The government is set to opt for costly buyers' credit from two export credit agencies of China and Switzerland for installation and upgradation of a power generation unit at Ghorashal, officials said Wednesday.
Power Division officials said they will rehabilitate the existing 210-megawatt (MW) power unit-3 at the Ghorashal power hub to a combined-cycle one and set up a new 260-MW gas-turbine unit at a cost of Tk 26.41 billion.
The division recently sent a development project proposal (DPP) titled 'Re-powering project of the Ghorashal 3rd unit' to the Planning Commission (PC) for approval.
A senior official said the state-owned Power Development Board (PDB) has already signed agreements with the contractor and credit-providers for setting up the power units even before getting the DPP approval for financing.
He pointed out the procedural flaw in this case, as no government agency can sign agreement with bidders or contractors before PC approves DPP.
But PDB has signed a deal with the contractor and financer before getting approval of the Executive Committee of the National Economic Council (ECNEC), the government's highest economic policy-making body, the official added.
The Power Division officials said PDB signed deal with Swiss company Alstom and China's CMC on January 12 this year for the re-powering of Ghorashal 3rd power unit.
The state-run power generator invited international tender in March 2012 for the project.
Besides, PDB has also selected the Swiss Export Credit Agency (SERV) and China Export & Credit Insurance Corporation (SINOSURE) for taking Tk 20.20 billion as buyer's credits.
A senior PC official said they are not clear about the PDB's plan on rehabilitation of the existing 210-MW power plant and setting up a new 260-MW one.
"The existing 210-MW power plant was set up 28 years ago. Its derailed capacity has now come down to less than 170 MW. How this inefficient and old power unit will be upgraded to a combined-cycle one is a moot question."
"Besides, PDB in its DPP said the total capacity of the existing 210-MW power units after conversion to combined cycle and the newly-built 260-MW plant will stand at 416 MW. How the total generation capacity of the power unit will be 416 MW is not clear in the proposal," the official said.
The PDB officials said they will borrow the Tk 20.20 billion credits from SERV at 2.15 per cent plus six-month LIBOR rate and from SINOSURE at 3.15 per cent plus six-month LIBOR for the power unit installation project at Ghorashal.
Besides, the government has to pay one per cent commitment fee, one per cent arrange fee and as much structuring fee for the borrowings, he said.
In addition, the government will have to pay US$25,000 as security agency fee and $600,000 as guarantee processing and application fees to the World Bank's Multi-lateral Investment Guarantee Agency (MIGA), he added.
"Without searching for soft loan, PDB has opted for taking hard-term loans. This borrowing will be a costly one, and electricity production cost will escalate," another PC official said.
He said Power Division is in a hurry to get the project endorsed, and they are putting pressure on PC to do it as early as possible.
According to the DPP, re-powering the Ghorashal 3rd unit will be completed by June 2017.