Infrastructure & PPPs in Nepal and Bangladesh - Q2 2022 Update
YOG INFRA Q2 2022 insights
BANGLADESH AND NEPAL saw subdued activity with regards to development of infrastructure and PPP projects. Both countries do need continued support from multilateral agencies, as they continue to evolve and identify infra projects aimed at socio-economic development.
Read more about key developments in Infrastructure and PPPs in the two countries in our latest insight.
AIIB READIES USD 200 Mn ON-LENDING FACILITY FOR BANGLADESH
The Asian Infrastructure Investment Bank (AIIB) and the Bangladesh government have signed an agreement for a USD 200 Mn on-lending facility. The funds will be used to finance infrastructure projects in the South Asian country through state-owned Infrastructure Development (IDCOL), which will further on-lend to private companies.
The facility will make long-term financing available for sub-projects in power generation, renewables and low carbon electricity, information and communications technology infrastructure, and cross-regional transportation, among others. The government’s Perspective Plan 2041 highlights the need for an annual investment of USD 10 Bn in infrastructure over the next two decades.
This is the Beijing-headquartered multilateral development bank’s first investment through a financial institution into infrastructure in the country. It has approved 15 projects totalling USD 2.8 Bn in Bangladesh, with more than half of them focused on the energy, transport, and water sectors.
BANGLADESH INCREASES BUDGETARY ALLOCATION FOR INFRASTRUCTURE
The Bangladesh government increased its budgetary allocation to infrastructure by 11.7% for the year through June 2023, it will spend BDT 2 Trn (USD 21.5 Bn). An additional allocation of BDT 531.5 Bn to PPPs and subsidies, as well as equity investments in state-owned commercial and financial institutions.
The country's Public-Private Partnership (PPP) Act is being amended, the legal and regulatory framework will be simplified so the country can implement large projects, including in social infrastructure.
The government has decided to cancel four coal-fired power projects, initially planned as a part of a programme to set up 10 such facilities with a total capacity of 8.6 GW. It will go ahead with the remaining six but will convert them to renewables or gas-based plants.
CHINESE STATE-BACKED DEVELOPER PLANS 55 MW BANGLADESH WIND FARM
China's Wuling Power is looking to jointly develop an onshore wind farm with a capacity of 55 MW to 70 MW in Bangladesh with two or more partner. The company, which is majority-owned by the State Power Investment Corporation, is planning to team up with Shanxi Construction and local Bangladeshi partners to study the potential investment for the greenfield project. It also plans to hire financial advisors to conduct due diligence.
The project, about 250 Km from Dhaka, has secured a power purchase agreement with the state utility, and an implementation agreement signed with the local government. Its economic and technical feasibility studies are also completed.
The Khulna development will be the second joint effort between Wuling and Shanxi Construction after the companies in January agreed to develop the Cox's Bazar Wind Farm project - covering an area of about 18 sq km - Bangladesh's first such large-scale onshore facility.
NEPALESE BANKS AGREE DEBT FOR 57.4 MW HYDRO PROJECT
Nepalese developer Hydro Village has arranged USD 75 Mn debt financing for a 57.3 MW hydropower project from a consortium of six local banks. The project costs an estimated USD 100 Mn.
The Myagdi Khola hydropower project will be built in Myagdi district at the confluence of the Kunaban and Myagdi rivers. It is scheduled to start construction in November this year and is likely to begin commercial operations by December 2025.
It will sell power to the Nepal Electricity Authority (NEA) through a power purchase agreement for a period of 35 years. In September 2018, the NEA agreed to buy the power for NPR 4.80 (USD 4 cents) per KWh during the wet season and NPR 8.40 in the dry season. It will have an annual average generation capacity of around 335 GWh.
List of Key Transactions - Bangladesh Q2-2022
Source: Inframation, YOG INFRA analysis
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