Govt to issue US$ 1.17b sovereign guarantee

Nazmul Ahsan

The government has decided to issue sovereign guarantee amounting US$ 1.17 billion to foreign funding agencies to source the lion’s share of the estimated cost to construct the country’s largest 1320 megawatt Rampal coal-based power plant.
The state guarantee that assures overseas lending agencies of getting back their investment in case the implementing agency fails to repay.
This will be the largest ever guarantee the finance ministry is going to issue so far against any project in the country, a senior finance ministry official said.
‘We will soon appraise of the power, energy and mineral resource ministry of our positive stance towards issuing
the sovereign guarantee, as the project is one of the priority power projects of the government included in the first-track projects list,’ a top finance ministry official told New Age on Thursday.
‘The US$ 1.17 billion guarantee accounts for 70 per cent of the total estimated cost of the power plant,’ he said.
The cost for the project has been estimated at US$ 1.68 billion, while the debt-equity ratio for the project stands at 70:30, sources said.
The project is a joint partnership between India’s state-owned National Thermal Power Corporation and Bangladesh Power Development Board. The BPDB and the NTPC agreed to implement the project on a 50:50 equity basis. The NTPC will set up and operate the plant.
The joint venture company is known as Bangladesh India Friendship Power Company. The proposed project, on an area of over 1,834 acres of land, is situated 14 kilometers north of the world’s largest mangrove forest—the Sundarbans.
In August 2010, a memorandum of understanding was signed between Bangladesh Power Development Board and India’s state-owned National Thermal Power Corporation where they designated to implement the project by 2016. On January 29, 2012, the BPDB signed an agreement with NTPC to build the plant.
Officials concerned said the Prime Minister’s Office last month asked the finance ministry to go-ahead with the project’s financing need.
‘Without having any sovereign guarantee, no company comes forward with their bidding proposal as the project involves huge foreign currency,’ another finance ministry official said.
Meanwhile, power officials said as many as 20 foreign companies including Japan’s Marubeni Corporation, Harbin Electric International and Dongfang Electric and Shanghai Electric of China, Korea’s Hyundai Electric Company, Larsen & Toubro Limited of India, Bharat Heavy Electricals Limited, Siemens India and the US General Electric have so far showed their interests in the project.
The project, however, drew criticism from environmentalists, left-democratic political organisations and the National Committee to Protect Oil, Gas, Mineral Resources, Power and Ports, as they think the plant would destroy the biodiversity of the Sundarbans.

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