The Basochhu/Rurichu Rivers were identified in the mid 1970s by hydropower engineers as a potential source of energy production in the medium-size range. Concrete plans, however, had not been developed until 1989, when the Austrian Government took interest in the project and financed the pre-feasibility study. In the same year a team of engineers visited the site and commenced the preparation of the pre-feasibility study, which showed promising results. In 1993 and 1994, a team of Austrian Engineers carried out the preliminary design of the project.
On April 14, 1995, the Financing Agreement was signed between the Royal Government of Bhutan and the Government of Austria. In 1996, an offer for the engineering and consultancy services for the Upper Stage was finalized while at the same time the Project Management Unit (PMU) was established within the then Department of Power, Thimphu, for the coordination and general administration of the project. The Technical Implementation Agreement (TIA) was signed between a Consortium of Austrian Consultants and the PMU on September 20, 1996.
The project taps the water from the Basochhu stream, which has a catchment area of 162 km2, above the Basochu waterfall through a 2.6 km long headrace tunnel and a 1.4 km long penstock. The two generating units have a total capacity of 24 MW and a mean annual energy generation of 105 million units.