FHM Humayan Kabir
The Planning Commission (PC) has sent back three power plant project proposals to the Power Division asking the latter to take opinion of the Economic Relations Division (ERD) on its borrowing hard-term loans for setting up the same, officials said Wednesday.
The Commission’s Project Evaluation Committee (PEC) at its review meeting, held recently, asked the Division for submitting ERD’s opinion on whether the commercial borrowing to the tune US$ 780 million will be feasible or not.
The BPDB, however, has already signed deals with foreign banks on hard-term for installing the three power plants in clear violation of government rules relating to commercial borrowing.
Sources said any government agency requiring foreign funds for development projects would have to request the ERD first to arrange soft loans. In the event of non-availability of such loans, the agency concerned might borrow foreign commercial loans with prior clearance from the ERD.
But the BPDB has signed deals on commercial loans for three power plants bypassing all these requirements.
The Bangladesh Power Development Board (BPDB) has sought approval for the installation of the 275mw coal-based power plant at Barapukuria at a cost of $330.52-millon, 300-450mw gas-fired power plant at Ghorashal at accost of $421.25-million and 100mw furnace oil-based power plant at Chapainawabganj at a cost of $137-millon.
“The rate of interest against the credits is much higher than the concessional loans, which the government agencies are used to borrowing. In addition, the lender will charge commitment fees, management fees, insurance premium and several other charges for their loans,” a senior PC official said.
“The actual cost of lending is likely to make the projects economically non-viable. The BPDB needs to clarify the matter to us. That is why we have asked the Power Division to submit ERD’s opinion on such commercial borrowings,” he told the FE requesting anonymity.
Power Division has already signed the buyers’ credit deal with a Chinese commercial bank at a rate of nearly 4.0 cent for setting up the 275mw coal-fired power plant at Barapukuria, officials said.
Besides, the BPDB has appointed a ‘controversial’ Chinese contractor — Harbin Electric International Company Ltd, for setting up the Barapukuria power plant project, they said.
The BPDB will borrow US$ 224 million credit from the Industrial & Commercial Bank of China Ltd (ICBC) for the plant and the loan is repayable within 13 years. The bank will charge 3.99 per cent rate of interest.
Besides, it will charge 1.50 per cent management fees and 1.0 per cent commitment fees per year, 6.62 per cent as insurance fees for the total credit amount and cost of expenses (including legal fees) — $150,000, the official said.
Power Division officials said the BPDB would take commercial loan amounting US$ 109 million from the HSBC for the 100mw power plant at Chapainawabganj.
The bank will charge LIBOR plus 3.5 per cent to LIBOR plus 5.5 per cent rate of interest for its loans. Besides, the state-owned BPDB will have to pay 6.6 to 12.3 per cent as insurance fees, 1.0 to 1.5 per cent as upfront fees, $25,000 as agency fees and another $25,000 as Export Credit Agency fees.
If the hard-term loan is taken, the electricity production cost will be Tk 21.70 per kilowatt hour (kwh), officials estimated.
The BPDB is also borrowing hard-term loan for setting up the 300-450mw power plant at Ghorashal.
The rate of interest for the power plant will be charged LIBOR plus 3.5 per cent. Besides, the lender will also charge commitment fees, management fees and insurance premium which will make the loan costly, officials said.
A senior ministry of finance (MoF) official wondered when the government was offering the lenders sovereign guarantees, then why the BPDB was going to pay them insurance fees and premiums.
The PC official said, “We know that Bangladesh needs power. But it does not mean that the power generation projects, which will not be viable due to hard-term borrowing, should be undertaken.”
Against this backdrop, until ERD gives positive opinion on the hard-term borrowing by BPDB, “we will not approve the power generation projects,” he added.