GuarantCo guarantees 15-year USD 13.5 million dual currency financing solution for Technaf Solartech Energy to support first-ever utility scale, grid connected solar power plant in Bangladesh
Setting the tone for increased contribution of renewables in the Bangladeshi energy mix and contributing cleaner electricity to the national grid
GuarantCo has provided a guarantee to support a 15-year USD 13.5 million dual currency financing solution on behalf of Technaf Solartech Energy Limited (TSEL), the first and currently only operational utility-scale solar project in Bangladesh, developed by Joules Power Limited, a Bangladeshi developer.
The guarantee will be shared across two tranches of US Dollar (USD) and Bangladeshi Taka (BDT) debt provided by Standard Chartered (SC).
GuarantCo, a Private Infrastructure Development Group (PIDG) company, provided an innovative structure which combined a credit guarantee with a liquidity extension guarantee, thereby mitigating both payment default risk and liquidity risk for SC. The liquidity extension guarantee allows TSEL to benefit from a 15-year tenor for its loan whilst also allowing SC to exit the transaction after 8 years (the typical maximum tenor in Bangladesh for infrastructure projects) should there be liquidity constraints. In the absence of a new funder replacing SC then GuarantCo would assume the refinancing risk whilst TSEL would continue to benefit from the full 15-year tenor. This innovative structure allows long-term infrastructure projects, like TSEL, to be financed efficiently in both hard and local currencies and sets an important precedent for the market in Bangladesh.
The solar power plant located at Teknaf, Cox’s Bazar Bangladesh, has an installed capacity of 28MWDC / 20MWAC. The expected annual yield is 43,000MWh and at peak production the plant supply will cover up to 80 per cent of the present electricity demand of the entire Teknaf region.
GuarantCo also obtained a USD 107,000 grant from the Technical Assistance Facility (TAF) of PIDG to fund and undertake technical and health, safety, environmental and social (HSES) due diligence and prepare a comprehensive environmental social action plan review by an independent advisor. The HSES review will bring the project in line with International Finance Corporation (IFC) performance standards and will not only demonstrate the critical requirements of such standards to other developers in the sector but also set the benchmark for future projects in Bangladesh. PIDG has an overarching commitment to HSES and to ensure strong HSES governance runs across all its operations.
The project will have a significant transformational impact in Bangladesh as it will set the tone for increased contribution of renewables in the energy mix of the country. Around 136,500 people will benefit from an improved quality of service: approximately 170 people were employed during construction and 70 people are currently employed during operational phase.
The innovative financing structure from GuarantCo resulted in TSEL winning the Finance Asia ‘Best Bangladesh Deal for 2018’.
Lasitha Perera, CEO of GuarantCo, said: “We are proud to have closed this landmark financing for the first-ever grid-connected solar power plant in Bangladesh and make a contribution to the country’s growing economy and its rising energy demand. This project will have a significant impact on the energy transition of the country towards increasing the share of renewable energy in the energy mix. Our funding solution is pioneering, by structuring the transaction to make it financially bankable, mitigating significant structuring risks and structuring the deal according to international standards to help the developer obtain financing from international investors for future projects. We also extended the tenor from 8 to 15 years which was essential in delivering the project and in the long run will help local banks to become comfortable with providing longer tenors to infrastructure projects.”
Nuher Latif Khan, Managing Director of Technaf Solartech Energy and a Director of the Dhaka Chamber of Commerce & Industry (DCCI), said: “We are delighted to have successfully completed this landmark and pathbreaking transaction with GuarantCo for our 28MW, first-ever grid-connected and currently only operational solar project in Bangladesh. The successful completion and financing of this project is in line with the vision of our Honourable Prime Minister to make Bangladesh self-sufficient in power and ensure that the country steadily moves to a cleaner energy mix where renewables would contribute at least 10 percent to the grid. Increased reliance to renewable energy sources like solar is not only environmentally friendly but also reduces the drain on Bangladesh’s foreign currency which is being spent on importing costly fossil fuels. We want to thank GuarantCo for their unwavering support in structuring and implementation of this unique transaction from the very start and we look forward to have many more years of association of working together.”
Technaf solartech power plant – before (start of GuarantCo’s involvement) and after construction
GuarantCo mobilises private sector local currency investment for infrastructure projects and supports the development of financial markets in lower income countries across Africa and Asia. GuarantCo is part of the Private Infrastructure Development Group (PIDG) and is funded by the governments of the United Kingdom, Switzerland, Australia and Sweden, through PIDG, and the Netherlands, through FMO and PIDG. GuarantCo is rated AA- by Fitch and A1 by Moody’s. www.guarantco.com
The Private Infrastructure Development Group (PIDG) is an innovative infrastructure development and finance organisation which encourages and mobilises private investment in pioneering infrastructure in the frontier markets of sub-Saharan Africa and south and south-east Asia to promote economic development and combat poverty. PIDG delivers its ambition in line with its values of opportunity, accountability, safety, integrity and impact. Since 2002, PIDG has supported 170 infrastructure projects to financial close and provided 231 million people with access to new or improved infrastructure. PIDG is funded by six governments (UK, Netherlands, Switzerland, Australia, Sweden, Germany) and the IFC. www.pidg.org