New Development

Agreement signed to resurrect development at Kholongchhu Hydropower project in Bhutan

Agreement signed to resurrect development at Kholongchhu Hydropower project in Bhutan
(photo courtesy Druk Green Power)

Druk Green Power Corporation (DGPC) and Tata Projects have signed an agreement to resume development of the 600 MW Kholongchhu Hydropower project, after years of suspension.

Kholongchhu is a run-of-river project with a stream diversion arrangement at about 4 km downstream of the dam to utilize the Jablangchhu stream.

Work at the Kholongchhu Hydropower Project is set to resume in July, as a result of the agreement. DGPC said this development marks a significant milestone in Bhutan’s energy sector, heralding renewed prospects for sustainable energy production and regional development.

The announcement was made in response to inquiries raised by a member of Parliament on June 14. The MP queried the Minister of Energy and Natural Resources on the project’s timeline; the feasibility of maintaining the Kholongchhu office in Trashiyangtse town; and strategies to mitigate costs, which have escalated from the initial estimate of BTN54.4 billion (US$651.2 million). Additionally, concerns were raised regarding contingency plans for solar and wind energy in light of potential climate change challenges.

“The commencement of the Kholongchhu project will not only foster balanced regional development but also reduce our dependence on imported electricity,” emphasized MP Wangdi.

Highlighting the project’s historical challenges, Minister Gem Tshering acknowledged the prolonged hiatus since 2016 due to financing hurdles. However, with DGPC assuming full ownership of Kholongchhu Hydro Energy Ltd. post-joint venture closure, renewed optimism surrounds the project’s prospects. The current financing strategy involves a debt-equity ratio of 70:30, with 70% secured from the Power Finance Corporation (PFC) and Rural Electrification Corporation (REC), Indian institutions specialized in energy sector investments. The remaining 30% equity will be sourced from capital markets, ensuring a robust financial foundation for the project’s resumption.

The anticipated revival of the Kholongchhu project not only signifies a strategic leap forward in Bhutan’s energy independence but also underscores the government’s steadfast commitment to harnessing natural resources for socio-economic growth, DGPC said. as a beacon of sustainable development in the global energy landscape.

In March 2021, Hydro Review reported that development work was likely to commence in April of that year. Civil and hydro mechanical works — like construction of the dam, headrace tunnel and powerhouse — were awarded to two companies.