Loan guarantee in power sector exceeds Tk 50,000 cr

Mahfuz Emran: Bangladesh Power Development Board (BPDB) is unable to pay the dues of government power plants due to the price of electricity. Government power companies have fallen into a cash crunch. Institutions have to pay installments of loans taken from various foreign banks from their own funds and money collected in banks.
Against these loans, the government has given guarantees, the amount of which has already exceeded Tk 50,000 crore. Analysts fear that if the institutions fail to repay the loan due to any reason, it may put the government in trouble.
According to the data of the Ministry of Finance, the guaranteed loan amount of the government at the end of June 30, 2023 was Tk 98,591 crores. Out of this, the guaranteed loan status in favor of 18 organizations of the power sector is Tk 51,496 crores. The government has given this guarantee against loans taken from banks in China, India, Japan, UK and Germany. Of these 18 power plants, the guaranteed loan status of nine has decreased compared to the previous financial year, while the rest have increased.
Ashuganj Power Station Company Limited (APSCL) under the implementation of Ashuganj 450 MW CCPP power plant, the status of government guaranteed loan in favor of HSBC Corporate Trustee Company (UK) Limited was Tk 1,300.35 crore at the end of last 30 June. Similarly, for the construction of Ashuganj 225 MW CCPP power plant, there is a loan guarantee of Tk 629.22 crore in favor of Dhaka branch of Standard Chartered Bank.
Ashuganj Power Station Company Limited (APSCL) Managing Director (Additional Duties) Engineer Md. Shah Alam Khan told, “BPDB gives us some money while paying off the loan and besides, the foreign loan is being paid with our own funds and fixed deposits in the bank. But we have not failed to repay the loan till now.
The status of government guaranteed loan in favor of HSBC for Shahjibazar 330 MW CCPP power plant under BPDB was Tk 1,079.88 crore at the end of last June. Apart from HSBC, ICBC and Exim Bank of China have loans in this project. Guaranteed loan status in favor of China’s ICBC Bank for Ghorashal 365 MW CCPP power plant owned by BPDB is Tk 180.11 crore.
Chapainawabganj 100 MW HFO power plant project owned by BPDB has a loan guarantee of Tk 450.28 crore in favor of HSBC. The amount of loan guarantee given in favor of HSBC in Ghorashal III Unit Re-Electrification Project is Tk 1,731.45 crore. The 400 MW Bibiana-3 gas-based CCPP power plant project has a loan guarantee of Tk 1,472.1 crore in favor of Japan’s JBIC. The status of government guaranteed loan in favor of Exim Bank of China for Khulna 330 MW dual fuel based CCPP power plant was Tk 2,259.94 crore at the end of June 30. There is a loan guarantee of Tk 287.20 crore in favor of Bank of China for 150 MW diesel based simple cycle power plant at Syedpur.
When asked about the repayment of foreign loans, BPDB Member (Finance) Sheikh Akhtar Hossain told, “We are paying the foreign loans regularly.” We are not far behind in this regard. However, the payment of others is getting delayed a bit.
A loan guarantee of Tk 407.18 crore in favor of China’s ICBC Bank’s Jiangshu branch for Kadda 150 MW dual fuel based CCPP power plant owned by Rural Power Company Limited (RPCL) and Powergen Company Limited. The 360 MW dual fuel CCPP power plant in Mymensingh under RPCL has a loan guarantee of Tk 204.59 crore in favor of Bank of China. The Patuakhali 1,320 MW thermal power plant under RPCL-Norinco (RNPL) has a loan guarantee of Tk 4,600.56 crore in favor of Exim Bank of China. BPDB-RPCL Powergen Company Limited has a loan guarantee of Tk 559.24 crore in favor of Germany’s AKA Bank for Sripur 150 MW diesel based simple cycle power plant.
Bangladesh-China Power Company Private Limited (BCPCL) has a loan guarantee of Tk 16,905.81 crore in favor of Exim Bank of China in 1,320 MW Payra thermal power plant. Rampal 1,320 MW coal-fired power plant project under Bangladesh India Friendship Power Company Limited (BIFPCL) has a loan guarantee of Tk 14,820.76 crore in favor of Exim Bank of India. In December last year, BCPCL failed to pay the coal price and loan installments of the Payra power plant due to financial crunch.
Policy Research Institute of Bangladesh (PRI) executive director Dr. Ahsan H. Mansoor, a businessman told, “In the electricity sector, the government has a large amount of bills owed at present. According to the power purchase agreement, the government is not able to pay against the power even if it buys it. Payra power plant loan has expired. In the existing situation, the government has to reschedule the debt by paying some amount. There is a debt repayment problem, it is not yet clear how the government will solve it. We advise the government to restructure the debt through discussions with all creditors. Depletion of foreign exchange reserves must be stopped at all costs. In the first four months of the current financial year, the fiscal deficit exceeded $4 billion. If this continues, it will reach $12 billion by the end of the fiscal year. In this situation, the issue of debt repayment should be postponed by negotiating with the creditors so that the government can breathe a little.’
The status of the loan guaranteed by the government in favor of ICBC Bank of China for the third phase of Barapukuria 275 MW coal power plant expansion project stood at Tk 1,197 crore at the end of June 30. The government has given a loan guarantee of Tk 1,174.54 crore in favor of Standard Chartered Bank, Dhaka branch for the Sirajganj 225 MW CCPP (second unit) project under Northwest Power Generation Company Limited (NWPGCL). In Sirajganj 225 MW CCPP (third unit) project owned by NWPGC, the amount of loan guarantee given in favor of Dhaka branch of Standard Chartered Bank is Tk 1,336.11 crore.
Analysts say the government’s expenditure on foreign debt repayments has already increased due to the devaluation of the taka. If the government power plants fail to repay the loan, the government will have to pay the money and this will increase the debt repayment pressure on the government.
Mohammad Muslim Chowdhury, the former finance secretary of the government and the former auditor general and controller told, “Our foreign debt portfolio has already increased by many, which is like $100 billion. The local currency has depreciated by 30 percent. As a result, the government’s expenditure on foreign debt repayment will naturally increase. Currently, there is a delay in payment of installments of various loans. In this, the guaranteed loans of various government agencies have increased the risk of default. Contingent liabilities of the government are the loans that the government has guaranteed. But it is increasingly likely to become a real liability of the government as the risk of corporate default increases. We are restricting many things to stop the erosion of reserves, even defaulting on loans. In this situation if the guaranteed loan defaults, then the government has to pay it. It will add to the existing debts of the government. This will increase the government’s expenditure.