The official committee on hard loans has sent back a proposal on borrowing US$224 million from a Chinese bank for setting up the 275-megawatt coal-fired power plant at Barapukuria as it found the loan too expensive, officials said Monday.
Besides, the committee, headed by Finance Minister AMA Muhith, in its meeting held recently also asked the Bangladesh Power Development Board (BPDB) to get the conditions of the proposed loan simplified through further negotiations with the Chinese lender, said Ministry of Finance (MoF) officials.
Earlier, the BPDB had selected the Industrial & Commercial Bank of China Ltd (ICBC) for borrowing the amount under buyers' credit for installing the proposed Barapukuria plant, a Power Division official said.
Meanwhile, an official team, led by the then BPDB member Abduhu Ruhullah, visited Beijing in September last year to negotiate with the ICBC for softening the lending conditions as per instruction from the government.
MoF officials said the Chinese bank has agreed to lend $224 million for setting up the US$330.52 million coal-fired power plant at nearly 6.0 per cent of interest and other service charges with shorter repayment period.
Besides, the BPDB has also appointed a 'controversial' Chinese contractor -- the Harbin Electric International Company Ltd -- for setting up the power plant, the Power Division official said.
The state-owned power development board has already signed deals with the Chinese joint venture company for setting up the plant and with the lender ICBC for bankrolling the project.
As per deal, the Chinese joint-venture company will set up the plant by July 2017.
The MoF official concerned said the loan will have to be repaid within 13 years, a shorter repayment period compared to other foreign loans.
"The rate of interest and other charges to be levied on the loan will stand at nearly 6.0 per cent. If taken, it would one of the most expensive loans take for financing a development project in Bangladesh," he told the FE requesting anonymity.
A joint-venture company -- Harbin Electric International Company Ltd, CCC Engineering and PR China -- will set up the Barapukuria 275MW power plant where the ICBC will give financial support as an Export Credit Agency (ECA).
According to the financial agreement, the Chinese bank will charge 3.25 per cent interest for its $224 million lending.
Besides, it will also charge 1.50 per cent management fee and 1.0 percent commitment fee for the credit.
In addition, the ICBC will charge an insurance fee which is equivalent to 6.36 per cent of the total credit amount, the official said.
Another official said the BPDB has already appointed the Harbin Electric which is black listed at the state-owned Eastern Refinery Ltd for its poor quality work in setting up a 3.0MW plant on the plant premises.
The company has also become controversial due to sub-standard works and unusual delays in installing Tongi 80MW power plant, Chandpur 150MW plant and Fenchuganj 100MW power stations, he added.
Since power sector is facing fund shortage, the government is forced to take the buyers' credit, a BPDB official said.
The BPDB had earlier set up each of 125MW two coal-fired power units at the Barapukuria coal mine area in the northern Bangladesh.
