Japan credit agency switches on to Bangladesh power project
JBIC joins US$642 million co-financing for 718MW natural gas-fired power plant in Meghnaghat
12 Aug 2020 | Michael Marray

Japan Bank for International Cooperation (JBIC) has signed a loan agreement with Reliance Bangladesh LNG & Power Limited (RBPL) for the Meghnaghat Natural Gas-fired Combined Cycle Power Plant in Bangladesh. This is JBIC's first project financing extended to Bangladesh, and is in support of JERA Co, Japan’s largest power generation company, which holds an equity stake.

The loan, amounting to US$642 million, is co-financed by the Asian Development Bank (ADB) and private financial institutions, including Mizuho Bank, Sumitomo Mitsui Banking Corporation, MUFG Bank, and SocieteGenerale.  Under the agreement signed on July 30, JBIC will chip in US$265 million under its Growth Investment Facility.  Nippon Export and Investment Insurance (NEXI) will provide insurance for a part of the loan provided by the private financial institutions.

RBPL will build, own and operate a 718 megawatt natural gas-fired combined cycle power plant in Meghnaghat, around 40 kilometres southeast of the capital Dhaka.  The electricity produced by the plant will be sold to the Bangladesh Power Development Board under a 22-year power purchase agreement.

Bangladesh is expected to see an average increase in electricity demand of about 6.6% per year until 2040 on the back of strong economic growth, according to JBIC.  However, supply has fallen behind demand, and the country continues to experience power shortages.  The Meghnaghat project, part of the Power System Master Plan, aims to stabilize the country’s power supply.

According to its Export Strategy for Infrastructure System, revised in June 2019, the Japanese government seeks to promote expanding orders for infrastructure systems, including the design, construction, operation and management of infrastructure, as well as increasing investments in local businesses.

And under its Strategic Energy Plan, released in July 2018, the government calls for the strengthening of the international competitiveness and overseas expansion of the country’s energy industry, and financing support from policy-based financial institutions to promote the entry of Japanese companies into overseas markets. The JBIC loan is in line with these government policies.