The Economic Relations Division has sought opinion from four government agencies regarding a World Bank Group member’s loan guarantee proposal for developing a power plant.
Multilateral Investment Guarantee Agency (Miga), a member of the World Bank Group, is going to provide loan guarantee to the state-run North-West Power Generation Company for developing the Sirajganj 2 power plant, sources said.
Miga is providing the guarantee for loans disbursed by the Singapore-based Sembcorp Utilities Pte Ltd and Clifford Capital Pte and some other financial institutions whose names could not be known immediately.
The four government agencies whose opinions were sought are: Bangladesh Bank, Board of Investment, Power Division and the Finance Division.
The total loan amount - $263m – will cover the construction and operation of the 414 megawatt dual fuel plant.
Bangladesh government has a plan to add up to 6,000MW of electricity to the national power grid by 2023.
Miga guarantee covers the said amount against the risk of default on sovereign financial obligations for up to 20 years, said sources.
Delwar Hossain, senior assistant head of the Economic Relations Division (ERD) under the Ministry of Finance, has recently wrote to the top officials of the four government agencies, seeking “no objection” certificates from them.
On January 14, Miga Director and General Cousel Ana-Mita Betancourt wrote to ERD chief Mohammad Mejbahuddin, also a senior secretary, seeking the necessary permission from the Bangladesh government regarding the loan guarantee.
Sembcorp will provide $83m as equity loan and Clifford will provide $180m as non-equity loan, reads the Miga official’s letter.
Miga must obtain written approval for guarantees above $50m under its own and the Bangladesh’s government’s guidelines, the letter adds.
The guarantee covers the risks of developing the Sirajganj 2 power plant associated with transfer, exploration, breach of contract, war and civil disturbances such as terrorism and sabotage.
“Because the plans of investor ofter change during the development of their projects, we will deem that we are at liberty to increase the aforementioned amounts of guarantee by up to 10% without securing additional authroisation from the government,” the Miga letter says.
A top official of Miga has recently told an international media outlet that private insurance was unavailable for the financing in Bangladesh.
“Right now – and especially as we look into the future – Bangladesh faces an acute shortage of [power] generation capacity,” said Miga’s Executive Vice-President and CEO Keiko Honda.
“When 40% of the population has no access to energy, this is a major barrier to economic growth and human development,” Honda said.