BANGLADESH Trends and Developments Contributed by: Arunima Dutta Aurni and M Imtiaz Farooq, Farooq & Associates
with reputed international lenders, including development finance institutions (DFIs), mul- tilateral financial institutions (MFIs) and com- mercial banks, financing major power projects. These lenders were comfortable with the previ- ous format of agreements and had worked out the associated risk mitigation. However, it will require significant time for lenders to familiarise themselves with this new format and to finance projects given these key bankability concerns. Payment Challenges in Existing Power Projects The existing power projects that have success- fully achieved commercial operation are invoic- ing the BPDB for payments as per their agree- ments. However, the BPDB’s payment cycle remains significantly delayed. While this issue existed during the previous government’s ten- ure, the delays have since worsened, with pay- ment deferrals ranging from three months to over a year depending on project priority.
The persistent delays not only hamper the cash flow of project sponsors but also undermine lender confidence, thereby increasing the risk premiums on future financing. Consequently, sponsors face mounting difficulties in servicing debt obligations and meeting other contractual commitments, which in turn threatens the over- all financial viability and sustainability of power projects in Bangladesh. Conclusion In light of these ongoing changes and chal- lenges, the power sector in Bangladesh stands at an interesting turning point. How it evolves from here will be crucial, not just for the sector itself but for the broader economy as well. It is a pivotal moment that calls for careful balancing of reform and practical solutions. Ultimately, the path chosen now will have a tremendous impact on the country’s energy future and economic growth.
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