China Eximbank provides $1.984 billion loan for First Phase of 1320MW Payra Coal-Fired Thermal Power Plant Project (Linked to Project ID#56005, #38245, #56547, #56402, and #56357)

On June 9, 2014, the Northwest Power Generation Company Ltd. (NWPGCL) signed a joint venture agreement with China National Machinery Import & Export Corporation (CMC) to construct the first phase of the 1320MW Payra Coal-Fired Thermal Power Plant Project. CMC and NWPGCL formed the Bangladesh-China Power Company Ltd. (BCPCL) — a special purpose vehicle — to carry out this project. CMC and NWPGCL each hold a 50% equity stake in BCPCL. The Prime Ministers from both countries attended the June 2014 signing ceremony for the BCPCL. NWPGCL and CMC registered BCPCL on October 1, 2014. NWPGCL is a subsidiary of the Bangladesh Power Development Board (BPDB). BPDP and CMC are both state-owned companies. The total cost of the 1320MW Payra Coal-Fired Thermal Power Plant is $2.48 billion and it is reportedly being financed according to an 80:20 debt-to-equity ratio. NWPGCL and CMC each reportedly will provide 50% of the equity financing for this project. Project ID#56005 captures the equity funding for the project. China Eximbank covered the remaining 80% of the project through debt financing. On May 12, 2018, the China Eximbank and BCPCL signed a $1.984 billion loan agreement to support the construction of the 1320MW Payra Coal-Fired Thermal Power Plant Project (as captured via Project ID#52748). The loan carries the following borrowing terms: a 15-year maturity, a 4 year grace period, an interest rate of LIBOR plus a 2.98% margin. Principal and interest is payable in 23 semi-annual installments. Interest is also payable semi-annually during the grace period. The loan is collateralized in that the 1320MW Payra coal-fired power plant facility has been mortgaged to the lender. The borrower is also required to maintain a minimum cash balance in a Debt Service Reserve Account (DSRA). As an additional credit enhancement, the Government of Bangladesh issued a $1 billion sovereign guarantee in support of the loan on December 31, 2017. The borrower made three principal repayments worth $64,946,000 in financial year 2020-2021 (July 1, 2020 to June 30, 2021) and $136,333,396 in financial year 2021-2022 (July 1, 2021 to June 30, 2022). However, the borrower struggled to meet its repayment obligation during the second half of calendar year 2022. The borrower failed to pay the fourth (scheduled) installment of principal and interest (worth $114 million) to the lender on December 8, 2022, which raised questions about a possible default and BCPCL's ability to secure a follow-on loan from China Eximbank for the Second Phase of 1320MW Payra Coal-Fired Thermal Power Plant Project. AM Khorshedul Alam, Managing Director of BCPCL, told a local media outlet at the time that his organization had the entire month of December 2022 to pay the fourth installment. China Eximbank reportedly issued an invoice amounting to $114 million due on December 8, 2022. But when BCPCL asked its 'account bank' – Sonali Bank – to make the payment, Sonali Bank said it was not in a position to provide such a large amount of US dollars. Following Sonali Bank's reply, the BCPCL wrote a letter to the Secretary of Bangladesh's Power Division on December 1, 2022, requesting its assistance by notifying the Forex Reserve and Treasury Management Department of the country's central bank (Bangladesh Bank) through the Finance Division to provide the required U.S. dollars to the bank account before December 8, 2022 at the Bangladesh Bank rate. 'The Ministry of Finance issued a sovereign guarantee of around $1 billion favouring the lender to secure this loan repayment. Failure to pay 4th loan [installment] may result in country default,' reads the letter. BCPCL also noted that '[I]f we failed to pay the loan [installment in a timely manner], loan financing for the 2nd phase of the project may be seriously threatened.' Two weeks earlier, on November 13, 2022, BCPCL wrote to the Forex Reserve and Treasury Management Department of the Bangladesh Bank and the Power Division to request help accessing the U.S. dollars needed to make loan repayments and coal import-related payments. 'The Bangladesh Bank is the only source that has the capability to support our huge forex liquidity requirement, BCPCL wrote in its letter. BCPCL also noted in its November 13, 2022 letter to the Power Division and the Bangladesh Bank that, that apart from the China Eximbank loan installment, it had $94.84 million in overdue coal import bills as of November 2022 (that were being financed through a deferred payment facility with CMC that carries a 3.25% interest rate and 6-month maturity). The China Eximbank loan's principal amount outstanding was $1,464,465,797 in financial year 2019-2021 (July 1, 2019 to June 30, 2020), $1,816,329,544 in financial year 2020-2021 (July 1, 2020 to June 30, 2021), and $1,679,996,148 in financial year 2021-2022 (July 1, 2021 to June 30, 2022). The Payra power plant is located in Dhankhali, Patuakhali, Bangladesh. This places the power plant along the north side of the Payra port, which will be renovated by the China Harbour Company and the China State Construction Engineering Corporation (see Project ID#55522). Phase one of the project involves the construction of power generation units one and two. Each unit will have a capacity of 660 MW, so phase one has a combined capacity of 1320 MW. In December 2017, BPDB contracted China Energy Engineering Group Northeast No. 1 Electric Power Construction Co., Ltd. (NPEC) and China National Energy Engineering & Construction Co., Ltd. (CECC) to construct the power plants. The first phase of the project was officially launched on October 27, 2018. The first phase of the power plant became operational on January 13, 2020, achieved its Initial Operation Date (IOD) on May 15, 2020, and achieved its Commercial Operation Date (COD) on December 8, 2020. It began supplying electricity to the national grid, per national load dispatch center (NLDC) demand, after achieving COD. A consortium led by the China Datang Overseas Electric Technology and O&M Co. Ltd. will carry out operations and maintenance of the power plant. Once operational, this power plant will sell energy to the BPDB at a cost of 6.56 BDT per unit of energy.

