Loans secured to update DPRs of Nyera-Amari and Bunakha HEPs

It is expected that upon completion of the DPR updates, the projects will be better positioned to secure international financing

The Ministry of Finance (MoF) has obtained a concessional loan of USD 5 million (mn) from the Asian Development Bank (ADB) to support the development of the Nyera-Amari I and II hydropower project, and the Bunakha Reservoir project.

This loan will be re-lent to the Druk Green Power Corporation (DGPC) to update the Detailed Project Reports (DPR) in accordance with the revised guidelines and to make them financially viable for international financial institutions.

The Managing Director (MD) of DGPC, Dasho Chhewang Rinzin said that the DPR update, funded through the Project Preparedness Financing (PRF) of USD 5 mn, will encompass various preparatory activities, such as due diligence assessments, engineering designs, cost updates, technical and financial analyses, and environmental and social impact assessments that adhere to the safeguard requirements of the ADB.

“It is expected that upon completion of the DPR updates, the projects will be better positioned to secure international financing.”

The MD also said, “The ADB, which is providing the PRF loan at a concessional interest rate ranging from 1% to 1.5% with 32-year loan tenure, has been requested to lead the consortium in arranging debt financing for these projects due to their size and fund requirements.”

“The project financing structure may involve the ADB as a standalone financier or a consortium of international financial institutions,” the MD said.

The DPR update process is estimated to take one year from the date of awarding the contract to consulting firms selected through an international competitive bidding process.

Following the DPR update, the consultants will continue to support the DGPC in detailed design preparation, tender invitations, and assistance until the award of the main works, with an expected completion timeframe of 20 months from the date of award.

Meanwhile, the MD said that the Bunakha Reservoir project can be strategically operated in conjunction with the existing two hydropower plants downstream (Chhukha and Tala) that will help alleviate some of the winter deficit situation that Bhutan faces.

“The Nyera-Amari I and II projects can optimize their benefits through tandem operation,” Dasho Chhewang Rinzin said.

The MD also mentioned that the implementation of these projects will serve to meet domestic demand, thereby ensuring energy security while also bringing in revenues from the export of surplus energy.

The development and implementation of the project are also expected to provide employment and economic opportunities to Bhutanese people, including a market for local products and nearby business communities.

However, he said that during the DPR update, there will be little involvement from the local communities. “But DGPC and the power sector can gain through expertise transfer and experience gained.”

The DPR is being revised to align it with the revised DPR guidelines of the government of Bhutan and to make the DPR bankable with international financial institutions.

The MD said that the existing DPRs need to be updated to reflect the changing social and environmental aspects, incorporate new technologies, and, “more importantly, align with the new guidelines and adopt best international practices, thus making the projects bankable to multilateral banks, including the ADB, for ensuing project financing.”

The 404 Megawatt (MW) Nyera Amari I and II hydropower projects and the 180 MW Bunakha Reservoir hydropower projects are located in Samdrup Jongkhar and Chhukha districts respectively. The DPRs for Nyera-Amari I and II were completed in 2017, while the DPR for Bunakha was completed in 2013.

The loan agreement was signed on December 18, 2023. DGPC will immediately initiate the updates to the DPRs of two hydropower plants.

Nidup Lhamo from Thimphu