Recurrent loan-repayment failure prompts the Export-Import Bank of China to contemplate flagging a joint-venture Bangladeshi power company as defaulter, officials have said, as financial crunch persists.
The alert came as Bangladesh-China Power Co (Pvt) Ltd (BCPCL), a joint venture of North-West Power Generation Company Limited and China National Machinery Import and Export Corporation, made repeated delays in loan repayment.
So far, at least two instalments of the credit have been repaid "after crossing the due time", sources said, prompting the Chinese bank to send in such message.
In a letter sent Monday to the managing director of BCPCL, A M Khurshedul Alam, a deputy general manager of China EXIM Bank said if the company failed to make the full payment of the current 6th instalment by December 8, Friday, the bank would be compelled to mark the company as defaulter.
"For the sake of avoidance of Event of Default (EOD), you are requested to keep the remaining amounts ready for repayment by the due date i.e. 8th December 2023," the reminder reads.
"Otherwise, EXIM Bank will not be in a position to refrain from imposing EOD at this time which will ultimately leave adverse effect on all the other ongoing projects in Bangladesh under EXIM Bank finance."
The size of the 6th instalment of the loan is US$140.892 million of which $88.445 million has been paid until November 30th and $52.447 million remained unpaid.
The loan was taken by BCPCL from the Chinese bank to build Payra 1320-megawatt coal power plant of which the first unit came into commercial operation in May 2020 and the second unit in December the same year. The second phase of the Payra 1320mw Thermal Power Plant is now under construction at the southern coastal power hub.
"We have been observing the delays in loan-repayment progress from your side with much concern," the lender mentions.
It says that though the EXIM bank has "disappointments over the late repayments and reserves the right to exercise the Event of Default (EOD), it was not done so exceptionally upon your petition as a friendly gesture allowing you to build up a strong financial foothold".
The deputy general manager of the bank requested the BCPCL management not to establish the "friendly gesture" as references in similar future events.
In the reminder he also has threatened that the failure to make payment of 6th instalment may result in potentially uncertainty over financing the second phase of the project.
"Your prompt and positive response on the above will help in maintaining the healthiness in our relationship," notes the banker of China that has undertaken and executed numerous megaprojects in Bangladesh.
The BCPCL managing director, A M Khurshedul Alam, told the FE Tuesday that the payment delay was happening due to shortage of foreign-currency reserves.
"I won't fail to make the payment of 6th instalment," he said, adding that the company paid another $6.0 million on Tuesday and could pay $10 million more Wednesday.
He said the BCPCL gets five days extra over the scheduled date to make the payment. "We won't face penalty," says Mr Alam.
Acknowledging the risk of being marked as defaulter he said, "If we fail to make payment in time, the bank won't release funds for other projects as well".
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