KFW agrees to convert renewable energy project loan into grant
Monday, 6 April 2009
FE Report
German development lender KFW has agreed to convert a credit line into grants to help Bangladesh step up its major renewable energy programme, officials have said.
The Frankfurt-headquartered bank will dole out more than US$12 million (9.0 million euros) in grants to IDCOL, enabling the country's top alternative energy financier to expand its solar home programme.
"The money will be a crucial prop for boosting the renewable energy (RE) programme across the country," Mosharraf Hossain Bhuiyan, outgoing chief executive officer of IDCOL, said last week.
"Finance Division has already given us its go-ahead for the conversion of loan into grants. Now a subsidiary loan deal will be signed with the German bank to clear the way for conversion. We hope to utilise the funds by June," he said.
IDCOL (Infrastructure Development Company Ltd) is implementing the country's biggest solar-based lighting programme, financing as many as 280,000 systems in the off-grid remote rural areas.
"Our major donors include the World Bank, GTZ, Global Environment Facility (GEF) and the ADB. The demand for solar home systems (SHS) is on the rise. So KFW's grants will help us reduce the prices too," the IDCOl official, also an additional secretary, told the FE.
At 56 per cent growth, Bangladesh's renewable energy market is the one of the fastest in the world. The size of the market, almost overwhelmingly dominated by solar system, is estimated at $150 million and experts forecast it would top $500 million by 2012.
Officials said KFW has obtained consent of the German Federal Ministry for Economic Cooperation and Development to allow conversion of the proposed refinancing facility into grant.
While KFW is interested to provide grants, a source alleged the approval process has got stuck up since last July, due mainly to the bureaucratic tangle.
"We've a fund worth 9.68 million euros under KFW fund for IDCOL's alternative energy programme. This fund is a grant from KFW to the government of Bangladesh, which the latter has on-lent to IDCOL free of interest for providing refinancing facilities to its partners," Mr Bhuiyan said.
The proposed loan conversion will allow IDCOL to provide grant facilities for 234,000 additional SHS, thus plugging the financing shortfall for additional 300,000 systems, slated to be funded by the World Bank.
He said the World Bank is currently processing upto US$115 million in loan to help the state-run infrastructure lender to re-finance additional 300,000 solar systems across the country.
The IDCOL's outgoing chief said his organisation failed to fund its partners, as the process for the conversion of KFW loan into grant remained pending for months.
"This has seriously affected the smooth operation of the IDCOL's RE programme. The converted loan will be used by IDCOL under its RE programme only," said Mr Bhuiyan.
German development lender KFW has agreed to convert a credit line into grants to help Bangladesh step up its major renewable energy programme, officials have said.
The Frankfurt-headquartered bank will dole out more than US$12 million (9.0 million euros) in grants to IDCOL, enabling the country's top alternative energy financier to expand its solar home programme.
"The money will be a crucial prop for boosting the renewable energy (RE) programme across the country," Mosharraf Hossain Bhuiyan, outgoing chief executive officer of IDCOL, said last week.
"Finance Division has already given us its go-ahead for the conversion of loan into grants. Now a subsidiary loan deal will be signed with the German bank to clear the way for conversion. We hope to utilise the funds by June," he said.
IDCOL (Infrastructure Development Company Ltd) is implementing the country's biggest solar-based lighting programme, financing as many as 280,000 systems in the off-grid remote rural areas.
"Our major donors include the World Bank, GTZ, Global Environment Facility (GEF) and the ADB. The demand for solar home systems (SHS) is on the rise. So KFW's grants will help us reduce the prices too," the IDCOl official, also an additional secretary, told the FE.
At 56 per cent growth, Bangladesh's renewable energy market is the one of the fastest in the world. The size of the market, almost overwhelmingly dominated by solar system, is estimated at $150 million and experts forecast it would top $500 million by 2012.
Officials said KFW has obtained consent of the German Federal Ministry for Economic Cooperation and Development to allow conversion of the proposed refinancing facility into grant.
While KFW is interested to provide grants, a source alleged the approval process has got stuck up since last July, due mainly to the bureaucratic tangle.
"We've a fund worth 9.68 million euros under KFW fund for IDCOL's alternative energy programme. This fund is a grant from KFW to the government of Bangladesh, which the latter has on-lent to IDCOL free of interest for providing refinancing facilities to its partners," Mr Bhuiyan said.
The proposed loan conversion will allow IDCOL to provide grant facilities for 234,000 additional SHS, thus plugging the financing shortfall for additional 300,000 systems, slated to be funded by the World Bank.
He said the World Bank is currently processing upto US$115 million in loan to help the state-run infrastructure lender to re-finance additional 300,000 solar systems across the country.
The IDCOL's outgoing chief said his organisation failed to fund its partners, as the process for the conversion of KFW loan into grant remained pending for months.
"This has seriously affected the smooth operation of the IDCOL's RE programme. The converted loan will be used by IDCOL under its RE programme only," said Mr Bhuiyan.