Agricultural Bank of China contributes to $1.78 billion buyer's credit for 2x660 MW Supercritical Coal-Fired Banskhali Power Plant Project (Linked to Project ID#52792, #98804, #98814, #54275)

In November 2010, Bangladesh Power Development Board (BPDB) began looking for sponsors to support the construction of a 2x660 MW supercritical coal-fired power plant — known as the 2x660 MW Supercritical Coal-Fired Banskhali Power Plant — in Paschim Gandamara within Banskhali Upzila and Chittagong Division. Then, on December 19, 2013, S. Alam Group — a Bangladeshi company that is active in the commodity trade, banking, insurance, and transportation sector — signed a deal with Shangdong Electric Power Corporation III (SEPCO III), a subsidiary of China Power Construction Co. (PowerChina), to set-up a joint venture company to finance, design, construct, and operate the 2x660 MW Supercritical Coal-Fired Banskhali Power Plant. The special purpose vehicle that was established, SS Power I Limited, is jointly owned by S. Alam Group (70% equity stake), SEPCO III Electric Power Construction Corporation (20% equity stake), and HTG Development Group Co. Ltd. (10% equity stake). The $2.506 billion Banskhali Power Plant is an independent power project (IPP) that was implemented on a build, own, and operate (BOO) basis and financed according to a debt-to-equity ratio of 71.1:28.9. On December 28, 2018, a syndicate of banks — including Bank of China (Qingdao Branch) as an arranger, lender, and original hedging bank, Bank of China Limited (Singapore Branch) as a lender, facility agent, offshore security agent, and offshore account bank, China Development Bank (CDB) as an arranger and lender, China Construction Bank (Shandong Branch) as an arranger, lender, original hedging bank, Agricultural Bank of China (Qingdao Branch) as a lender, China Minsheng Bank (Qingdao Branch) as a lender, and Rupali Bank Limited as a lender, onshore security agent, and onshore account bank — signed a $1.782 billion USD syndicated buyer’s credit agreement with SS Power I Limited for the 2x660 MW Supercritical Coal-Fired Banskhali Power Plant Project. The buyer’s credit carried a 15-year maturity and an unknown interest rate. It was also supported by a Sinosure credit insurance policy and secured by (collateralized against) a share pledge, account pledge, a mortgage and debenture. AidData estimates that Bank of China contributed $296,666,666.7 (captured in Project ID#52792), CCB contributed $296,666,666.7 (captured in Project ID#98804), CDB contributed $296,666,666.7 (captured in Project ID#98814), and that ABC also contributed $296,666,666.7 (captured in Project ID#98815). The borrower was to use the proceeds of the loan to finance (a) 85% of the cost a $1.86 billion commercial (EPC) contract between S. Alam Group and SEPCO III, which was signed on June 29, 2015; and (b) 85% of the cost of the Sinosure premium and interest during construction under the senior buyer’s credit facility. The syndicated loan covered 71.1% of the total project cost. S. Alam Group, SEPCO III, and HTG Development Group Co. Ltd. were expected to cover the remaining 28.9% via equity contributions. Project ID#52792 captures the debt financing for the project, while Project ID#54275 captures the equity financing for the project. The purpose of the project was to construct a supercritical coal-fired power plant — with two 660 MW supercritical power generation units — and a new special coal unloading wharf in Paschim Gandamara within Banskhali Upzila and Chittagong Division (exact locational coordinates: 21.970844, 91.888932). The IPP is governed by the terms of an Implementation Agreement (IA) and a 25-year power purchase agreement (PPA) executed with Bangladesh Power Development Board (BPDB). SEPCO III is the general engineering, procurement, and construction (EPC) contractor responsible for project implementation. However, several other contractors are also involved in the project. Dongfang Electric Corporation is responsible for providing the turbine generators, while Babcock & Wilcox Beijing Co., Ltd. is responsible for providing the boiler equipment. Sinohydro Foundation Engineering Co., Ltd. is also involved in project implementation. A formal project unveiling ceremony took place on October 14, 2016, with Chinese President Xi Jinping and Prime Minister of Bangladesh Sheikh Hasina laying the plant's foundation. However, project implementation did not begin until significantly later. A notice to proceed (NTP) was issued to the EPC contractor on December 10, 2018, and project implementation commenced on December 31, 2018. As stipulated in the EPC contract, the project completion date was scheduled to fall between 39 and 40 months (March 31, 2022 or April 30, 2022) after the EPC commencement date and the NTP date. The construction of the Banskhali Power Plant has been the source of significant, often violent, controversy in Bangladesh. Villagers opposed to the plant began peaceful protests during the S. Alam Group's land acquisition efforts, decrying the displacement because of the plant's construction. Then, on April 4, 2016, 500 villagers gathered on the grounds of Gondamara School to protest against the construction of the plant, despite local authorities having banned the demonstration. The demonstration turned violent, as police opened fire, killing four protesters and wounding 30 more. Then, in early February 2017, at a community meeting in Abhaittya Ghona in Banskhali, sponsored by the Bangladesh Navy, the S. Alam Group, and local authorities, clashes broke out between pro and anti-plant factions (which were composed of followers of a local Awami League leader and Bangladesh Nationalist Party leader, respectively) that led to the death of a pro-plant man and injured 16 more. After the clashes, the Bangladesh Navy began to supervise the project site's security along the local police. In July 2020, the sponsors of the project were fined ৳2,000,000,000 BDT for delays in the construction works and received a two-year extension to the project period. Then, on April 17, 2021, clashes erupted between the Banskhali police and construction workers at the plant, supported by local people. The workers had been protesting over unpaid wages. The resulting altercation saw the police kill five workers and critically wound a dozen more. During the protest, workers committed arson and vandalism in the construction period. Two more workers died of their injuries, raising the death toll to seven. The next month, on May 28, 2021, police arrested a local Bangladeshi engineer for posting an anti-power plant message on Facebook under Bangladesh's Digital Security Act. One cause of the resistance to the power plant is allegations from local residents near the power plant that the S. Alam Group bought their land to construct a garment factory to increase local employment, not a polluting power plant. The resistance was reportedly so strong that the S. Alam Group was willing to shift the entire plant to Chokoria if it could not convince the locals to support the plant. Another cause of protests was the environmental impact of the plant. An analysis of the air quality segment of the project's Environmental Impact Assessment (EIA) by the Helsinki-based Centre for Research on Energy and Clean Air, in collaboration with the Bangladesh Environmental Lawyers Association and the Bangladesh Working Group on External Debt, found that the EIA was filled with false information and omitted key details, in violation of the laws of Bangladesh. For example, the EIA failed to discuss the health impacts of the plant or mercy pollution, and falsely claimed that the air quality in Banskhali met Bangladeshi standards. The conclusions of the review suggested that the low-quality of the EIA was either the result of gross incompetence or deliberate manipulation. In a June 2021 letter to China's Commerce Minister, 129 activists and 79 organizations from 21 countries, including a number of well-known Bangladeshi figures, asked the Chinese Government to withdraw financing and technical support from the Banskhali Power Plant Project based on the project's lack of transparency, violations of human rights, and environmental damage.

