Govt to issue Tk 50b bonds to clear power sector dues

The government is set to issue new bonds worth Tk 50 billion to address pending payments to private power producers, according to official sources.
The move is currently awaiting final approval from the Finance Ministry.
"We've completed all the necessary processes from our end to issue the new bonds amounting to Tk 50 billion. Now it's with the Finance Ministry for the final approval," a senior official of the state-owned Bangladesh Power Development Board (BPDB) told UNB.
The official expressed the hope that the BPDB will receive the final clearance from the Finance Ministry within this week, after which the bonds will be floated.
He added that some 25-27 public and private sector banks will be involved in the bond issuance process, similar to previous instances.
The initiative aims to ease the financial strain on independent power producers (IPPs) and stabilise the country's power sector, the officials said.
According to them, the BPDB initiated the move and approached the Power Division to discuss the issue with the Finance Division.
"We've been calculating BPDB's dues with the private power producers, known as independent power producers (IPPs)," said another top BPDB official.
He disclosed that BPDB's total unpaid bills currently amount to approximately Tk 420 billion, of which the IPPs are owed around Tk 70 billion.
Of the remaining amount, Tk 170 billion is owed for gas bills, while state-owned public sector power plants are owed Tk 100 billion.
Indian public and private sector entities, including the Adani Group, are expected to receive about Tk 80 billion.
In an earlier initiative aimed at stabilising the power sector, the previous Awami League government secured Tk 206.2 billion through the issuance of special bonds to clear outstanding liabilities to private power plants.
This effort involved collaboration with two prominent private banks -- City Bank and Pubali Bank.
A comprehensive agreement was signed on January 25, marking a crucial step in addressing the power sector's financial challenges.
As per the agreement, the government issued bonds worth Tk 198.50 billion to City Bank and Tk 775 million to Pubali Bank, according to the Ministry of Finance.
The government's inability to disburse subsidy funds has left private power plants struggling to meet their financial obligations, pushing some to the brink of insolvency.
To address this crisis, the issuance of special bonds with an 8 per cent coupon rate, reflecting the repo rate set by Bangladesh Bank, was introduced. Any future changes in the repo rate will adjust the bond interest rate accordingly.
At the end of the bond term, the government will settle bank dues along with interest and reclaim the bonds. Unlike typical 15-20-year bonds, these special bonds have a maximum tenure of 10 years to meet the urgent needs of the power sector.
Key players in the power sector, including Summit Power, United Power, Confidence Power, Baraka, Kushiara, Doreen, and Akron Power, are among the beneficiaries of this initiative.
The Finance Division has also disclosed plans for phased agreements with other banks, including BRAC Bank and Bank Asia, to further address the sector's liabilities.
Reflecting on the agreement's significance, managing directors of several banks expressed optimism.
While banks can leverage these bonds with Bangladesh Bank, it provides the government with crucial financial breathing space.