Dagachhu stacked an export PPA, pension equity and carbon credits into one dam

Bhutan sits on enormous Himalayan hydropower potential but had neither the capital nor a private-investment track record; its big dams had all been government-to-government grants from India. The 126 MW Dagachhu run-of-river project in Dagana district was deliberately structured as the country's first infrastructure public-private partnership.

The ownership stack did the persuading. Druk Green Power Corporation kept 59 percent, Tata Power of India took 26 percent, and — unusually — Bhutan's own National Pension and Provident Fund took 15 percent, turning citizens' savings into project equity. Debt came from the Asian Development Bank (US$51 million for civil works), Austria's RZB (EUR 41.23 million for electro-mechanical works) and the pension fund, at a 60:40 debt-equity ratio.

Every revenue risk was pre-sold. All power beyond royalty energy went to India under a long-term PPA with Tata Power Trading — renegotiated in 2014 from Nu 2.40 to Nu 2.90 per unit as tunnel geology pushed costs from Nu 8.16 billion to Nu 12.2 billion. And in 2010 the project was registered with the UNFCCC as the world's first trans-boundary Clean Development Mechanism project, monetizing the emissions its exports displaced in coal-heavy India.

The plant was commissioned in 2015 with mean annual generation of 515 GWh, proving the PPP template Bhutan had never tried.

Sell the power and the carbon across the border; let the pension fund own a slice

Giving the buyer (Tata Power) equity aligned India's grid with the plant's success, not just its output.

The pension fund's 15 percent kept part of the return inside Bhutan's own savings system.

CDM registration added a revenue layer that cost nothing to build — only paperwork and verification.

A long-term export PPA converted a remote river into contracted foreign-currency cash flow lenders could underwrite.

A small country's infrastructure becomes bankable when every revenue layer — export PPA, local savings, foreign debt, carbon credits — is stacked into the same special-purpose vehicle.

Dagachhu became Bhutan's proof that private capital works in its hydropower sector. ADB and Tata Power returned for the Nikachhu PPP, and in 2024 DGPC and Tata Power expanded their partnership to over 5,000 MW of new hydro and solar projects — built on the template Dagachhu wrote.