BPDB seeks conversion of its large debt into equity

A proposal to convert a large sum of Tk 254 billion that the Bangladesh Power Development Board (BPDB) owes to the government is under consideration, sources said.
The proposal is seen as a move to rescue the state-owned entity from near-bankruptcy.
Officials said the debt, which includes both outstanding loans from government coffers and interest thereon, threw the power board into a negative-equity status.
Presently, the negative debt-equity ratio of the BPDB stands at 114:14, which shows a yawning gap that discredits the board to creditors in case of seeking loans.
As per the finance ministry policy, the requisite debt-equity ratio should be 40:60.
The negative debt-equity ratio indicates that the BPDB is "almost a bankrupt" state organization, according to a finance ministry official.
As a result, the BPDB has to face an embracing situation while seeking loans from foreign lenders for implementing its various development projects, the sources said.
"The move to convert the outstanding government loans along with interest into equity has been taken so that the BPDB regains a positive debt-equity status which will ultimately help in its browning from lenders," said a high official of the power board.

The BPDB purchases electricity from the private and government power plants as a single buyer, sources concerned said.
Prices of the existing private power plants' electricity are much costlier than production cost. As a result, the government has to provide excess funds to the BPDB for purchasing electricity from the private power plants, they said explaining how it bogged down to the near-bankrupt position.
The BPDB has incurred net losses of over Tk 254 billion in the last eight fiscal years between 2007-08 and 2013-14 due to purchase of electricity at higher prices from the different private rental, quick-rental and independent power plants, they mentioned.
The total losses ballooned mainly due to the gap between purchase and sale rates of electricity, they also said.
The government has handed out Tk 238 billion in the last eight years to help the entity foot the fat bill.  Interest on the loans has stood at Tk 15.77 billion.  The entire losses counted by the BPDB came to Tk 254 billion in the period.
"Conversion of the BPDB's loans into equity will be ultimately borne by the people in the form of increased prices of electricity," Professor of the University of Dhaka Dr Md. Ali Taslim told the FE Thursday.
He said the economy will not grow in future to an expected level. The people of the country will have to face a lot of problems due to different government subsidies.
The DU professor reminded that the Greek crisis has been a result of this type of government loans converting into equity.
As a result, the government of that EU country stepped into a trap due to the previous debt crisis which converted into equity of other form.
Presently, they are meeting the debt crisis by cutting salaries and pensions of the service-holders.
"Approval for new independent power plants will be continued in the country in future as the government failed to establish big power plants. On the other hand, demand for electricity is increasing gradually," he said.  
Country's energy regulator Thursday increased natural gas and power tariffs on average by 26.29 per cent and 2.93 per cent respectively for retail consumers with effect from September 01.
There are about 96 public and private power plants in operation in the country. Average Tk 6.54 needs to generate per-unit electricity. The BPDB purchases electricity at different rates from the private power plants.     
Despite several attempts through phone or SMS, chairman of the BPDB Khandker Maksudul Hassan did not respond.
The power division has made significant progress in implementing two mega coal-fired power projects, including Indo-Bangla joint venture and JICA-funded 1200MW power projects in Rampal and Madarbari respectively, an official of the division said.
Earlier, the BPDB had sent a proposal for converting its Tk 254-billion loans into equity. The finance ministry sat Thursday to review the BPDB's proposal. But the ministry did not make any concrete decision.
A meeting source said, "It will take time to convert the BPDB loan into equity."
When contacted, Director, Finance, of the BPDB Mizanur Rahman said the government provided loans at 3.0 per cent rate of interest as subsidy for purchasing electricity from private plants. "The loans are becoming liability of the BPDB day by day."
He said foreign lenders would prefer to approve any loan to BPDB if the negative debt-equity ratio of the agency is made into positive.
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