Additional details

1. Despite news articles that identify the lending terms for the 1320MW Payra Coal-Fired Thermal Power Plant Project as non-concessional, the grant element exceeds 25%, so AidData categorizes it as a concessional loan. 2. AidData codes the project as having mixed (development and commercial) intent because the power plant is being partially financed via equity contributions (as described in Project ID#56005). 3. The Chinese project title is 孟加拉帕亚拉PAYRA2*660MW燃煤电站项目 or 帕亚拉超临界燃煤电站. Other English names for the Payra Coal-fired Power Plant Project include 'Payra Power Hub' and the alternative spellings of “Pyra” and “Paira”. 4. As of February 2023, the 2018 China Eximbank loan for this project was not captured in the China’s Global Energy Finance (CGEF) Database or the China's Overseas Development Finance (CODF) Database published by Boston University’s Global Development Policy Center. 5. AidData has estimated the loan’s all-in interest rate by adding 2.98% to average 6-month LIBOR in May 2018 (2.5%). 6. This project should not be confused with any of the joint-development agreements for the Payra 3600 MW LNG-to-Power Project signed by NWPGCL and Siemens (German). 7. Evidence of the issuance of a sovereign guarantee can be found on the Ministry of Finance website (see https://mof.portal.gov.bd/sites/default/files/files/mof.portal.gov.bd/page/e9e8a8c8_8a8b_4536_a18b_fc5ca696650a/St_6a1_en.pdf). 8. The DSRA requirement is described via https://www.bcpcl.org.bd/files/pdf/140-1668593944.pdf 9. Note there are three different power plants being constructed in the Patuakhali region of Bangladesh. Each one of these projects is funded partially via joint ventures between Chinese and Bangladeshi state-owned enterprises and partially via China Eximbank loans. Two of the coal-fired plants will contain two 660MW generators, with the third project involves two phases, both of which have two 660MW generators. The joint venture partners have clarified that these plants are near each other, but they are distinct plants supporting a region-wide electrification campaign. These projects include: (a) Bangladesh’s Northwest Power Generation Company Ltd. and China National Machinery Import & Export Corporation, which established the Bangladesh-China Power Company Ltd. (BCPCL) joint venture in October 2014 to oversee the financing, design, and construction of Patuakhali 1320MW (2 x 660MW) Ultra Supercritical Coal Based Thermal Power Plant Project (Phase 2). The joint venture is captured in Project ID#56005. China Eximbank is funding phase one (units 1 and 2) of this project (see Project ID #52748). China Eximbank financing for phase two (units 3 and 4) is currently unspecified, with the most recent details record in Project ID#38245. (b) Bangladesh’s Ashuganj Power Station Company Ltd. (APSCL) and China’s China Energy Engineering Corporation Ltd. (CEEC) established a joint venture in July 2017 to oversee the financing, design, and construction of Patuakhali 1320MW (2 x 660MW) Coal-Fired Power Plant (Ashuganj/ APSCL). The joint venture is captured in Project ID #56547. CEEC will solicit a loan from the China Eximbank for the debt portion of the project. China Eximbank financing for this project is currently not captured in a stand-alone Project ID#. (c) Bangladesh’s Rural Power Company Ltd. (RPCL) and China’s NORINCO, which established a joint venture in November 2017 to oversee the financing, design, and construction of 1320MW (2 x 660MW) MW Patuakhali Coal Fired Thermal Power Plant. The joint venture is captured in Project ID#56357. China Eximbank debt financing for the project is captured via Project ID#56402.

Number of official sources

18

Number of total sources

39