India’s PFC & REC to support hydropower project in Bhutan with US$559m loan

Government of India undertakings PFC and REC have signed an MoU with Kholongchhu Hydro Energy Ltd., a joint venture between the Indian and Bhutan government, to provide a loan of US$559 million towards the construction of a new hydropower plant in the Trashiyangste district of Bhutan.

March 11, 2021

The loan is towards construction of a 600MW hydropower plant in Bhutan.

The new project will help generate up to 30,000MW of hydropower, benefitting both countries.

The project is the first to follow the JV model in Bhutan, with FY 25-26 as the expected commission timeline.

India is also pursuing cross-border energy trade with Myanmar, Sri Lanka, Nepal, and Bangladesh.

Government of India undertakings Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) have signed a memorandum of understanding (MoU) with Kholongchhu Hydro Energy Ltd (KHEL), a joint venture (JV) between the Indian and Bhutan government, to provide a loan of US$559 million towards the construction of a 600MW hydropower plant in the Trashiyangste district of Bhutan. The new project is a step towards helping Bhutan harness its full potential to generate up to 30,000MW of hydropower, of which current capacities utilise less than 5 per cent, as reported by LiveMint on March 11. The move is in line with Prime Minister Shri Narendra Modi’s intent to build energy links with neighbouring countries in South Asia, increasing India’s overall stake in the global energy market.

According to a statement from PFC, bilateral cooperation between India and Bhutan focuses on the hydropower sector so funding towards the new project will help strengthen the relationship between the two countries. It identified the project as the first to follow the JV model in Bhutan with FY 2025-26 as the expected commission timeline, and stated how the energy generated by it will help both India and Bhutan meet future power requirements. Similarly, India is focusing on establishing cross-border energy trade with Myanmar, Sri Lanka, Nepal, and Bangladesh, to improve resource efficiency and price discovery within these markets.

In 2019-20, Indian successfully increased its renewable energy capacity by 7.6 GW with a further increase of 34.2 GW in various stages of implementation, according to the Ministry of New and Renewable Energy. Currently ahead of targets to set up an additional renewable energy capacity of 175 GW by 2022, India is in pursuit of setting up 500 GW of renewable energy generation capacity by 2030. Renewable energy is pivotal to rapid urbanisation and industrialisation in India and neighbouring South Asian countries, so collaboration will contribute to strong economic growth and opportunities in the region.