The European Investment Bank (EIB) has issued a €82mn projects loan to the Bangladeshi government.

The facility will help fund the conversion of two gas-fired plants to combined-cycle power plants, with the overall aim of both increasing the capacity of the country’s faltering power grid and reducing its carbon emissions.

Matilde del Valle Serrano, an EIB spokesperson, tells GTR that the loan has an 18-year tenor and that while its pricing remains confidential, it is “in par with other multilateral development banks and well below commercial alternatives”.

The EIB is the latest in a line of development banks to provide funding for the conversion of the Baghabari and Shagibacar plants. In 2012, the Asian Development Bank (ADB) loaned the government US$700mn, to be used in the conversion of four gas-fired plants, the aforementioned two included.

Other lenders have included the Islamic Development Bank and Agence Française de Développement. The total debt accrued to date is US$1.6bn.

Magdalena Alvarez, the EIB’s vice-president who oversaw the lending, says that she hopes the improvement in access to energy will help improve living conditions for the majority of Bangladeshis.

She continues: “Sustainable access to the energy supply will also help avoid bottlenecks and will enable the more efficient and rational use of energy resources, thus reinforcing the positive effects in terms of climate change mitigation and adaptation.”

Construction contracts have yet to be awarded. GTR is informed that despite the presence of a number of European DFIs, the loan is “fully untied and contractors will be selected on the basis of full international competitive bidding which will be launched in due course”.

The EIB has set no limit to the amount of credit it is willing to lend to Bangladesh and has earmarked water, rail and rural energy as areas of possible investment.