Orion Group yesterday got the go-ahead to borrow $88 million from foreign sources for its two major power projects.
The approval came at the meeting of the scrutiny committee for approval of foreign loan/supplier's credit, chaired by Bangladesh Bank Governor Atiur Rahman.
The committee approved a total of $125.05 million of foreign loans, which come at a lower cost, for seven projects. The remaining $37.05 million will be borrowed by five garment and textile companies.
Orion will borrow from a Singapore-based lender for operation of its Dutch-Bangla Power and Associates in Narayanganj and Orion Power Meghnaghat.
The projects are 100 megawatt heavy fuel oil-based power plants and are running at their optimum levels.
Power projects are extremely capital-intensive businesses and it is tough to run them with the high borrowing costs in Bangladesh, Salman Karim, managing director of Orion Group, said.
Though some sectors in Bangladesh get preferential interest rates, power does not, which pushes a plant's costs up.
“We had no option but to borrow from foreign sources for our sustainable business operation.”
The highest interest rate of the approved proposals is three-month Libor+4.50 percent a year, according to BB. It said the effective interest rate will be within 4.74 percent and the tenure of the loans at least three years.
A BB official said there are many foreign financing proposals that are being considered for approval.
The scrutiny committee for approval of foreign loans hopes that this type of foreign financing will help the country keep the greenback's (US Dollar) price stable and maintain a positive balance of payment.
The committee approved foreign loans worth around $2.6 billion in fiscal 2013-14, while the amount was $2.4 billion in fiscal 2012-13 and $1.8 billion in fiscal 2011-12.