YOG INFRA Q2 2024 insights
SOUTH ASIAN countries - Bangladesh, Nepal, Bhutan and Sri Lanka (BNSB) saw bounce back of roject development activities after some quarters of slowdown. We see emergence of PPPs and private sector investments across renewable energy and urban infrastructure developments, albiet on a small scale with support from DFIs in form of technical assitance and well as co-financings.
Read more about key developments in Infrastructure and PPPs in the four countries in our Q2 2024 insight.
BANGLADESH
REVISED TARIFFS MAKE CLEAN ENERGY COMPELLING FOR BANGLADESH
The Bangladesh government recently increased power tariffs for all consumer categories due to the upheavals caused by a significant gap between power generation costs and corresponding revenue. The government also revised the natural gas price for power generation. While inflationary pressures will likely remain high in the wake of electricity and gas price hikes, different energy consumers will now find clean energy investment more compelling.
The recent increase in electricity tariffs of around 9.9% per kilowatt-hour (kWh) for medium and large industries and the gas price hike of 2.5% per cubic meter for captive power generation will likely motivate industries to foster energy efficiency further.  Â
ADB LEADS FINANCING OF FIRST PRIVATE SECTOR SOLAR PROJECT IN BANGLADESH BY INTERNATIONAL LENDERS
The Asian Development Bank (ADB) is providing a significant financial package to support the construction of a solar power plant in Bangladesh. This project is a milestone for the country as it represents the first private sector utility-scale solar facility to receive backing from international lenders.
The 100-megawatt solar power plant is expected to generate a substantial amount of clean electricity annually while also reducing greenhouse gas emissions. The project is being undertaken by Dynamic Sun Energy Private Limited, a subsidiary of Paramount Textile PLC (PT), a major Bangladeshi textile manufacturer with a strong commitment to sustainability. ADB played a key role in structuring and arranging the USD 121.55 Mn financing package, which includes contributions from ADB itself, ILX Fund I (an emerging market private credit fund), and the Japan International Cooperation Agency.
GOVT CREATES RENEWABLE ENERGY FUND OF USD 8.5 Mn
The government has created a Tk 1.0 Bn (USD 8.5 Mn) renewable energy fund for the first time in the proposed national budget FY 2024-25, which is a time-befitting step in the right direction to achieve the renewable energy goal of 2041. As part of the long-term master plan for power generation, a plan has been adopted to import about 9,000 MW of electricity from neighbouring countries by 2041 under regional and sub-regional cooperation programs and a target of 40% of the total power generation from renewable energy has been set.
The Rooppur Nuclear Power Plant construction project at Ishwardi in Pabna is under implementation. After its implementation, a total of 2,400 MW of electricity in two units will be connected to the national grid, which will accelerate the economic development of the country.
While the amount is only Tk 1.0 Bn (USD 8.5 Mn), this is a step in the right direction to achieve the renewable energy goal of 2041. As renewable energy installations surge, the government will perhaps need to increase its allocation for renewable energy in the future. On the other hand, import duty is imposed on raw materials for energy-efficient LED lamps. 10 % duty on raw materials will significantly raise the cost of LED lights, according to Shafiqul.
ADB, CITY GROUP PARTNER TO BUILD ENERGY-EFFICIENT OILSEED CRUSHING PLANT TO SUPPORT FOOD SECURITY IN BANGLADESH
The Asian Development Bank (ADB) and Rupshi Seed Crushing Limited, a member of the City Group, have signed a USD 10 Mn loan to construct a greenfield energy-efficient, multi-oilseed crushing plant within the City Economic Zone in the Narayanganj District, Bangladesh.
The new plant will replace an older, less efficient facility. It is expected to save 1.3 million cubic meters of water and 1,000 tons of fuel, decrease energy costs by 9 kilowatt-hours per ton, and reduce greenhouse gases by 1,723 tons annually, while production capacity will remain at 3,000 metric tons of soybean seed crushing per day. Workers from the original plant will be absorbed into the new one. HSBC is also providing an export credit agency-guaranteed parallel loan.
