Singaporean utility company Sembcorp has secured US$409mn in project finance for a power plant in Bangladesh.
The lenders are the International Finance Corporation (IFC), Clifford Capital – a Singapore-based project financier – and CDC Group – a development finance institution owned by the UK government. Each will contribute US$103mn to the project debt.
A Sembcorp spokesperson tells GTR that the Bangladeshi commercial banking market “does not have the depth and tenor to match multilateral financing”.
She explains: “Given the capital adequacy ratios enforced by Basel III directives, international commercial banks require either export credit guarantees or extended political risk cover to extend tenors of up to 14 years. By utilising multilateral financing, Sembcorp was able to secure long-term limited recourse debt financing at more attractive spreads, as compared to the all-in cost of financing through international commercial banks with cover.”
A portion of Clifford Capital’s tranche is covered by the Multilateral Investment Guarantee Agency (Miga), which is also providing political risk coverage for an equity portion invested by Sembcorp. It is the first time Sembcorp has worked with the IFC or Miga, both members of the World Bank Group.
The project is a greenfield, dual-fuel combined cycle power plant in Bangladesh. It is located in the Sirajganj region of Bangladesh and will have a capacity of 414MW. A build-own-operate project, it will cost US$414mn in total.
Bangladesh is plagued by a chronic lack of electricity. Blackouts are common and industry is often disrupted by power outages.
The spokesperson from Sembcorp – which is developing the project in partnership with Bangladesh’s state-owned North-West Power Generation Company – says: “Bangladesh is among the fastest growing economies in the world, and also has a growing demand for power.
“Present generation capacity is unable to meet prevailing load demands, and more power plants are required to cater to the country’s increasing power needs and support economic expansion. To this end the government plans to add about 10GW of capacity over the next decade.”
The plant will be the second-largest in Bangladesh and the head of the debt team at CDC Holger Rothenbusch is keen to talk up its potential impact.
He say: “The chronic lack of electricity in Bangladesh is a major barrier to economic growth and poverty reduction. CDC’s US$103mn commitment, which is our biggest ever direct debt investment, will help Sembcorp deliver a vital energy project that has the potential to transform millions of lives. We look forward to working with Sembcorp across other South Asian countries as they develop more energy infrastructure.”