ADB to support hydropower generation in Bhutan

The Asian Development Bank will fund $120 million towards Bhutan’s 118 MW Nikachu hydropower project, whose total estimated project cost is $200 million dollars.

The project is modelled on public-private partnership (PPP) lines, with Druk Green Power Corporation (DGPC), and the debt to equity ratio of 65:35.

Nikachu is the second project to be built as a PPP after Dagachu project, which is due for commissioning by end of September.

However, ADB will provide 95 million dollars of the total 130 million dollars debt portion and 25 million dollars of the equity portion (70 million dollars). The remaining amount will be raised from other investors, including DGPC.

Of the total ADB funding, $25 million is provided as a grant, $75 million is a loan from ADB’s ordinary capital resource (OCR) with three percent interest, and another $25 million loan is from the Asian Development Fund with one percent interest during the grace period of eight years, Bhutan’s national newspaper Kuensel reported.

The vice president of ADB for south, central and west Asia, Wencai Zhang, who is in Bhutan, said: “Energy was one of the major priority areas identified during his meeting with senior government officials in the last few days”.

“For the Nikachu project,” he said, “ADB would not only co-finance, but also help bring in investment from the private sector.”