BANGLADESH'S PPP AUTHORITY & IFC PARTNER FOR LALDIA TERMINAL PROJECT
Bangladesh’s Public-Private Partnership (PPP) Authority, under the Prime Minister’s Office, has signed an agreement with the International Finance Corporation (IFC) for the provision of Transaction Advisory Services for the 'Establishment and Operation of Laldia Container Terminal at Chittagong Port through PPP Model' project.
This agreement is set to facilitate detailed technical, legal, and financial due diligence, along with a scoping study on the environmental and social impacts of the proposed PPP project. The primary goal of the study is to develop a bankable transaction structure and to select qualified private partners for the establishment and operation of the Laldia Container Terminal at Chittagong Port via the PPP model.
The Laldia Container Terminal project aims to enhance the container handling capacity of Chittagong Port through the construction of a new terminal in the Laldia area. This project is expected to bolster Bangladesh's port logistics capacity. A global private operator will be responsible for designing, building, financing, operating, and eventually transferring the terminal under a Public-Private Partnership basis. The project is anticipated to generate numerous jobs, stimulate economic growth, streamline supply chains, attract foreign investment, and enhance logistical capacity.
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BHUTAN
BHUTAN ADVANCES IN SOLAR TECHNOLOGY WITH ISA SUPPORT, LAUNCHES NEW RESOURCE CENTRE
The International Solar Alliance (ISA) has committed a grant between USD 200,000 to 300,000 to Bhutan to support the development of solar technology in the country. This funding will facilitate the establishment of a Solar Technology Application Resource Centre (STAR C) at the College of Science and Technology in Phuentshogling. The initiative marks a significant development since Bhutan joined the ISA in October 2022.
STAR C is designed to become a leading hub for solar research, development, and application in Bhutan, capitalizing on the region’s abundant sunlight. The center will focus on testing solar technologies, setting standards for solar products, and providing training for technicians. This aligns with Bhutan’s goals to bolster its solar capacity, especially given its status as a net importer of electricity during the winter months.
The project is part of a broader collaboration under a two-year Country Partnership Agreement signed in April 2024 between the ISA and Bhutan’s Ministry of Energy and Natural Resources, along with the Royal University of Bhutan. This agreement outlines plans to enhance the deployment of solar technologies across the country. Additionally, the ISA will provide an extra USD 50,000 to Bhutan for the installation of solar-powered cold storage in Paro and Zhemgang, enhancing food preservation capabilities in these areas. This collaboration aims to advance Bhutan’s energy security and transition to renewable energy, in line with ISA’s global mission to spur solar investments worth USD 1 Tn by 2030 for a carbon-neutral future.
EIB FUNDS HYDROPOWER AND SOLAR PROJECTS IN BHUTAN
The European Investment Bank (EIB) has initiated its first-ever project in Bhutan, one of only three net carbon-negative nations worldwide. The project, supported by a 30-year loan of EUR 150 Mn (USD 164 Mn), focuses on enhancing Bhutan's renewable energy infrastructure, particularly through new solar photovoltaic and hydropower schemes under the EU’s Global Gateway initiative.
This investment aims to address Bhutan's vulnerability to climate change while expanding energy access without increasing carbon emissions. By diversifying the country’s power mix with small to mid-size run-of-river hydropower plants and solar photovoltaic generation, the project seeks to bolster Bhutan's energy security and facilitate the trading of clean energy across borders.
REVIVAL OF PPP KEY FOR GROWTH, SAYS ADB
To overcome the 13th Five Year Plan’s (FYP) resource gap, Bhutan needs to adopt an innovative financing strategy involving all stakeholders, including the private sectors. To achieve the goal of transforming Bhutan into a high-income economy by 2034, with an estimated 9% Gross Domestic Product (GDP), the Asian Development Bank (ADB) said that the country requires massive capital injection.
