A provision of “Payment Guarantee” for renewable-energy sector is now restored, nearly two years after it was scrapped by the interim government only to dissuade both local and foreign investors from making fresh investment, sources said.
In the absence of payment guarantee, local and foreign banks as well as multilateral lenders shied away y from providing loans for renewable energy projects, leading to lower response in the tenders.
Many tenders on renewable-energy projects received only a few bidders during the last two years, forcing the government to extend bid document-submission deadlines repeatedly.
Now investors say as the government agreed to include the provision of payment guarantee in the bid documents, they have no risks in making investment, and getting bank loans to set up renewable-energy-based power plants will be easier for them.
Officials said the investors had long been pressing the government to restore the provision of payment guarantee so that they can secure loans to set up green power plants.
In the face of their repeated demands, Power Division in a recent letter to Bangladesh Power Development Board (BPDB) has asked for incorporating the provision of payment guarantee while inviting tenders in the future, sources said.
Contacted Friday, Golam Mortuza, Director IPP Cell-1 of BPDB, acknowledged government directives to incorporate the provision of payment guarantee again into bid documents, now that government thrust on energy search grows amid a crunch.
“We are working on it. It was a long demand from the private sector,” he told The Financial Express.
Mr Mortuza said the government guarantee would help attract both local and foreign investments in the renewable-energy sector.
As the interim government had written off the guarantee and was not issuing guarantee letters, a number of solar-power projects faced setbacks in getting loans disbursed from local and foreign financiers, including the Asian Development Bank and Japan International Cooperation Agency.
Amid the stalemate, the ADB- JICA duo in a letter to then energy adviser reminded about upholding the contractual obligations, including the issuance of payment-guarantee letters in favour of the independent power producers.
Imran Chowdhury, Deputy Director of Sonagazi Solar Power Ltd, said Power Division’s decision to include the payment guarantee in contractual framework is a significant step towards improving the bankability of Bangladesh’s utility-scale renewable-energy projects.
“Payment security is one of the key considerations for international lenders, and this measure is expected to strengthen lender confidence and facilitate access to long-term project financing,” the company man told The Financial Express.
He has suggested incorporating the provision of payment guarantee into the tender documents of BPDB’s ongoing IPP-based solar projects before the bid-submission deadline to maximise the benefits of the decision.
“This would provide greater certainty to prospective bidders, encourage wider participation from experienced international project developers and IPPs, and strengthen competition,” said Mr Chowdhury, also a director of Bangladesh Sustainable and Renewable Energy Association.
Stakeholders say as Bangladesh moves towards its target of 10-gigawatt renewable- energy capacity by 2030, improving project bankability will be essential to mobilise international financing and accelerate the implementation of utility-scale solar projects.
Amid the significant fall of electricity generation due to the shortage of gas and fuel oils and rising power subsidy, the new government in the recent months gave utmost importance on producing clean power.
To this end, the renewable-energy sector has been granted various facilities, including waiving import duty on equipment for clean power plants and offering tax rebate for green power consumers.
Bangladesh currently has the installed capacity to generate 1,822 megawatts of electricity from renewable sources, according to the Sustainable and Renewable Energy Development Authority (BSREA).
Source: https://thefinancialexpress.com.bd/economy/payment-guarantee-restored-to-lure-investment-in-renewable-power
