Bangladesh PPP project -Govt to create fund for energy sector

Source :The government is going to create first ever fund for energy sector to encourage public-private partnership (PPP) projects with an option to raise money from the capital market amid growing power outage and demand.

It will be a general pool of fund operated under a company and it will be used in PPP projects on equity or debt basis.

The projects can also have the option to raise fund from the stock market to gather necessary funding.

The government would create the fund to encourage the private sector to come forward with new energy-related projects.

A committee, which was assigned to find out a way to raise funds for the power sector, submitted its report to the government recently. Deputy Governor of Bangladesh Bank Ziaul Hasan Siddiqui headed the committee.

Initially, the government would provide Tk 15 billion (1,500 crore) as seed money for the fund and Tk 10 billion will be raised from non-resident Bangladeshis and other investors, said Securities and Exchange Commission (SEC) member Mohammed Yeasin Ali, also a member of the committee.

The fund will be a ‘patient capital’ which means the return from the investment will be long-term in nature but with commercially viable profit, he said.

“A potential entrepreneur can seek investment and if the project is viable the fund will provide a portion of the cost,” he added.

The entrepreneur will have to invest from his own pocket and he can also raise funds from the stock market, Mr Yeasin said.

It will be a mixture of investments from individuals and the fund; and the investor can also raise an amount from the stock market, he explained.

An experienced manager will be appointed to manage the fund and he will ensure the profitability from the projects financed, he added.

Chairman of Bangladesh Power Development Board (PDB) ASM Alamgir Kabir said foreign direct investments or the government can finance the big projects, but this fund will be used to finance small-scale projects.

“Mega power plants or gas exploration projects need huge investments and the fund cannot cater to the need of such projects,” he said.

The fund can finance joint ventures or other small-scale projects of may be 100 megawatt (mw) capacity, he added.

The government has plans to generate 8,000 mw power in the next five years and it needs about $7 billion for that, Mr Alamgir said.

The committee proposed that the fund will be a limited company for long-term capital appreciation and it will only consider those projects which have over 15 per cent internal rate of return (IRR), the report said.

The government’s seed money of Tk 15 billion can be channelised from the Tk 25 billion PPP fund earmarked in the current budget, it added.