BE2C2 Report — The Bangladesh government aims to bring the whole country under electricity coverage by 2021 with a combination of public-private partnership (PPP) and independent power producers (IPPs). To achieve this target, gas-rich Bangladesh requires multibillion dollar investments in the power sector – both fossil and renewable. As a result, the government is increasingly diversifying the sources of investment.
“We are attracting innovative funds. One of the big innovative ways is Export Credit Agency (ECA) financing,” Nasrul Hamid, state minister for power, energy and mineral resources, told reporters at the Dhaka Reporters Unity on January 21 reported Daily Star.
Under the ECA arrangement, the agencies involved in the project implementation will mobilize finances, said the minister.
Small power projects are attracting private sector investment while the government is seeking innovative financing through joint venture and the ECA backed financing for large power projects led by Hongkong and Shanghai Banking Corporation.
HSBC pioneered the ECA financing in the country’s power sector back in 2012, arranging $420 million credit facility for Ashuganj Power Station – second largest in the country. Since then, HSBC has arranged about $1.14 billion of financing to implement five major power projects in the country. Other international banks followed the suit.
Last month, HSBC organized a thought-leadership program in Dhaka on China’s “One Belt One Roadway” initiative in collaboration with the Bangladesh China Chamber of Commerce and Industry. Titled “Bangladesh-China Business Outlook: One Belt One Road and RMB internationalization,” the seminar participants discussed increased connectivity with other economies in the region and investment, as China’s Belt and Road Initiative could lead to the realization of a new economic area, the participants noted.
Last September, during President Xi’s visit to Dhaka, China and Bangladesh agreed to elevate their relationship from a “comprehensive partnership of cooperation” to a “strategic partnership,” and signed off on loans worth $24 billion, enhancing Sino-Bangladeshi energy cooperation.
According to experts, Bangladesh has one of the lowest per capita power consumption in the region which stands at roughly 350kWh compared to 1,075 kWh in India, 527 kWh in Sri Lanka, and 495 kWh in Pakistan. Bangladesh needs more credible power supply to bring the remaining one-third population under its electricity coverage.
A total of $6.9 billion ($3.1 billion in the public sector and $3.8 billion in the private sector) of investment has been made for setting up power plants in the country for generating 7,200 megawatts (MW), according to Bangladesh Power Development Board (BPDB).
To implement the proposed ongoing power projects which will generate about 10,700MW electricity, the country will require a total investment of $15.5 billion, out of which the public sector is investing $8.2 billion and the private sector investment will be $7.3 billion.
The government also has a plan to generate 60,000MW of electricity by 2041 – a move that will require further investment worth $20 billion.
Bangladesh’s growth is expected to increase to 7.2 per cent this fiscal year from 7.1 per cent last fiscal year. It is one of the fastest growing emerging economies according to World Bank and other global multilateral development institutions.