CMC provides $94.84 million loan — via deferred payment arrangement — for coal imports to support the 1320MW Payra Coal-Fired Thermal Power Plant Project (Linked to Record ID#56005, #52748, #38245, #56547, #56402, and #56357)

CMC provides $94.84 million loan — via deferred payment arrangement — for coal imports to support the 1320MW Payra Coal-Fired Thermal Power Plant Project On June 9, 2014, the Northwest Power Generation Company Ltd. (NWPGCL) signed a joint venture agreement with China National Machinery Import & Export Corporation (CMC) to construct the first phase of the 1320MW Payra Coal-Fired Thermal Power Plant Project.

CMC and NWPGCL formed the Bangladesh-China Power Company Ltd. (BCPCL) — a special purpose vehicle — to carry out this project. CMC and NWPGCL each hold a 50% equity stake in BCPCL. The Prime Ministers from both countries attended the June 2014 signing ceremony for the BCPCL. NWPGCL and CMC registered BCPCL on October 1, 2014.

NWPGCL is a subsidiary of the Bangladesh Power Development Board (BPDB). BPDP and CMC are both state-owned companies.

The total cost of the 1320MW Payra Coal-Fired Thermal Power Plant is $2.48 billion and it is reportedly being financed according to an 80:20 debt-to-equity ratio. NWPGCL and CMC each reportedly will provide 50% of the equity financing for this project. Record ID#56005 captures the equity funding for the project.

China Eximbank covered the remaining 80% of the project through debt financing.

On May 12, 2018, the China Eximbank and BCPCL signed a $1.984 billion loan agreement to support the construction of the 1320MW Payra Coal-Fired Thermal Power Plant Project (as captured via Record ID#52748).

Principal and interest are payable in 23 semi-annual installments. Interest is also payable semi-annually during the grace period. The loan is collateralized in that the 1320MW Payra coal-fired power plant facility has been mortgaged to the lender.

As an additional credit enhancement, the Government of Bangladesh issued a $1 billion sovereign guarantee in support of the loan on December 31, 2017.

The borrower made three principal repayments worth $64,946,000 in the financial year 2020-2021 (July 1, 2020 to June 30, 2021) and $136,333,396 in the financial year 2021-2022 (July 1, 2021 to June 30, 2022). However, the borrower struggled to meet its repayment obligation during the second half of the calendar year 2022.

The borrower failed to pay the fourth (scheduled) installment of principal and interest (worth $114 million) to the lender on December 8, 2022, which raised questions about possible default and BCPCL's ability to secure a follow-on loan from China Eximbank for the Second Phase of 1320MW Payra Coal-Fired Thermal Power Plant Project.

AM Khorshedul Alam, Managing Director of BCPCL, told a local media outlet at the time that his organization had the entire month of December 2022 to pay the fourth installment. China Eximbank reportedly issued an invoice amounting to $114 million due on December 8, 2022.

But when BCPCL asked its 'account bank' – Sonali Bank – to make the payment, Sonali Bank said it was not in a position to provide such a large amount of US dollars.

Following Sonali Bank's reply, the BCPCL wrote a letter to the Secretary of Bangladesh's Power Division on December 1, 2022, requesting its assistance by notifying the Forex Reserve and Treasury Management Department of the country's central bank (Bangladesh Bank) through the Finance Division to provide the required U.S. dollars to the bank account before December 8, 2022 at the Bangladesh Bank rate. 'The Ministry of Finance issued a sovereign guarantee of around $1 billion favoring the lender to secure this loan repayment.

Failure to pay 4th loan [installment] may result in country default,' reads the letter.

BCPCL also noted that '[I]f we failed to pay the loan [installment in a timely manner], loan financing for the 2nd phase of the project may be seriously threatened.' Two weeks earlier, on November 13, 2022, BCPCL wrote to the Forex Reserve and Treasury Management Department of the Bangladesh Bank and the Power Division to request help accessing the U.S. dollars needed to make loan repayments and coal import-related payments. 'The Bangladesh Bank is the only source that has the capability to support our huge forex liquidity requirement, BCPCL wrote in its letter.

The China Eximbank loan's principal amount outstanding was $1,464,465,797 in the financial year 2019-2021 (July 1, 2019 to June 30, 2020), $1,816,329,544 in the financial year 2020-2021 (July 1, 2020 to June 30, 2021), and $1,679,996,148 in the financial year 2021-2022 (July 1, 2021 to June 30, 2022).

The Payra power plant is located in Dhankhali, Patuakhali, Bangladesh.

This places the power plant along the north side of the Payra port, which will be renovated by the China Harbour Company and the China State Construction Engineering Corporation (see Record ID#55522). Phase one of the project involves the construction of power generation units one and two. Each unit will have a capacity of 660 MW, so phase one has a combined capacity of 1320 MW.

In December 2017, BPDB contracted China Energy Engineering Group Northeast No. 1 Electric Power Construction Co., Ltd. (NPEC) and China National Energy Engineering & Construction Co., Ltd. (CECC) to construct the power plants. The first phase of the project was officially launched on October 27, 2018.

The first phase of the power plant became operational on January 13, 2020, achieved its Initial Operation Date (IOD) on May 15, 2020, and achieved its Commercial Operation Date (COD) on December 8, 2020.

It began supplying electricity to the national grid, per national load dispatch center (NLDC) demand, after achieving COD. A consortium led by the China Datang Overseas Electric Technology and O&M Co. Ltd. will carry out operations and maintenance of the power plant. Once operational, this power plant will sell energy to the BPDB at a cost of 6.56 BDT per unit of energy.

The project site is located at Latitude: 22⁰ 59' 58" N and Longitude: 90⁰ 17' 58" E adjacent to the Kazol River or upstream of Rabnabad Channel at Dhankhali Union, Kalapara Upazila, Patuakhali District of Bangladesh. The site is spread across the Mouza: Modhupara, Char Nisanbaria, and Nisanbaria.

The site can be approached by a direct road from the nearby Dhaka – Kuakata Road (highway no. R880). The site is nearby the widely used Londa Kheya Ghat at Kalapara Upazila. Transport of heavy equipment can be made by an adjacent river route. The site is approximately 13 km away from the nearest Upazila.