ADB to invest $120 million in Bhutan's hydropower project

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ADB to invest $120 million in Bhutan's hydropower project

The Asian Development Bank will fund $120 million for Bhutan's 118 MW Nikachu hydropower project, which has an estimated project cost of $200 million dollars.

The project will follow the public-private partnership (PPP) model. Druk Green Power Corporation (DGPC), a government-owned company, will be the sponsor and the debt to equity ratio will be 65:35.

Nikachu is the second hydropower project to be built with the PPP model after the Dagachu project, which is due for commissioning by September end.

80 per cent of electricity generated by the project would be exported to India by way of a Power Purchase Agreement (PPA) while the rest 20 per cent would be sold through merchant route in India.

ADB will provide $95 million of the total $130 million debt amount and $25 million of the equity investment. The remaining amount will be raised from other investors, including DGPC.

According to sources, 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.

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."

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