The latest edition of the Asian Development Outlook highlights limited progress in public-private partnership (PPP) implementation in Bhutan, despite the country’s political commitment and favorable legal framework. Challenges hindering PPP projects in Bhutan include complex institutional settings, centralized approval procedures, a small market with a developing private sector, dominant state-owned enterprises, and a lack of successful examples and awareness of PPPs.
Bhutan’s sole PPP project, the Multi-Level Car Park in Thimphu, has not led to further development in PPPs due to these challenges. A revised PPP policy, pending cabinet approval, aims to overcome these obstacles and create a conducive environment for successful PPP project implementation. The updated policy aims to simplify the approval process, categorize projects based on size for quicker approval, integrate PPP into sectoral plans, allow unsolicited project proposals, and implement other improvements.
The outlook says that the 13th FYP acknowledges the importance of public-private partnership (PPP) to finance infrastructure development and service delivery. To overcome the plan’s resource gap, estimated at 9% of GDP, and to achieve the goal of transforming Bhutan into a high-income economy by 2034, Bhutan needs to adopt an innovative financing strategy involving all stakeholders, including the private sector.
ADANI GROUP SIGNS MOU FOR 570 MW GREEN HYDRO PLANT
Adani Group chairman Gautam Adani has met Bhutan Prime Minister Tshering Tobgay and signed a Memorandum of Understanding with the country's Druk Green Power Corporation for a 570 MW hydroelectric plant in Chukha province, emphasizing the potential for significant energy production and contribution to Bhutan's power needs. The initiatives discussed promise to bring significant advancements in green energy and infrastructure, benefiting both Bhutan and the broader region.
NEPAL
NEPAL HOSTS AN INVESTMENT SUMMIT IN HOPES OF ATTRACTING FOREIGN MONEY FOR HYDROPOWER PROJECTS
Nepal hosted an investment summit in hopes of attracting much-needed foreign investment, especially in developing hydropower projects to produce more electricity that it can sell to neighbouring countries. Several foreign investors were attending the two-day meetings in the capital, Kathmandu, where Nepali officials urged investment in developing hydropower projects and in other areas like tourism and industry.
Only 3,200 megawatts have been harnessed so far and only about 5,568 megawatt large-scale projects are under construction or in the pipeline. This explicitly shows the enormous opportunities to invest in the hydropower sector in Nepal. Existing and planned cross-border transmission lines with India and China aid energy exchange within the region. Nepal has signed agreements or memorandum of understanding with China, India, and Bangladesh for power trade or cooperation.
The main objective is to project the country as an emerging destination for private sector investment and to highlight recent reforms in enhancing the investment climate and ensuring regulatory frameworks and support for foreign as well as domestic investment.
NEPAL’S 2024 BUDGET FOCUSES ON ELECTRICITY EXPORT
Nepal in its recent budget attempts to boost hydropower production and export electricity to Bangladesh. NRs 50.74 Bn (USD 378 Mn) allocated for the energy sector in the upcoming budget. Nepal plans to boost hydropower production and export electricity to Bangladesh. It has currently allocated NRs 50.74 Bn (USD 378 Mn) for the energy sector in the upcoming budget.
The focus is on electricity production and export to Bangladesh starting from the fiscal year 2024-25. NRs 1.96 Trn (USD 14.65 Bn) budget prioritizes hydropower, particularly reservoir-based projects, with NRs 50.74 Bn (USD 378 Mn) allocated for energy sector development. The goal is to increase hydropower generation capacity. Plan is to connect an additional 900 MW to the national transmission grid, raising the total capacity to 4,500 MW. The per capita electricity consumption is expected to rise to 450 units.
