint venture where Bhutan's Druk Green Power Corporation (DGPC) holds a 60 percent equity stake, and India's Tata Power holds the remaining 40 percent.

Project Scope and Economic Impact

The 600-megawatt (MW) Khorlochhu Hydropower Project is situated in the Trashiyangtse Dzongkhag region of Eastern Bhutan, along the Kholongchhu River. With an estimated total project cost, including financing charges, of approximately ₹69 billion (Nu 70 billion), the project is slated for commissioning between 2029 and 2030. Once operational, it is projected to generate more than 2,500 million units (2,524 million units) of electricity annually.

The generated power will play a dual role: meeting Bhutan's domestic electricity demand, particularly during the winter months, and exporting surplus energy to India during the summer. This arrangement is facilitated by existing Power Purchase Agreements (PPAs), ensuring revenue certainty for the project.

Innovative Financing and Construction Progress

The financing model for the Khorlochhu project is notable for its non-recourse nature, meaning that loan repayment will be derived solely from the project's revenues, without reliance on a sovereign guarantee from the Bhutanese government. This approach has been hailed as a 'landmark project for Bhutan,' potentially opening new avenues for financing future projects in the country. PFC will serve as the sole lender for the project.

Construction activities for the project have already commenced, with civil works underway since January 2025. The project aligns with Bhutan's ambitious goal of achieving 20 GW of hydropower generation capacity by 2040. The collaboration also underscores the growing clean energy cooperation between India and Bhutan.