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Bangladesh : BANGLADESH opens its power sector to private banks for lending $10-$20 billion by 2030

July 25, 2014

Bangladesh's power sector opened opportunities for private banks to lend $10 billion and $20 billion by 2030, as the country struggles to narrow the gap between demand and supply of electricity.

The government plans to produce 39,000 MW of electricity by 2030 against demand of 34,000 MW to fulfil its ambitious plan of taking power to all by 2021.

Plugging the energy gap requires $60 billion of investment up to 2030.

The government will not be able to fund this, which lends significant room for private-sector involvement.

The government's substantial spending for the power and energy sector, the power sector needs increased private participation, either from domestic or foreign sources.

The share of private-sector financing in power projects will increase to 58% by 2016.

Large independent power producer projects had a debt component of 60-70%, with the rest from equity financing.

As Bangladesh moves up the income ladder, a larger part of the debt financing is likely to come from bank lending, as the country is likely to become less eligible for multilateral concessional debt.

A maximum of 50% of project financing over the medium to long term. It assume a 60% private-sector share over the medium term, this suggests that $40 billion of the additional investment required for power projects up to 2030.

StanChart raised $190 million from international lenders for a 335 MW electricity plant of Summit Meghnaghat Power Company Ltd in a single funding for any private power company in the country. The British bank contributed $40 million to the fund.

Investing in energy capacity is to have a positive effect on growth. The $60 billion of investment has the capacity to raise nominal GDP by $50 billion by 2030.

Between 2010 and 2013, only 50% of planned electricity generation was added to the grid.

Timely project implementation will be crucial for achieving the power generation targets.

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Source: TendersInfo (India)

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