The Planning Commission has sent back a power-generation project for Ghorasal as costly buyer's credits are being taken for implementation without trying for concessional loans, officials said Wednesday.
Power Division officials said the Power Development Board (PDB) moved to borrow costly buyer's credits from two export-credit agencies of China and Switzerland for installing and upgrading the unit-3 of Ghorashal Plant.
The state-run PDB has planned to rehabilitate the existing 210-megawatt power unit-3 to a combined-cycle one and set up a new 260MW gas-turbine power unit at a cost of Tk 25.19 billion (US$324.03 million).
Earlier, the Power Division had sent a development project proposal (DPP) titled "Re-powering project of the Ghorasal 3rd unit" to the Planning Commission for getting the go-ahead.
A senior government official said PDB had already signed agreements with the contractor and the credit providers for setting up the power units before getting the seal of approval on the DPP.
Power Division officials said the PDB signed twin deals with Swiss company Alstom and China's CMC on January 12 this year for the re-powering of the Ghorasal 3rd power unit.
The state-owned power generator invited international tender in March 2012 for repowering the unit-3 Ghorashal power plant.
Besides, the PDB has also selected the Swiss Export Credit Agency (SERV) and China Export & Credit Insurance Corporation (SINOSURE) for borrowing Tk 20.19 billion ($259.75 million) in buyer's credit.
"The state-owned agency hasn't searched concessional loans. Rather it has directly gone for borrowing the hard-term credits. It will raise the cost of power generation," the official told the FE, preferring anonymity.
Moreover, he contended, no government agencies can sign agreement with bidders or contractors before approval for the DPP from the Planning Commission (PC).
PDB officials said they would borrow from the Swiss lender SERV at 2.15 per cent plus six-month LIBOR rate and from the SINOSURE at 3.50 percent plus six-month LIBOR rate for the Tk 20.19 billion credit.
In addition, government has to pay 1.0 per cent commitment fee, 1.0 per cent agency fee and another 1.0 per cent structuring fee for the credits, he said.
Also, the government will have to pay US$25,000 as the security-agency fee and $600,000 as guarantee processing and application fees to the World Bank's Multilateral Investment Guarantee Agency (MIGA).
A senior Planning Commission official said they had asked the Power Division to clarify the borrowing of the costly loans instead of searching for concessional loans available from any lenders at this moment of global financial meltdown.
"Besides, we have also asked the Power Division to clarify the plan of the PDB on rehabilitation of the existing 210MW power plant and setting up a new 260MW one," he said.
The existing 210MW power plant was set up 28 years ago. Its derailed capacity has now come down to less than 170 megawatts.
"How this inefficient and old power unit will be upgraded to a combined- cycle one is questionable," he said.
"Besides, the PDB in its DPP said the total capacity of the existing 210MW power units after conversion to Combined Cycle and the newly set-up 260MW plant will stand at 416 megawatts. How the total generation capacity of the power unit will be 416 megawatts is not clear in the proposal," the official said.
"Without searching for soft loan, the PDB has gone for taking hard-term loans. This borrowing will be costly one and the electricity production cost will escalate," another PC official said.
He said the PDB has not described in detail work-plan of some of the components of the project (like land-development works) in the DPP. But those must have to be reflected clearly in the DPP, he argued.
The official said the Power Division is in a hurry to have approved the project as they are putting pressure on the PC to do it as early as possible.
The PC official said if the Power Division could clarify correctly on the queries of the commission, the DPP would be recommended.
According to the DPP, the re-powering of the 3rd unit of the Ghorashal plant will be completed by December 2017.
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