Power Sector Policy & Financing

M. Amzad Hossain
Director Commercial
Power Cell
 Vision & Mission

Vision Providing reliable electricity to all at an affordable price

Ensuring reliable electricity for all by 2021 through integrated

Mission development of generation, transmission and distribution system
 Strategic Development Goal

Ensure access to affordable, reliable, sustainable and modern energy

Goal-7 services for all.

Goal-9 Build resilient infrastructure, promote sustainable industrialization

and foster innovation (3i).

Goal-13 Climate Action.

 Legislation & Policy Framework
 National Energy Policy, 1994(amended in 2005)

 Private Sector Power Generation Policy (IPP) of Bangladesh, 1996

 Policy Guideline for Small Power Plant in Private Sector, 1998

 Captive Power Plant, 2007

 Policy Guidelines for Enhancement of Private Participation in the Power Sector, 2008

 Remote Area Power Supply System(RAPSS) Guidelines, 2007

 BERC Act, 2003

 RE Policy of Bangladesh, 2008

 Emergency Energy & Power Supply Special Act, 2010

 Sustainable & Renewable Energy Development Authority (SREDA) Act, December, 2012.
 Salient features of IPP Policy

 Investment friendly
 Tariff based bidding
- Capacity Charge : ensures reasonable ROI
- Energy Charge : fuel cost is pass through
 Guaranteed by Govt. for payment obligations through Implementation
Agreement(IA)
 Easy consents from various agencies

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 Major Incentives for IPPs
 Exemption from corporate income tax for 15 years.
 Plant and equipment (full value) and spare parts (10% of original plant cost) without
payment of customs duties, VAT and any other surcharges.
 Repatriation of equity along with dividends.
 Tax exemption and repatriation facilities on royalties, technical know-how and technical
assistance fees
 BDT convertible into foreign currency
 IA and PPA ensure fair and reasonable risk allocation, and payment by the Purchaser is
guaranteed by GOB
 Payment under the PPA is ensured by Letter of Credit

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 RE Policy

 SREDA has been created to promote and execute Sustainable

Energy and Energy Conservation activities
 “Renewable Energy Policy of Bangladesh ” adopted in 2009 sets
target of 10% from Renewable Energy of total generation by
2021 which will account for 3,100 MW

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 Power system expansion plan
Year 2017 2021 2030 2041

Generation 15,821 24,000 40,000 60,000

Capacity(MW)

Grid 30,993 46,450 100,000 261,000

Capacity(MVA)

Distribution(KM) 401,000 478,000 526,000 530,000

 Investment Requirement
(in billion US$)

Sector 2017-2021 2022-2031 2032-2041

Generation 10 13 20

Transmission 7 6 10

Distribution 4 5 10

Total 21 24 40
What are the Sources of
Financing?
 Source of Financing

 Own financing(equity financing /share issue or retained earning)

 GOB financing(interest rate @3% on D:E=40:60)
 Soft loan (World Bank, ADB etc.). Loan Term 30-40 years & rate of
interest 0.5%-1%.
 Supplier’s credit
 Private financing(through private equity or commercial loan)
 Export Credit Agency(ECA) backed financing
 Bond/Debenture
 Supplier’s credit

 Loan Tenure 12-15 years

 Low interest rate i.e. 3-3.5%
 EPC cost high(burden to the borrower)
 Requires govt. guarantee
 Foreign currency financing
 Project financing upto 80-90% EPC price
 Share
 Different private power generation companies already issued
share to capital market raised fund for future investment or
debt payment.

 Public company already issued a certain percentage of share

to the domestic capital market.

 There is no fixed bearing expense.

 Limited scope of capital raising.

 ECA
 Buyer’s credit.
 ECA is a Guarantor(equipment supplier at home country).
 6-13% premium to be paid to ECA at a time for such guarantee.
 Management or structuring fee or arrangement fee about 1-1.5% at a
time is required to pay to lender.
 Commitment fee 0.5% to 1% p.a on utilization of commitment.
 Rate of interest is 6 month LIBOR + fixed margin (i.e. 2-3.5%).
 Tenure 12-15 years(Rampal 20 years).
 MIGA charges premium at 2.5% p.a over 13-15 years loan repayment
 Commercial Financing
 MIGA is one of the main source of commercial loan.
 Rate of interest 6 month LIBOR + fixed margin 2.5-3.5%.
 Premium @2.5-3% p.a but payment upfront. It means at a time 18-20%
on credit amount.
 Loan conditional
 Bond

 By this time APSCL got mandate from ICB to issue Power Bond in the
domestic market to raise fund BDT 6,00 crore.
 Face value of Bond Tk 1,000.
 Coupon rate : @8.5% or 2 years Treasury Bond yeild + 4% margin
whichever is higher but not exceeding 10.5%%.
 Maturity period 5 years years but repayment will be amortization based.
 Non convertible bond.
 Bond: Option International market
 16,000 MW(BPDB 3,600 MW and 12,400 MW by other public sector
companies) will be generated by 2025 but financing is not yet finalized.
 Bond will be issued to the international investor to raise fund supported
by sovereign guarantee.
 Lead arranger or Issue Manager and associated agencies will be engaged.
 Road show will be conducted at different places in the world.
 For any queries
dir.com@powercell.gov.bd