Bhutan needs Nu 123 bn to generate 10,000 MW power

Thimphu: A department of energy proposal shows that, for Bhutan to generate 10,000 MW by 2020, it would require an investment of Nu 123 billion in the 10th Plan itself. As part of this, the government is proposing to use Nu 40 billion of the Nu 100 billion committed by India for this purpose.

A hydro power policy is also being framed that proposes to allow FDI, private sector, public sector and government to government participation, that will allow for this 10,000 MW capacity to be met in time and guide hydro power development of Bhutan in future.

The government has already identified the top 11 hydro projects, that will be developed first (see box) totalling around 6229 MW. “These projects have been chosen before others on the grounds of technical, economic, social, environmental aspects,” said the secretary for the ministry of economic affairs, Dasho Sonam Tshering.

“The government will be starting around seven or eight major projects in the 10th plan, of which around four may see construction activity, while the rest will have advanced DPR reports done,” said the director general of the department of energy, Sangay Wangdi.

According to the ministry of economic affairs, the government is proposing to execute around 7,000 MW of works bilaterally between the Bhutanese and Indian governments.

“To achieve the 10,000 MW target, we’re also looking at the Joint venture model, which will mean buying of equity or shares by RGoB and GoI and then jointly borrowing the rest of the money from other sources to complete a hydro project,” said Dasho Sonam Tshering. This will mean that, once these joint ventures make a profit, a certain percentage will be declared as dividends. The secretary also emphasized that it was not financially feasible for Bhutan to fund so many large projects at once on just grants or loans.

“The remaining 3,000 MW may be opened to the private sector under the build, own, operate and transfer or BOOT model,” said Dasho Sonam Tshering.

Already Indian giants like Tata, Reliance, GMR, Lanco, Jai Prakash, Green Infrastructure Development have contacted the ministry, expressing interest in private sector participation. Even a few companies from Norway and South Korea have expressed interest.

Under the private model (though it has not been fixed), the companies may be liable to provide 12 percent free electricity to RGoB after building the entire project from scratch on their own expense. This may include, besides the dam, tunnel and plant, other facilities like residence complexes, schools and hospitals. The companies may also have a corporate tax of around 30 percent on profits, though a tax holiday on a case by case basis could be considered. For all this, though not fixed, as per the current electricity act, the license or ownership could be for around 30 years.

Also, a part of this proposal is to keep around 100 MW size projects reserved for only Bhutanese companies or Bhutanese joint ventures in collaboration with foreign partners.

“Bhutanese companies will also be welcome to participate in the larger projects, provided they have the funds and capability,” said an official of the department of energy.

To avoid fronting or front companies, Bhutanese companies will have to have a minimum stake of 26 percent in any project. “This will ensure them board sitting rights, so that they’re involved in any decision taken,” said an official. From the RGoB’s side, Druk Green Power Corporation under DHI will be the main player involved in partnerships of major projects.

The policy on hydropower is currently being drafted by the department of energy and will have to pass scrutiny of the cabinet and possibly the Assembly. The Nu 40 billion being used for hydro projects has to be discussed in the plan talks in Thimphu and Delhi. The policy is drawing on experience of India and South East Asia that has private sector participation in electricity manufacture and distribution.