The project was implemented by Bangladesh Power Development Board (BPDB). Applied Energy Services (AES), Meghnaghat was selected for the project. The selection was based on lowest levellised tariff among the five competing bidders, which ranged from 2.79 to 3.98 US cents/kWh. An agreement was signed with the successful bidder in mid-1999.
The agreements included a power purchase agreement with BPDB, implementation agreement with the Government, gas supply agreement with Titas and land lease agreement with BPDB. The land was supposed to be prepared (dredged filled and compacted) by BPDB, under a public sector project.
It was a BOO type of project with 22 years operating period; three additional years were allowed for construction. Most of the agreements were done under English law and the land lease agreement was under Bangladesh law. The Government gave a payment guarantee on behalf of BPDB and a performance guarantee on the gas supply by Titas. Financial closure was reached in April 2001. The commercial operation date was planned 30 months after the financial closure date.
AES also agreed to supply BPDB about 1.4 billion kWh of free electricity worth US$ 34.75 million, which was equivalent to five months full-load production.
Project description
Net generation capacity of the project was 450 MW. The plant configuration consisted of two gas turbines of 137.5 MW each and one steam turbine of 190 MW, and a condenser.
The generated electricity was to be delivered to the national power grid through three different transmission lines. The Engineering, Procurement and Construction (EPC) contractors were Hyundai Engineering & Construction Co. Ltd and Hyundai Heavy Industries Co. Ltd.
Project Financing
The total estimated project cost was US$ 300 million with an equity participation of US$ 80 million. The total project borrowings of US$ 220 million consisted of the following:
IDCOL: | US$ 29 m (senior debt) |
IDCOL: | US$ 60 m (junior debt) |
ADB: | US$ 50 m (principal) |
ADB: | US$ 20 m (Complementary Financing Scheme or CFS - a credit enhancement product of ADB) |
ANZ: | US$ 70 m (in two separate tranche) |
Security to the lenders was provided on the plant, site, rights and title to the project agreements. IDA provided a partial risk guarantee of US$ 70 million for the ANZ loan backed by a counter-guarantee by the Government. Financial closure took place in April 2001 and the first disbursement took place in October 2001 after all the pre-requisites of Conditions Precedent Documents (CPDs) had been submitted.
Problems faced in implementing the project
BPDB’s handling of the tendering process was slow for various reasons.
The land was not prepared by the BPDB as per the specifications. Soil preparation was inadequate regarding protection against earthquakes. BPDB could not do this and the EPC contractor had to do it at BPDB’s cost. This delayed the project for few months and the Government had to pay US$ 4.5 million as penalty.
As per the Power Purchase Agreement (PPA), there was a provision for supplying free electricity by the project company to BPDB prior to commercial operation, which was stipulated after a long negotiation at the cost of delay. Such commitment of supplying free electricity by the project company was an unusual case and resulted in undue complexity in the procurement process.
In mid 2000 (during the construction phase) EPC contractor Hyundai faced significant liquidity problems. Lenders became doubtful if Hyundai could implement the project. The lenders compounded Hyundai’s problems by insisting on a performance guarantee from Hyundai six months before the completion date.
Current status
This is a successful PPP power project in Bangladesh. Presently the plant is smoothly running and supplying power to the national grid.
Courtesy: Infrastructure Investment Facilitation Centre, Bangladesh.