MIGA, a member of the World Bank Group, continued its commitment to Bangladesh's power sector by announcing a guarantee of US$69.5 million for Standard Chartered Bank (SCB) and Siemens Bank's loans to North-West Power Generation Company Limited (NWPGCL), a state-owned power generation utility.
The guarantee contributes to the construction, installation and operation of a 220 MW combined cycle duel fuel power plant near Sirajganj, 130km northwest of Dhaka. Once operational, the plant will produce 1,649 GWh each year at a lower cost than at present.
MIGA's guarantee provides coverage for up to 15 years against the risk of non-honoring of sovereign financial obligations and is the fifth in a series of power projects being guaranteed in Bangladesh. Bangladesh is among the most energy-starved countries in the world. Access to reliable power is a significant challenge for private sector firms, including in the critically important ready-made garment sector, with 60 percent of them currently dependent on off-grid diesel or gas generators.
MIGA Executive Vice President and CEO Keiko Honda, said:
"The demand for electricity in Bangladesh is expected to grow by leaps and bounds over the next decade. Channeling consistent and long-term financing from the private sector through the support of our guarantees is critical."
MIGA's guarantee is an important part of the Government of Bangladesh's focus on drawing in private sector funds to augment scarce public funds and support from development finance institutions.
SCB is arranging an approximately US$197 million financing package, representing 80 percent of the Sirajganj Unit 3's project costs, while NWPGCL will make an equity investment of 20 percent. MIGA's participation in the transaction helps fill a financing gap often seen in low-income countries.
Furthermore, MIGA's focus on environmental and social requirements through application of its Performance Standards ties in well with the project's requirement. NWPGCL has also demonstrated its commitment to environmental and social standards by establishing its own Environmental and Social Management System following an earlier Sirjganj 2 power project, also guaranteed in part by MIGA.
Surya Bagchi, Global Head, Project & Export Finance of Standard Chartered Bank, which led the syndication for the project, said:
"This is in line with our brand promise to be "Here for good". Standard Chartered Bank is committed to supporting the development of the power sector in Bangladesh; we are working on a number of projects in Bangladesh across the power sector value chain and count on MIGA's continued support to help transform this sector."
The Engineering, Procurement, and Construction contract was awarded to the consortium of China National Machinery Import & Export Corporation (CMC) and Fujian Electric Power Survey & Design Institute (FEDI). Siemens AG will provide the gas turbine, steam turbine, generator, auxiliary systems and series to the project.