Finance Division receives proposal for Tk5,000cr bonds to clear power dues
It is still in the preliminary stage and will take a few more days to finalise, says an official
The Ministry of Finance has received a proposal from the Bangladesh Power Development Board (BPDB) for issuing new bonds worth Tk5,000 crore to settle outstanding dues in the power sector.
The proposal is currently being verified by the Finance Division, reviewing how much is owed to each institution and to the Finance Division, a senior official of the Finance Division told The Business Standard yesterday.
The entire outstanding amount cannot be cleared all at once or through bonds, which is why the proposal is under review, he added.
The official further said, "The matter is still in the preliminary stage and will take a few more days to finalise. Once it receives approval from government high ups, the bonds will be issued."
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A senior official of the BPDB said, "We've completed all the necessary processes from our end to issue the new bonds. Now it's with the finance ministry for final approval."
He added that some 25-27 public and private sector banks will be involved in the bond issuance process, similar to previous instances, reports UNB.
According to BPDB officials, the state-owned power company initiated the move and consulted the Power Division to discuss the issue with the Finance Division. The initiative aims to ease the financial strain on independent power producers (IPPs) and stabilise the country's power sector.
"We've been calculating BPDB's dues with the private power producers [IPPs]," said another top BPDB official.
He disclosed that BPDB's total unpaid bills currently amount to approximately Tk42,000 crore, of which the IPPs are owed around Tk7,000 crore.
Of the remaining amount, Tk17,000 crore is owed for gas bills, while state-owned public sector power plants are due Tk10,000 crore.
Indian public and private sector entities, including the Adani Group, are expected to receive about Tk8,000 crore.
In an earlier initiative aimed at stabilising the power sector, the previous Awami League government secured Tk20,620 crore through the issuance of special bonds to clear outstanding liabilities to private power plants.
The effort involved collaboration with two prominent private banks – City Bank and Pubali Bank.
A comprehensive agreement was signed on 25 January, marking a crucial step in addressing the power sector's financial challenges.
As per the agreement, the government issued bonds worth Tk19,850 crore to City Bank and Tk77.50 crore to Pubali Bank, according to the finance ministry.
The government's inability to disburse subsidy funds had left private power plants struggling to meet their financial obligations, pushing some to the brink of insolvency.
To address the crisis, the issuance of special bonds with an 8% coupon rate, reflecting the repo rate set by Bangladesh Bank, was introduced. Any future changes in the repo rate will adjust the bond interest rate accordingly.
At the end of the bond term, the government will settle bank dues along with interest and reclaim the bonds. Unlike typical 15-20-year bonds, these special bonds have a maximum tenure of 10 years to meet the urgent needs of the power sector.
Key players in the power sector, including Summit Power, United Power, Confidence Power, Baraka, Kushiara, Doreen, and Akron Power, are among the beneficiaries of this initiative.
The Finance Division has also disclosed plans for phased agreements with other banks, including BRAC Bank and Bank Asia, to further address the sector's liabilities.
Reflecting on the agreement's significance, managing directors of several banks expressed optimism. While banks can leverage these bonds with Bangladesh Bank, it provides the government with crucial financial breathing space.