The government plans to initiate the construction of several large-capacity hydropower projects, including the
1,200 MW Budhigandaki
1,061 MW Upper Arun project
Additional projects like Nalagad, Jagdulla, Naumure
77.5 MW Ghunsaj
70 MW Ghunsa Khola hydropower project
The construction of the 783 MW Sunkoshi III hydropower project and the integration of 100 MW of solar projects from the private sector into the national grid are also planned. The 2024-25 budget, which begins mid-July, is 6.2% larger than the current fiscal year’s unrevised budget of NRs 1.75 trn (USD 13 Bn). Recurrent expenditure is estimated at NRs 1.14 Trn (USD 8.49 Bn) (61.31% of the total budget), capital expenditure at NRs 352 Bn (USD 2.62 Bn) (18.94%), and financial management expenditure at NRs 367 Bn (USD 2.73 Bn) (19.74%). Financing sources include NRs 1.26 Trn (USD 9.38 Bn) from revenue, NRs 330 Bn (USD 2.46 Bn) from internal loans, NRs 217 Bn (USD 1.62 Bn) from external loans, and NRs 52.3 Bn (USD 389 Mn) from foreign grants.
SJVN'S 900 MW PROJECT IN NEPAL TO START POWER GENERATION FROM 2025
SJVN expects its under-construction 900 MW Arun-3 hydro-electric project in Nepal to start power generation from next year as nearly three-fourths of the work has been completed. More than 74% of the project works have already been completed and the remaining works are going on in full swing. The project has the potential to generate 3924 million units of electricity every year.
Project Details:
Capacity:Â 900 MW
Cost:Â Over USD 1.6 Bn
Construction Start:Â May 2018
Expected Completion:Â 2025
Operation Model:Â Build-Own-Operate-Transfer (BOOT) with ownership transferring to Nepal after 30 years
NEPAL OPENS TENDER FOR PHOTOVOLTAIC PROJECTS
Nepal is aiming to significantly boost its solar energy production by issuing a tender for grid-connected solar power projects. This tender offers a total capacity of 800 MW. The winning companies will sell the generated electricity to Nepal's Electricity Authority for 25 years through a competitive bidding process. The tender specifies locations for project development and connection to the national grid.
Projects must be at least 1 MW for connection to smaller substations and 10 MW for direct grid connection. Individual companies can bid on multiple projects, but the total capacity cannot exceed 150 MW. This initiative marks a major step for Nepal, which currently has only 115 MW of solar power capacity. It highlights their commitment to expanding renewable energy sources.
NEPAL PARLIAMENT RATIFIES SOLAR ALLIANCE AGREEMENT
Nepal's House of Representatives has passed a proposal seeking ratification of a framework agreement related to the membership of the International Solar Alliance that will help the Himalayan nation increase usage of solar power in its effort to combat the impact of to changing climate.
The International Solar Alliance (ISA) was conceived as a joint effort by India and France to mobilize efforts against climate change through the deployment of solar energy solutions and announced on the sidelines of the 21st Conference of Parties (COP21) to the United Nations Framework Convention on Climate Change (UNFCCC) at Paris in 2015.
SRI LANKA
ADB TO RESUME SRI LANKA PROJECT FINANCING, BACK PPP UNDER NEW STRATEGY
Asian Development Bank will resume financing projects under its 2024-2028 country partnership strategy along with budget support loans linked to reforms. The ADB was focusing on budget support loans with the start of an IMF program, but from late in 2024 project finance is likely to start depending on Sri Lanka’s capacity to borrow.
Irrigation, education and health are likely areas for project financing in the near term. ADB is looking to provide technical support and knowledge under its new operating model of finance ++, by going beyond financing, bringing experts for required areas. ADB will also support private sector activity and public-private partnerships. It is also working on a green bonds framework.
INDIA TO FUND FULL RENOVATION OF SRI LANKA'S KANKESANTHURAI PORT IN JAFFNA, TO BOOST FERRY LINK
In a significant development, the Sri Lankan Cabinet has greenlit the renovation of the Kankesanthurai Port in the Jaffna district of northern Sri Lanka, with India stepping in to cover the entire project cost. The Kankesanthurai Port, situated in Sri Lanka's north region, spans approximately 16 acres and lies 104 km (56 nautical miles) from Karaikal Port in Puducherry, India.
