Asian Development Bank (ADB) will provide US$120.5 million in a mix of loans and grants to build a run-of-the-river hydropower plant in central Bhutan though a public-private partnership (PPP).

The planned 118-megawatt (MW) plant will be located on the Nikachhu River in a narrow valley in the central Trongsa District. As a run-of-the-river plant, it will not need a large reservoir for water storage.

The plant will be developed and managed by Tangsibji Hydro Energy Ltd (THyE), a special purpose company owned by the Bhutan government-backed Druk Green Power Corporation (DGPC). DGPC intends to sell 26% of THyE to a foreign private company in 2015.

Additional financing for the US$198.18 million hydropower plant will come from a US$58.82 million syndicated loan, denominated in rupees, from a consortium of Indian commercial banks. DGPC will also provide US$18.86 million.

The plant is expected to start operating in the middle of 2019. THyE has already signed a 25-year power purchase agreement with Power Trading Corporation of India, India's largest power trading company

Kaoru Ogino, Principal Energy Specialist with ADB's South Asia Department

"By developing the hydropower export, Bhutan can generate additional income that helps finance social services at home such as health, education and rural development. It will also have a positive climate impact in the region. Using clean energy from Bhutan, India will eliminate around 460,000 tons of carbon dioxide emissions every year that it would otherwise have generated through fossil fuels."

The Nikachhu plant marks ADB's second hydropower project in Bhutan. ADB also helped finance the Dagachhu hydropower plant in southern Bhutan. That plant, which completed construction in August, was the first infrastructure public-private partnership in Bhutan.