Bhutan will need to assess the risk associated with huge upfront investment and evolving energy market condition so that investment in hydropower remains attractive.

This was highlighted in the Druk Green Power Corporation’s (DGPC) annual report as the key challenge, whose mandate is to complete the value chain of the watt-to-wire business of hydropower.

While the debate over social and environmental concerns is gaining momentum, the annual report stated that hydropower’s impact on current account deficits leading to INR shortage needs clarity.

“There is a lot of concern that more investments into hydropower will put the future generations of Bhutanese deep into debt,” the report stated. “The biggest challenge would be to build a common understanding on the future prospects and plans for hydropower development that the people of Bhutan endorses.”

A World Bank report stated that 18 percent of the hydropower revenue is pumped back into debt servicing. In the next 30 years, this could reach 38 percent. This may have implications on the fiscal balance of the government budget.

DGPC’s chief executive officer, Dasho Chhewang Rinzin, said that hydropower related external debt has to be maintained at less than 40 percent of the revenue, as per the new debt management policy.

He said that 18 percent is not worrying and that the limit is well maintained against the projection. “We feel that we are within the government policies.”

He said that as far as hydropower is concerned, the loans are being availed to create assets and revenue will service the debt.

“We have serviced all the debts ourselves,” he said. Having repaid the Kurichhu and Chhukha hydropower debts, the major hydro debt that remains is of  Tala, which would be serviced next year.

Dasho Chhewang Rinzin said that it’s about economy of scale: “The more you invest, the more you earn.” He added that the country earns Nu 8 to 9B annually after repaying the loans.

He also added that two World Bank experts are on conflicting ends. On the one hand, it is worried about the debt and, on the other hand, it has shown interest on grant and debt financing on some projects.

The government of India’s guideline on cross border transmission, Dasho Chhewang Rinzin said, is being looked at and the future of hydropower may evolve between 2017 and 2018, following which a concrete long term plan may come out.

Meanwhile, the increased generation from all the four existing hydropower plants achieved the highest generation to date of 7,573 million units (MU) of electricity, earning a revenue of Nu 14.624B.

About 5,373 MU of electricity was exported to India.

Tshering Dorji


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