A Bangladesh-China joint venture that implemented the 1,320-megwatt thermal power-plant project in Patuakhali continues entreaty for finance ministry's intervention to get US dollars for timely loan repayment to a Chinese bank.
Sources say a severe dollar dearth in Bangladesh has caused serious disruptions to the repayment of loan instalments of various development projects.
And repayment of loans by the Bangladesh-China Power Limited (BCPCL) management to the Chinese ExIm Bank has been inordinately delayed as such.
BCPCL is a joint venture between Bangladesh's North-West Power Generation Company Limited (NWPGCL) and China National Machinery Import and Export Corporation (CMC).
Due to repeated delays in paying instalments, the bank threatened the BCPCL of calling an 'event of default', which might result in the closure of the plant as per schedule eight of the loan deal.
The seventh instalment of $140 million, which includes interest amount, is due in the first week of June 2024.
The company in a letter to the Power Division this week made a request to manage dollars by relaying the issue to the Bangladesh Bank through the Finance Division.
The BCPCL management says its corresponding bank, Sonali Bank PLC, has informed the company that it is "not in a position to provide such requirements of USD".
"Thus, the Bangladesh Bank is the only source that has the capability to support our FX liquidity requirement," the BCPCL letter reads.
The joint-venture firm took $1.984 billion in loan from the ExIm Bank of China, while other shareholders funded $496 million to construct the $2.48-billion power plant.
Officials have said the BCPCL has so far paid six out of 23 instalments of principal amounting to $416 million. The outstanding loan-principal balance now stands at $1.465 billion. The ExIm Bank recently issued payment advice for $140 million for the June instalment.
According to the letter, loan repayment of around $280 million is required each year to maintain the debt-service obligation.
Moreover, another $140 million (equivalent to one instalment) is required maintaining in the Debt Service Reserve Account (DSRA) being reserved prior to six months of a repayment date or prior to the upcoming repayment date.
However, maintaining a balance of $140 million in the DSRA is not possible due to dollar crisis in Bangladesh, the letter mentions.
BCPCL managing director AM Khurshedul Alam in the letter requested arranging dollars "to meet the foreign-currency obligation on account of debt servicing to avoid loan default and payment of defaulted interest."
The company faced a default-like situation before making its sixth instalment, which was due on 08 December 2023.
Of the $140.892-million instalment, BCPCL had paid $88.445 million until November 30 in phases and $52.447 million remained unpaid then.
Had BCPCL failed to make the full payment of the sixth instalment by December 08, it would be forced to mark the company as a defaulter, a deputy general manager of the ExIm Bank wrote earlier.
"For the sake of avoidance of Event of Default (EOD), you're requested to keep the remaining amount ready for repayment by the due date, i.e. 08 December 2023," reads the letter.
"Otherwise, EXIM Bank won't be in a position to refrain from imposing EOD at this time, which will ultimately leave an adverse effect on all other ongoing projects in Bangladesh under EXIM Bank finance."
Mr Alam then told the FE that the payment delay was due to a shortage of required foreign currency in the country.
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."
Dr Zahid Hussain, a former lead economist at the World Bank's Dhaka office, told the FE earlier that the country's foreign-currency shortage would not lessen unless the exchange rate was made fully market-based.
"Thus, the problem of repayment of foreign loans will continue," he said.
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