Kholongchhu Hydropower project expected to resume next month

With the signing of an agreement between Druk Green Power Corporation (DGPC) and Tata projecs, the project is now expected to move forward

After years of suspension, the Kholongchhu Hydropower Project is set to resume operations next month, following the signing of an agreement between Druk Green Power Corporation (DGPC) and Tata Projects. 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 by the Minister of Energy and Natural Resources (MoENR), Gem Tshering, during a session of the National Assembly, in response to inquiries raised by Trashiyangtse Bumdelling-Jamkhar Member of Parliament (MP), Wangdi, on June 14th 2024. The MP queried the Ministry on the project’s timeline, the feasibility of maintaining the Kholongchhu office in Trashiyangtse town, and strategies to mitigate cost escalations, which have escalated from the initial estimate of Nu 54.4 billion. 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.

Minister Gem Tshering assured that the project is slated to restart operations next month, prioritizing the completion of ongoing projects like Puna Tsangchu I and II before transitioning to Kholongchhu. He underscored the Ministry’s efforts in advancing smaller nearby initiatives such as Gamri I and II to complement broader energy development goals.

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 percent secured from reputable Indian institutions like the Power Finance Corporation (PFC) and Rural Electrification Corporation (REC), specialized in energy sector investments. The remaining 30 percent equity will be sourced from capital markets, ensuring a robust financial foundation for the project’s resumption.

“While there may be temporary inconveniences and challenges for local communities, the completion of these projects will bring long-term benefits, fostering sustainable development,” reassured Minister Gem Tshering. He emphasized the positive implications of reduced reliance on imported electricity, reflecting Bhutan’s evolving industrial landscape and economic progress.

The anticipated revival of the 600 MW 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. As preparations gain momentum, stakeholders anticipate a transformative impact on national energy security and regional prosperity, positioning Bhutan as a beacon of sustainable development in the global energy landscape.

By Nidup Lhamo, Thimphu