The Islamic Development Bank (IsDB), the Asian Infrastructure Investment Bank (AIIB) and Infrastructure Development Company (IDCOL) have signed a long-term financing facility with Nutan Bidyut Bangladesh (NBB). This is a first co-financing by IsDB in cooperation with AIIB and IDCOL for a Ppblic-private partnership project.
The agreement will see the organisations build, own and operate (BOO) a dual fuel combined cycle power plant in Bhola Island, Bangladesh, for a period of 22 years from the date of start of operations. With net generation capacity of 220 MW under gas and 212 MW under high speed diesel (HSD) operations, the completed plant will generate an estimated energy output of 1,322,000 MWh per annum at an 80% plant load factor.
The purchaser is Bangladesh Power Development Board, the government-owned entity which is the largest electricity generation and distribution entity in the country. IDB is providing a US$60 million ijarah facility with a 18-year door-to-door tenor to support this project. The sponsor, Shapoorji Pallonji Infrastructure Capital Company, is a part of the Shapoorji Pallonji group, a global institution with a leading presence in several industries, including engineering and construction, infrastructure, real estate, water, energy and financial services.
The project is in line with the IsDB’s commitment to support the UN Sustainable Development Goals. Energy is the major pillar of the seventh Five-Year Plan - 2016-2021 of the government of Bangladesh (GoB) as one-third of the nation does not have access to electricity.
The project will provide quality, reliable, sustainable and resilient infrastructure that will contribute to the government's initiative to increase power generation capacity by 17,984 MW by the year 2021. It will provide Bangladesh with cheaper energy as compared to the conventional hydrodeoxygenation (HDO)/HSD-fired capacity.
This announcement follows a memorandum of understanding (MoU) signed by the AIIB and IsDB on 25 June 2018 to establish a framework for strategic cooperation, including actively seeking to co- finance projects in common areas of operations. The overarching theme of the MoU is Mobilising Financing for Infrastructure: Innovation & Collaboration.
The MoU enables the two banks to jointly foster collaboration, share information and facilitate knowledge exchanges on development finance, Islamic finance and integrity mechanisms. The MoU is expected to have a strong focus on sustainable infrastructure including the development of energy and power, transportation and telecommunications, rural infrastructure, water supply and sanitation, environmental protection, urban development and logistics.
“An agreement between our banks is a natural fit because we are both dedicated to development and helping our members promote growth and economic opportunity,” said AIIB President Jin Liqun. “We have complementary skill sets and expertise. We believe working together on joint investments and initiatives will strengthen our capacity to deliver on our respective missions and benefit our members.”
Said IsDB Group President HE Dr Bandar M.H. Hajjar: “We have a number of common member countries in Asia and also in Africa and a significant overlap in sectors and financing activities. IsDB Group looks forward to jointly strengthening the effectiveness and sustainability of our banks’ operations and to looking for new ways to stimulate the region’s economic growth together. We strongly believe in the power of innovation, science and technology to stimulate growth and will ensure this is a key area of collaboration for the banks going forward.”
Among other activities, the banks intend to share knowledge and exchange experiences among employees through joint temporary assignments, secondments and training.