WB to give partial risk guarantee for proposed Bibiana power plant
Wednesday, 9 June 2010
A Z M Anas
The World Bank (WB) has agreed to cover up to US$150 million of the total loans to be borrowed from the commercial market for the planned 450 megawatt (mw) Bibiana power plant in Habiganj, officials said Monday.
But the global lender, which has rolled back power sector financing in Bangladesh since the 1990s, is not interested "at this point of time" to provide lending for the power station, languishing for years.
The International Development Association (IDA), the bank's low-cost lending arm, usually provides partial risk guarantee to the potential developers of large infrastructure projects including power stations implemented in poor countries.
"The bank, we are told, is ready to cover the full amount of commercial borrowing-it could cover up to $150 million," said a senior official at the Power Development Board, the state electricity provider.
Including equity and donor funds, he estimated that cost of the power generation project could reach $500 million, where commercial lending will make up a large slice.
A world Bank official who is not allowed to speak to this reporter on record confirmed the development but said the bank's country office is "closely monitoring the bidding process" of the first Bibiana power project.
Officials at the Power Cell said although it selected four pre-qualified bidders, only two came in to submit financial proposals for the "widely-watched" project, where the Asian Development Bank could partner with the World Bank.
The pre-qualified bidders include YTL Power International Berhad of Malaysia, Summit Industrial and Mercantile Corporation (Pvt) Limited and GE Energy LLC, Joint venture of China National Machinery and Equipment Import and Export Corporation (CMEC), and MPC Consortium of Meiya Power Company (Hong Kong) and Shasha Denis Ltd of Bangladesh.
Boosting electricity generation is one of key challenges for the government as it plans to add 9000 megawatts of electricity to the grid by 2015.
The government estimated it would require at least $9.0 billion to help turn around the ailing power sector. Power blackouts that peak at 2000mw a day take off 2.0 per cent of gross domestic product (GDP), according to the World Bank. If PRG is provided for Bibiana, this will be the third by the bank in Bangladesh--the other two are Meghnaghat and Haripur plants.
"We're committed to this project. Our request to the government is to ensure transparency in bidding. If that is ensured, money will not be a problem," the bank official said.
He said the Washington-based agency would carry out its own due diligence after the project is awarded to the developer.
Meghnaghat power plant is the first power generation project partially guaranteed by the bank, followed by Haripur project under which US$60.9 million out of $181 million was covered over 15 years.
Partial risk guarantees may also cover transfer risks that may be caused by constraints in the availability of foreign exchange, procedural delays and adverse changes in exchange control laws and regulations.
Partial risk guarantees are used in IDA member countries, in sectors undergoing significant reforms. IDA guarantees are offered on a pilot basis to private lenders against country risks that are beyond the control of investors and where official agencies and private markets currently offer insufficient insurance coverage.
The World Bank (WB) has agreed to cover up to US$150 million of the total loans to be borrowed from the commercial market for the planned 450 megawatt (mw) Bibiana power plant in Habiganj, officials said Monday.
But the global lender, which has rolled back power sector financing in Bangladesh since the 1990s, is not interested "at this point of time" to provide lending for the power station, languishing for years.
The International Development Association (IDA), the bank's low-cost lending arm, usually provides partial risk guarantee to the potential developers of large infrastructure projects including power stations implemented in poor countries.
"The bank, we are told, is ready to cover the full amount of commercial borrowing-it could cover up to $150 million," said a senior official at the Power Development Board, the state electricity provider.
Including equity and donor funds, he estimated that cost of the power generation project could reach $500 million, where commercial lending will make up a large slice.
A world Bank official who is not allowed to speak to this reporter on record confirmed the development but said the bank's country office is "closely monitoring the bidding process" of the first Bibiana power project.
Officials at the Power Cell said although it selected four pre-qualified bidders, only two came in to submit financial proposals for the "widely-watched" project, where the Asian Development Bank could partner with the World Bank.
The pre-qualified bidders include YTL Power International Berhad of Malaysia, Summit Industrial and Mercantile Corporation (Pvt) Limited and GE Energy LLC, Joint venture of China National Machinery and Equipment Import and Export Corporation (CMEC), and MPC Consortium of Meiya Power Company (Hong Kong) and Shasha Denis Ltd of Bangladesh.
Boosting electricity generation is one of key challenges for the government as it plans to add 9000 megawatts of electricity to the grid by 2015.
The government estimated it would require at least $9.0 billion to help turn around the ailing power sector. Power blackouts that peak at 2000mw a day take off 2.0 per cent of gross domestic product (GDP), according to the World Bank. If PRG is provided for Bibiana, this will be the third by the bank in Bangladesh--the other two are Meghnaghat and Haripur plants.
"We're committed to this project. Our request to the government is to ensure transparency in bidding. If that is ensured, money will not be a problem," the bank official said.
He said the Washington-based agency would carry out its own due diligence after the project is awarded to the developer.
Meghnaghat power plant is the first power generation project partially guaranteed by the bank, followed by Haripur project under which US$60.9 million out of $181 million was covered over 15 years.
Partial risk guarantees may also cover transfer risks that may be caused by constraints in the availability of foreign exchange, procedural delays and adverse changes in exchange control laws and regulations.
Partial risk guarantees are used in IDA member countries, in sectors undergoing significant reforms. IDA guarantees are offered on a pilot basis to private lenders against country risks that are beyond the control of investors and where official agencies and private markets currently offer insufficient insurance coverage.