Payra Power Plant's coal import bills, loan payment stuck over dollar crisis

The Bangladesh-China joint venture that has implemented the Payra 1,320MW Thermal Power plant is struggling to manage dollars to pay coal import bills and repay loans taken for the plant.

The company – Bangladesh-China Power Company (PVT) Limited – has already missed some payment deadlines and needs $387.39 million this month on an urgent basis, reads documents obtained by The Business Standard.

Of that amount, $114 million is needed for the payment of the fourth instalment of a loan, which the company failed to pay within the 8 December deadline set by the lender.

According to the documents, failure to pay the instalment may result in country default, which will make the authorities ineligible to get credit support from the lender – the Export-Import Bank of China – for the second phase of the Payra Power Plant project.

Engineer AM Khorshedul Alam, managing director of Bangladesh-China Power Company, however, told The Business Standard that they had the entire month of December to pay the instalment. State-owned Sonali Bank was settling the bill, he added.

But, the loan instalment remained unpaid till the end of the banking hour on Thursday, 8 December, sources at Sonali Bank told TBS.

Explaining the rush at the eleventh hour, Khorshedul Alam said, "We used to pay the instalments through Standard Chartered Bank. But, recently the bank decided not to facilitate coal projects. Therefore, we had to shift the account to Sonali Bank which took some time."

The company has also turned to the authorities concerned, including the Power Division and the Bangladesh Bank, for help managing the required liquidity.

Loan repayment

Bangladesh-China Power is a joint venture between North-West Power Generation Company Limited – a Bangladesh government-owned entity, and China National Machinery Import and Export Corporation (CMC).

The joint venture company has implemented the Payra thermal power plant at a cost of $2.480 billion, which started commercial operations on 8 December 2020.

Out of the total cost, $1.984 billion is debt funded solely by the Export-Import Bank of China and the remaining $0.496 billion was provided by shareholders.

As per the conditions of the lender's debt service, the loan tenure is 15 years including four years of a grace period. Bangladesh-China Power is committed to repaying the principal and interest in 23 semi-annual instalments at LIBOR plus 2.98% interest.

The company has already made three instalments amounting to $201 million.

The lender issued an invoice amounting to $114 million due on 8 December 2022. But when Bangladesh-China Power asked the account bank – Sonali Bank – to make the payment, the bank said it was not in a position to provide such a huge amount of US dollars.

Following Sonali Bank's reply, the company on 1 December wrote to the secretary of the Power Division, requesting the Power Division to assist them by notifying the Forex Reserve and Treasury Management Department of the Bangladesh Bank through the Finance Division to provide the required dollars to the bank account before 8 December at 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 instalments may result in country default," reads the letter.  

The company also explained its concern over the implementation of the second phase of the Payra Thermal Power Plant Project which is due to be financed by the same lender.

"If we failed to pay the loan instalments timely, loan financing for the 2nd phase of the project may be seriously threatened," says the letter.

Earlier on 13 November, it also wrote to the Forex Reserve and Treasury Management Department of the Bangladesh Bank and the Power Division for allocating dollars for making debt repayment and coal import-related payments.

"The Bangladesh Bank is the only source that has the capability to support our huge forex liquidity requirement," Bangladesh-China Power Company writes in its letter.

When asked about the matter, Kazi Sayedur Rahman, deputy governor of the Bangladesh Bank declined to comment.

Coal import bill overdue

Payra 1320MW Thermal Power Plant, the largest coal-fired power plant in the country, is run by coal imported from Indonesia.

The plant would need around four million tonnes of coal annually to run on full capacity. 

Bangladesh-China Power needs to open 12-13 LCs worth $70 million to $80 million each month to import coal for the plant, according to sources who know about the matter. 

In its letter to the Power Division and the Bangladesh Bank, Bangladesh-China Power Company said that apart from the loan instalment, it had $94.84 million in overdue coal import bills as of November.

Besides, the company required $86.88 million and $91.67 million for coal import and freight payments in November and December, respectively, according to the letter.

Khurshedul Alam, however, said delays in coal import bill payment would not hit the company hard because they had made the exporter supply the energy on deferred payment for six months.