HSBC: Energising the power sector
One of the world's largest banking and financial services organisations, the Hongkong and Shanghai Banking Corporation (HSBC) is working to develop infrastructure in markets where it operates.
HSBC's export and specialised finance team arranges export credit agencies (ECA)-supported facilities across diverse business sectors worldwide.
In line with HSBC's global strategy, the bank has arranged about $1.14 billion in financing to implement five major power projects in Bangladesh, which is one of the strategic sites for HSBC. Total power generation capacity of these five projects will be 1,371MW.
Of the five projects, four are government-owned. Those are -- Ashuganj Power Station's combined cycle power plant, south unit (450MW), Bangladesh Power Development Board's (BPDB) Ghorasal third unit repowering plant project (416MW), BPDB's Shahjibazar combined cycle power plant (330MW) and BPDB's Chapainawabganj HFO fired power plant (100MW).
The combined capacity of these four projects is 1,296MW, which is 10-12 percent of Bangladesh's total power generation capacity. Three of these projects are gas-based and the other is heavy fuel (HFO) based. The loan repayment period of these ECA-backed loans is 12 to 13 years.
Ashuganj Power Station's combined cycle power plant (south unit) HSBC Bangladesh arranged $420 million in loans for Ashuganj Power Station Company Ltd to help the state-run electricity producer set up a 450MW combined cycle power plant. The project is the first transaction of its kind in the power sector in Bangladesh.
This is the first ECA-backed project in the country's power sector. Three ECAs -- HERMES of Germany, CESCE of Spain and ONDD of Belgium -- provided guarantee in this deal. The financing was also backed by the Multilateral Investment Guarantee Agency (MIGA) of the World Bank.
The new unit of Ashuganj Power Station Company Ltd has already started production. The company is now producing about 700MW to 1,000MW of electricity from its 10 units, according to the company's website.
Ashuganj Power Station is the second largest power station complex in Bangladesh with installed capacity of 1,480MW and de-rated capacity of 1,401MW, meeting 10 percent of the country's electricity requirements.
Officials of HSBC Bangladesh said the credit arrangement is a reflection of the bank's ongoing efforts to support infrastructure growth in the public sector in Bangladesh, especially bolster government activities to enhance power supply in order to sustain the current economic growth momentum.
Implementation of the project commenced in December 2012.
BPDB's Shahjibazar combined cycle
power plant
With total investment costs estimated at $338 million, the Shahjibazar 330MW gas-based combined cycle power plant is one of the largest gas-fired investments of BPDB in the power sector to date under the country's Power System Master Plan 2010. HSBC arranged $257 million of the ECA-backed credit for this project.
Long tenor financing, with a three-year availability period matching the construction period of the power plant and 10-year repayment period, is the longest tenor achieved by BPDB. Chinese ECA (Sinosure) provided the guarantee. This is the first ECA-backed financing received by BPDB.
The implementation began in March 2014 and the single cycle unit of Shahjibazar has gone into production.
BPDB's Chapainawabganj HFO fired
power plant
With total investment costs estimated at $131 million, the Chapainawabganj 100MW Heavy Fuel Oil (HFO) power plant will be equipped with 12 HFO engines. HSBC arranged $112 million of ECA-backed facilities to finance the project. Chinese ECA (Sinosure) and Finnish ECA (Finnvera) provided guarantees. The project is part of the country's Power System Master Plan 2010 and will help improve the overall electricity supply in the northwestern part of the country, where the export processing zones have been set up.
The plant will be powered by HFO due to the absence of gas supplies in the northern part of the country.
The financing package covers 100 percent of the EPC costs, including the supply of goods and services from China and Finland by way of the Sinosure and Finnvera supported loans. Associated costs and expenses have been financed under an uncovered facility. The implementation began in May 2015.
BPDB's Ghorasal third unit repowering plant project
HSBC Bangladesh arranged $333 million of ECA and MIGA-backed credit facility for this project. Chinese ECA (Sinosure) and Swiss ECA (SERV) provided guarantee for this project.
This is the first repowering project in Bangladesh. BPDB will use the funds to implement its 416MW Ghorasal third unit repowering power plant project in Narsingdi.
After repowering, Unit 3 will be converted from a 210MW steam turbine with 27 percent efficiency, into a combined cycle unit with 416MW generation capacity and 54 percent efficiency.
The old existing plant of Ghorasal has a capacity of 175MW now, which consumes 52 million cubic feet of gas per day (MMCFD). Once the repowering project is completed and another 10 to 15 MMCFD gas will be made available for the project, the generation will be raised to 416MW.
The repowering project is important for another feature -- if a new power plant was to be set up at the existing Ghorashal plant, it had to be shut down, meaning the country would have received 175MW less electricity for at least three years.
Now, the old plant would continue to churn out the existing 175MW while the repowering continues.
The implementation started in February last year with the signing of the agreement.
Sustainability, to HSBC, means building business for the long term by balancing social, environmental and economic considerations in the decisions the bank makes. The bank is also interested in financing solar energy projects and has clearly stated that it will not invest in projects that harm the environment or the society.
The bank is a signatory to the Equator Principles (EPs) which is a risk management framework, adopted by financial institutions, for determining, assessing and managing environmental and social risks in projects and is primarily intended to provide a minimum standard for due diligence to minimise the associated risks in the project.
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