Govt takes $1.5b hard loans to install five power plants

FHM Humayan Kabir

The government has finally decided to borrow hard-term loans worth nearly US$1.5 billion from export credit agencies (ECAs) for setting up five big power plants, officials said Monday.

The Power Division officials said they have already selected bidders for setting up the plants, to be mobilised with the ECA loans.

“We have already selected the contractors. They have come up with loans from the ECAs. The contractors will ensure funding and setting up of the plants,” said a senior official.

Financing from the ECAs, the sources said, is hard-term borrowing with a high rate of interest and a short maturity period (2 to 10 years).

The ECA loans are usually supplier’s credits, extended to the exporter, but they may also be buyer’s credits, extended to the importer. The risk on these credits, as well as on guarantees and insurance, is borne by the sponsoring government.

An official of the Power Division said the government has already approved $622 million ECA credit for the state-owned Ashuganj Power Station Company Ltd (APSCL) for installing two gas-fired power plants of 225 megawatt and 450 mw capacity respectively.

The APSCL signed a contract in October 2011 with the selected contractors — South Korean Hyundai Engineering Company and Daewoo International Corporation — to build the 225 mw gas-based combined cycle power plant at Ashuganj station.

In May last year, the APSCL signed another contract with a consortium of Inelectra International AB of Sweden and TSK Electronica y Electricidad SA of Spain to build a 450 mw gas-based plant at the same power station.

Besides, the Ministry of Finance (MoF) has also approved borrowing from the ECAs to set up three other big power plants, including the Bibiyana 450 mw plant-III, Shahjibazar 300 mw plant, and Barapukuria-III 250 mw plant.

The proposed Bibiyana plant will require funds worth nearly $400 million, the Shahjibazar plant $350 million, and the Barapukuria plant nearly $250 million.

The Bangladesh Power Development Board (BPDB) signed contracts with Japanese and Korean companies to set up Bibiyana 399.28 mw base-load combined cycle power plant in December last year.

As per the contracts, the BPDB will repay the loans at 3.28 per cent interest rate over a period of 10 years.

The joint venture company of Guangdong Power Engineering Corporation and Guangdong Electric Power Design of China will set up the Shahjibazar 300 mw power station at a cost of $279.678 million.

Besides, the joint venture of Harbin Electric International Company and CCC Engineering (HEI-CCCE JV) will install the 250mw Barapukuria-III power station at a cost of $248.87 million.

The cabinet committee on government purchase in January this year approved the bid of the Shahjibazar 300mw combined cycle power plant project and 250mw Barapukuria-III coal-fired power station.

The contractors will arrange loans from the ECAs to install the power stations, said a BPDB official.

“The contractors will come forward with the financers and set up the power stations. We will repay the money in seven to 10 years,” the official told the FE.

The BPDB official said the ECA credit will be hard in nature since those will be taken at higher interest rates with shorter maturity periods compared to the lower interest rates and longer maturity periods offered by different bilateral and multilateral donors to Bangladesh.

ECAs currently finance or underwrite about $430 billion of business activities across the globe, about $55 billion of which goes towards financing projects in the developing countries.

Source: Financial Express

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