No limit on loans for power producers’ fuel purchase

Bangladesh Bank allowed banks to keep private sector power producers out of the purview of the single borrower exposure limit when giving them loans for the import of raw materials, including fuel oil, according to the media reports.

As per the single borrower exposure limit, banks are not allowed to give out loans that are more than 25 % of their capital to a single person, entity, or business group.

But the rule will not be applicable for independent power producers (IPPs) in running their plants as Bangladesh Bank will allow the companies to take loans from lenders beyond the limit, according to a central bank notice.

Banks will have to follow the new rule until December this year.

Media reported citing a central bank official, on condition of anonymity, told that Bangladesh Independent Power Producers’ Association (BIPPA) wrote a letter to the central bank governor on February 20 requesting him to arrange sufficient dollars for the power plants to import heavy fuel oil.

As per the letter, the IPPs together will require approximately $250 million per month from March to June this year to import heavy fuel oil (HFO).

Given the ongoing international price of the HFO, including the cost of shipping and insurance, the IPPs will require $1.05 billion in the four months.

Without this kind of support from Bangladesh Bank, the country will inevitably face widespread load shedding during this critical time of irrigation, Ramadan and summer, the BIPPA said in its letter.

The BB official said the central bank has addressed the BIPPA’s demand by issuing the notice.

The IPPs will first take loans in the form of the local currency, after which they will convert those to dollars to import fuel oil from abroad, he said.

For this reason, the central bank relaxed the single borrower exposure limit to facilitate the IPPs.

Among the IPPs, Orion Power will require $197.10 million, Summit Power $159.86 million, Doreen Power $102.80 million, Confidence Power $97.50 million, Acorn Power $73.59 million and Baraka Power $68.32 million.

The letter also mentioned the names of some other IPPs that would require a hefty amount of dollars in the four months to June this year.