US-based AES Corporation (AES) achieved a double business success in Bangladesh when it announced financial closure of a $300m power plant near Dhaka only days after Prime Minister Sheikh Hasina had switched on the country’s largest private power plant, also owned and run by AES.

The opening of the Haripur gas-fired combined cycle plant, which is also near the capital Dhaka, will eventually bring on-line a production capability of 360 MW. This will be achieved after a second unit goes into operation later this year, according to Scott Kicker, AES’s Managing Director in Bangladesh.

AES subsidiary AES Meghnaghat Limited has signed a financing deal with the Asian Development Bank (ADB), Infrastructure Development Company Limited and ANZ Investment Bank (ANZ) that will allow the construction of the 450 MW Meghnaghat power plant to proceed. Up to $220m of the total project cost of $300m is being funded through one of the first cross-border, non-recourse debt financing transactions ever completed in Bangladesh.

Only around 18 per cent of the Bangladeshi population are connected to the electricity grid and power demand is growing rapidly. An electricity supply shortage led the government to introduce a number of initiatives, all of which were aimed at increasing power generation and reducing the country’s power shortage, with the goal of achieving universal electrification by 2020.

One of these initiatives introduced in October 1996 was the Private Sector Power Generation Policy and aimed at encouraging private sector participation in Bangladeshi power generation. Since the government ended its monopoly in electricity generation, AES is one of the few foreign owned companies to have come to Bangladesh.

Referring to the Meghnaghat project, Mr. Dennis W. Bakke, President and Chief Executive Officer of AES, stated, “We are pleased that we have achieved this important milestone in Bangladesh for a plant that will deliver such clean and low-priced electricity. The Meghnaghat business expands our presence in the sub-continent and demonstrates how a dedicated project team, supported by AES people around the world working together, can deliver on earlier commitments.”

The financing for Meghnaghat consists of a $50m direct loan from the ADB, a $20m co-financing facility arranged under the ADB’s Complementary Financing Scheme and a $70 million facility guaranteed by the ADB pursuant to its Partial Risk Guarantee program.

ANZ is acting as the sole arranger and underwriter of both the ADB co financing facility and the ADB guaranteed facility for a total commitment of $90m. IDCOL, a government of Bangladesh lending institution which is sponsored by the World Bank, will be providing a total of $80m, which consists of a $60m subordinated facility and a $20m senior facility.

AES Corporation will make an $80m equity contribution.

Haripur and Meghnaghat are the first large-scale independent power projects in the country to be developed, financed and implemented under the Private Sector Power Generation Policy of Bangladesh and Meghnaghat is the first project financing transaction to benefit from the Partial Risk Guarantee scheme of the ADB. It is also the first ever infrastructure development project in Bangladesh to be financed by World Bank-sponsored IDCOL.

AES will own and operate the Meghnaghat plant, which is located 30 km south east of Dhaka, Bangladesh. Electricity will be sold to Bangladesh Power Development Board under a 22-year power purchase agreement at one of the lowest electricity prices ever offered. Titas Gas Transmission and Distribution Company, Ltd. (a wholly owned subsidiary of state energy company Petrobangla) will supply natural gas to the power plant for the term of the power purchase agreement.

The plant is being designed and built by a consortium of Hyundai Engineering & Construction Co. Ltd. and Hyundai Heavy Industries Co. Ltd. Construction of the facility began on January 24, 2001 and is expected to be completed by October 2002.