GuarantCo has provided a guarantee to support a 15-year $13.5 million dual currency financing solution on behalf of Technaf Solartech Energy Limited (TSEL), the first and currently only operational utility-scale solar project in Bangladesh, developed by Joules Power Limited, a Bangladeshi developer.
The guarantee will be shared across two tranches of US Dollar (USD) and Bangladeshi Taka (BDT) debt provided by Standard Chartered (SC).
GuarantCo, a Private Infrastructure Development Group (PIDG) company, provided an innovative structure which combined a credit guarantee with a liquidity extension guarantee, thereby mitigating both payment default risk and liquidity risk for Standard Chartered.
The liquidity extension guarantee allows TSEL to benefit from a 15-year tenure for its loan whilst also allowing SC to exit the transaction after 8 years (the typical maximum tenor in Bangladesh for infrastructure projects) should there be liquidity constraints.
In the absence of a new funder replacing SC then GuarantCo would assume the refinancing risk whilst TSEL would continue to benefit from the full 15-year tenor.
The solar power plant located at Teknaf, Cox’s Bazar Bangladesh, has an installed capacity of28MW/20MW.
The expected annual yield is 43,000MWh and at peak production the plant supply will cover up to 80% of the present electricity demand of the entire Teknaf region.
GuarantCo also obtained a $107,000 grant from the Technical Assistance Facility (TAF) of PIDG to fund and undertake technical and health, safety, environmental and social(HSES) due diligence and prepare a comprehensive environmental social action plan review by an independent advisor.
The HSES review will bring the project in line with International Finance Corporation (IFC)performance standards and will not only demonstrate the critical requirements of such standards to other developers in the sector but also set the benchmark for future projects in Bangladesh.
The project will have a significant transformational impact in Bangladesh as it will set the tone for increased contribution of renewables in the energy mix of the country.
The innovative financing structure from GuarantCo resulted inTSEL winning the Finance Asia ‘Best Bangladesh Deal for 2018.’
Lasitha Perera, CEO of GuarantCo, said: “We are proud to have closed this landmark financing for the first-ever grid-connected solar power plant in Bangladesh and make a contribution to the country’s growing economy and its rising energy demand. This project will have a significant impact on the energy transition of the country towards increasing the share of renewable energy in the energy mix."
Nuher Latif Khan, Managing Director of TechnafSolartech Energy and a Director of the Dhaka Chamber of Commerce & Industry (DCCI), said: “Increased reliance to renewable energy sources like solar is not only environmentally friendly but also reduces the drain on Bangladesh's foreign currency which is being spent on importing costly fossil fuels."
