WASHINGTON, D.C., July 31, 1998 --- The International Finance Corporation is investing US$55.2 million in Khulna Power to build, own, and operate the first independent power plant in Bangladesh at a total cost of about US$103 million. The 110-megawatt power plant is being developed on a fast-track basis and is expected to be operational as early as September of this year. The project, located near Khulna, which is in the country’s least developed western region, will help to reduce severe power shortages that constrain the growth of the private sector.
The power plant will initially run on residual fuel oil from an international fuel supplier and convert to natural gas when it becomes available. The plant, which uses proven diesel generation technology, will be mounted on two barges holding diesel engine generators. The output will be sold to the Bangladesh Power Development Board, the state-owned electric company, under a 15-year power purchase agreement.
Vivek Talvadkar, Director of IFC’s Power Department, said that the success of this first independent power producer in Bangladesh will provide a prototype for others to emulate. Private sector participation in power generation will greatly reduce the need for public investment and avoid the high costs incurred by expensive generation at existing power plants, he added.
IFC’s financing package includes an equity investment of US$3.3 million, a loan of up to US$22.5 million for IFC’s own account, and a syndicated loan of up to US$29.4 million for the account of participants.
Wartsila NSD Corporation is the project’s main sponsor. It is a subsidiary of Metra Corporation of Finland and is the world’s leading designer and manufacturer of medium-speed diesel engines for power generation. The two local partners are Summit Industrial and Mercantile Corporation (Pvt.) Ltd. and United Enterprises & Co. Ltd. The local shareholders are active in the fuel storage and transportation industries in Bangladesh.
IFC, part of the World Bank Group, fosters growth in the developing world and in emerging economies by financing private sector investments, mobilizing capital in the international financial markets, and providing technical assistance and advice to governments and businesses.