Nu 54.818bn estimated for completion of Kholongchhu project

It will be another five years before the project is completed

Work for the completion of the Kholongchhu hydro energy limited (KHEL), the first joint venture company formed between Druk Green Power Corporation (DGPC) and India’s Satluj Jal Vidyut Nigam Limited (SJVNL), which commenced in 2015 and was scheduled to be completed in 2020 will take another five years to be completed.

The cost of completing the project is estimated to be over Nu 54.818bn and will take over five years to complete, according to officials from the Ministry of Energy and Natural Resources (MoENR). The initial cost projected was Nu 33.05bn and estimates of cost on completion increased to Nu 54.818bn by 2022.

Based on the understanding reached between royal government of Bhutan (RGoB) and government of India (GoI) in October 2022, DGPC has bought all the equity shares and now holds 100% share holdings in the project.

According to an official from the MoENR, based on understanding reached between the two governments, the GoI has agreed to consider RGoB’s request to facilitate access to finance and energy market for sale of surplus power from Kholongchhu. India has the Power Finance Corporation (PFC) and the Rural Electrification Corporation (REC) which are both PSUs of India and are like public banks for power projects. They are large in size and provide financing for large power projects. The Kholongchu project was already in negotiation with PFC and REC earlier when it was a joint venture, and so the DGPC requested them if they can consider DGPC as a client now.

“RGoB and DGPC are exploring debt financing for the project through the Indian public sector financial institutes,” said the official from MoENR, adding that the infrastructure works which got impacted by the COVID-19 pandemic and fund constraints are being resumed and works are ongoing at the site.

The official said that the main civil contracts which had been awarded are kept on hold since the project is yet to achieve financial close.

In addition, the official said that skeletal contingent of manpower is maintained at the site to reduce cost, to take care of the pending issues and at the same time to oversee and safeguard the constructions or assets.

The cost of completing the Kholongchhu project is estimated to be over Nu 54.818bn and will take over five years to complete, according to the MoENR.

Meanwhile, the official said that the development of Kholongchhu project is an integral part of addressing national energy security.

“RGoB and DGPC will make all the efforts to ensure that the project is completed and we are actively involved in mobilizing financing for the project,” the official said, adding that KHEL is a priority.

With the KHEL project, the people of Trashiyangtse and adjoining Dzongkhags will benefit, he said, adding that the local people of Trashiyangtse are excited after hearing that the work of the project will soon resume. 

The official shared that the people will benefit from hiring of vehicles and houses, up-gradation of roads and electrical utilities, market for farm produce and local products, infrastructural and contract services, employment opportunities, amongst others. 

In addition, the official said that traders, shopkeepers and small business owners will also benefit.  “The project had also spent a sizable amount of funds for corporate social responsibility (CSR) activities mainly for the benefits of the local people.”

Similarly, at the national level, the construction capacity, project management expertise and manufacturing capacities will be enhanced apart from benefits vitalization of the local economy, according to the MoENR.

 The DGPC and SJVN joint venture faced several issues from the start, but even as they were resolved some issues could not be resolved. One was the refusal to give 20% of the works on the dam to CDCL, another was over management control and the final issue was differences on raising financing.

In June 2022, when the government was questioned about the delay at KHEL, Prime Minister (PM), Dr. Lotay Tshering said that the agreement between joint ventures mentioned that 20% of capital work would be awarded to a Bhutanese contractor.

He said that from the Indian agency side, they wanted to execute 100% of capital works and award 20% in the construction of roads, bridges and buildings at the site.

However, from the Bhutan side, they requested 20% of capital work for the construction of tunnels, due to which the two agencies could not come to a consensus.

In February 2023, Lyonpo Loknath Sharma said that the DGPC now fully owns 100% of the shares of the company after SJVN was paid Nu 3.5bn for its 50% shares which is its investment so far.

The minister said that as per the timeline the plan is to start construction on the project by June 2023.

 He also said that the main effort now for DGPC is to seek financing for the project. In terms of who would buy the power he said the Government of India has agreed to buy any surplus power from the project.

Sherab Dorji from Thimphu