Under the port development project, it has been planned to repair and rehabilitate the existing breakwaters, piers, and roads including dredging and wreck removal and construction of a new pier and a warehouse. The total cost of the endeavor was disclosed in March this year, amounting to USD 61.5 Mn.
Despite delays attributed to financial considerations, Sri Lanka is now exploring the possibility of completing the renovation under a public-private partnership (PPP) framework, underscoring the shared commitment to revitalizing the Kankesanthurai Port.
ADANI TO INVEST OVER USD 1 BN IN SRI LANKAN WIND PROJECTS
Adani Group plans to invest over USD 1 Bn in setting up projects in Sri Lanka to generate electricity from wind in what would be the island nation's single largest foreign direct investment and the biggest ever power project. Group firm Adani Green Energy Ltd (AGEL) will set up two wind farms in Sri Lanka's Mannar town and Pooneryn village in the northern provide with a total installed capacity of 484 MW at an investment of about USD 740 Mn. The related infrastructure that would transmit electricity to consumption centers will see a further investment of over USD 290 Mn. The projects will not just be Sri Lanka's largest renewable energy project but also the nation's biggest power project to date.
 AGEL will be paid 8.26 cents per kWh as per the agreement. This is lower than up to 26.99 cents per kWh paid to thermal projects of state-owned CEB and 9.67 to 13.99 cents per kWh for wind projects. It is lower than 8.75 cents per kWh paid for the Odamawadi solar project. Adani Group is also involved in building a USD 700 Mn terminal project at the island nation's largest port in Colombo. Adani's project has received Sri Lankan cabinet approval, and a power purchase agreement (PPA) is being finalized, post which the Indian giant will begin work and deliver the project in 2 years.
SRI LANKA’S CENTRAL BANK SIGNS GREEN FINANCE DEAL WITH IFC
The Central Bank of Sri Lanka (CBSL) has signed a deal with the World Bank’s International Finance Corporation (IFC) to receive financial and technical assistance in developing its sustainable finance strategy. The program would allow it to update the green finance taxonomy it first released in 2022 to help ascertain the sustainability of different business activities in Sri Lanka. The central bank has already been developing a sustainable finance roadmap since 2019 with technical support from the IFC and issued guidelines two years ago that encourage licensed banks to start using green bonds and invest in sustainable activities.
The strategy will be given a new focus on inclusive green finance with an emphasis on export-oriented SMEs (small and medium-sized enterprises) as part of the collaboration with the IFC. The collaboration is being part-financed by an EU programme to support sustainable private sector development in six south Asian countries, including Sri Lanka.
MAS HOLDINGS LAUNCHES SRI LANKA’S LARGEST PUBLIC-PRIVATE PARTNERSHIP FOR DEVELOPING FUTURE OLYMPIANS
MAS Holdings, Sri Lanka's leading apparel-tech conglomerate, has received Cabinet approval to establish the MAS Athlete Training Academy, the nation’s first and largest Public-Private Partnership (PPP) aimed at fostering next-generation Olympians.Â
The academy represents an investment of over INR 550 Mn (USD 6.58 Mn) spread across eight years, aimed at nurturing and supporting young athletes to represent Sri Lanka at the 2028 Los Angeles Olympics and the 2032 Brisbane Olympics. The comprehensive development program includes focused training, world-class athletic gear, international exposure, nutritional and educational support, and direct funding and equipment for athletes and their coaches.
Following a rigorous evaluation process at the all-island school games in May 2024, the first batch of 56 athletes, comprising 24 girls and 32 boys, has been selected from nine provinces. These athletes represent various track and field events, including short, mid, and long-distance races. Their performance and training metrics will be monitored using a state-of-the-art digital app.
The goal is to provide a holistic development environment for these young athletes. By integrating high-quality training, international exposure, educational and nutritional support, to take the talents from the grassroots to the global stage, establishing a new era of athletic excellence in Sri Lanka.
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