Bhola-2 220MW Combined Cycle Power Plant
On June 7, 2022, the Multilateral Investment Guarantee Agency (MIGA), a member of the World Bank Group, issued guarantees totaling US$407 million to cover the acquisition and refinancing of Nutan Bidyut (Bangladesh) Limited, the project enterprise that owns and operates the Bhola-2 220MW, dual fuel (gas/HSD) combined cycle power plant. The MIGA guarantees will cover equity investments by Actis against the risk of breach of contract-arbitral award default for a period of up to 20 years. The MIGA guarantees will also cover the non-shareholder loans made by a group of international banks for up to 18 years against the risks of transfer restriction, expropriation, war and civil disturbance, and breach of contract-arbitral award default. Mizuho Bank, Ltd. undertook the role of MIGA coordinating bank for the original lending group that included DBS Bank Ltd., and the Singapore branches of the Bank of China Limited, ING Bank N.V., Société Générale, and Sumitomo Mitsui Banking Corporation.
Bangladesh, which accounts for approximately 0.3% of global CO2 emissions, is making bold steps in its role to support global efforts for combating climate change. Through ambitious actions set out in its updated Nationally Determined Contributions, the country is seeking to move toward a low-carbon and climate-resilient economy, and the power sector is playing a vital role. Highly efficient and cost-effective gas-based power plants such as this project have been identified as a key feature for Bangladesh’s decarbonization pathway as gas-based power generation provides a reliable baseload capacity for the system and is cleaner than other more carbon-intensive fossil fuel alternatives. The Bhola-2 power plant is a highly efficient facility that utilizes best-in-class technology that produces less GHG emissions than comparable power plants of its size and utilizes a captive source of domestic gas. To ensure the sustainability of this project, an extended flood risk analysis and action plan was also developed to improve the climate resilience of the plant and reduce the likelihood of adverse impacts to the neighboring community.
MIGA’s support for the project aligns with the World Bank Group’s engagement and Bangladesh’s long-term strategy for energy security through reliable access to reasonably priced energy and ensures that the plant is operated efficiently and in a progressive manner that is more responsive to climate issues. The project is expected to yield positive development benefits by mobilizing a foreign sponsor with extensive operational management expertise in the power sector, as well as international commercial lenders to replace existing DFI lenders, thereby improving the financial stability of the project during a period of waning FDI activity exacerbated by the COVID-19 global pandemic. The acquisition of a just-turned operational power asset will not only ensure the availability of power in Bangladesh but will also highlight a business model that has potential for replication. The project is aligned with MIGA’s strategy of greater engagement in IDA countries and is consistent with the World Bank’s focus on the pillars of growth and competitiveness, social inclusion, and climate and environmental management presented in Bangladesh’s Country Partnership Framework FY16-FY20.