Additional details

1. The Chinese project title is 艾萨拉姆2x660MW燃煤电站项目 or 孟加拉国艾萨拉姆2x660MW燃煤电站项目 or 艾萨拉姆项目. The power plant is also known as the Chittagong 1320 MW Thermal Power Plant and the S.Alam Chittagong Power Plant. Banskhali is also spelled Banshkhali. 2. Several sources suggest that the Export-Import Bank of China was involved this financing this project, despite its absence on an Industrial and Commercial Bank of China webpage describing the structure of the syndicated loan that supported the project. This issue merits further investigation. 3. The exact size of BOC, ABC, CDB, and CCB's respective financial contributions to the $1.78 billion syndicated loan are unknown. For the time being, AidData assumes that all 6 members of the lending syndicate contributed equal amounts ($296,666,666.7). 4. AidData has coded this transaction as a collateralized loan because Bank of China and Rupali Bank Limited were selected as the security agent (i.e. collateral agent) for the loan. When lenders take collateral as security for their loans, a collateral/security agent is often appointed to enforce rights against the collateral in the event of the borrower's default under the loan. 5. This loan is not recorded the China’s Overseas Development Finance Dataset, which Boston University's Global Development Policy Center published in December 2020. 6. This project is considered to be part of the Bangladesh, China, India and Myanmar Economic Corridor (BCIM) and the Belt and Road Initiative (BRI). 7. HTG Development Group Co. Ltd. is sometimes referred to as STG Development Group. 8. During Chinese President Xi Jinping's state visit to Bangladesh in October 2016, Xi announced several major energy cooperation projects, including the S.Alam Chittagong Power Plant. 9. Sinosure provided medium and long-term buyer credit insurance and overseas investment (equity) insurance. 10. Deheng Law Firm advised the project owner on PRC law. Sunshine Law Firm acted as the leading counsel, and Doulah & Doulah acted as Bangladesh counsel to China Export & Credit Insurance Corporation (Sinosure). JunHe served as PRC counsel to the financing party.

Number of official sources

17

Number of total sources

37