Infrastructure-Development-In-Bangladesh.Pdf
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Pen Portrait of KEYNOTE SPEAKER Nazrul Islam Managing Director Infrastructure Investment Facilitation Company Mr. Nazrul Islam, Managing Director of Infrastructure Investment Facilitation Company (IIFC), is one of the leading PPP infrastructure expert in the world. Out of his 34 years of overall experience, he has 27 years of PPP experience in Asia, Pacific and Africa. He has worked in PPP assignments in more than 14 countries including Bangladesh, Kenya, Nigeria, Indonesia, New Zealand, Cook Islands, Rwanda, India, Pakistan, Sri Lanka, Philippines, Hong Kong, Malaysia, China and Solomon Islands. Mr. Islam has been involved in PPP assignments worth over US$ 20 billion in capital investment. He has experience of 35 PPP transactions, 55 PPP projects development and 10 PPP related policy and guidelines formulation. He has been involved in over 100 PPP trainings and capacity building workshops. He contributed valuable roles in the formulation of the captive power policy, remote area power supply systems (RAPSS) Policy, grid open access, coal policy, Private Sector Infrastructure Guidelines and Economic Zones Policy. Before Bangladesh, he worked for nine years as an international consultant with the Electricity Corporation of New Zealand, the main Government utility in New Zealand at the time, as Group Manager, Project Development. In this position, he was responsible for developing a number of BOT and BOO power generation projects in the Philippines, Indonesia, India, China and other countries. He is conversant with all types of power generation technologies such as combined cycles, coal fired power stations, reciprocating engines, geothermal power stations, hydro, combined heat and power and renewable energy, He specialises in contracts, contractual frameworks, negotiations and financial modeling. He is presently leading a team of IIFC experts in a banking sector PPP transaction for increasing Financial Inclusion in Nigeria, through one of its first PPP projects. Institute of Cost and Management Accountants of Bangladesh (ICMAB) Infrastructure Development in Bangladesh: Future Prospects and Challenges Presented by Nazrul Islam Managing Director Infrastructure Investment Facilitation Company 27 April 2015 . PART A: Infrastructure Development Needs . PART B: Selected PPP Projects Carried Out (studying the past) . PART C: Two Key Sectors: Power and Economic Zones . PART D: Challenges for Infrastructure Development for Integrating Public Finance and PPP Finance in the National Planning Process (learning by reflection) PART A: INFRASTRUCTURE DEVELOPMENT NEEDS 3 . Plan envisages both public investment and private investment in infrastructure through public-private partnership (PPP) . Government seeks to grow infrastructure investment from 2% of GDP to 6% of GDP during the Sixth Five-Year Plan . The Plan targets 75% of this investment to come from private sector participation, making PPP the core of policy Public and Private Investment in Infrastructure 7 6 5 Private Infrastructure Investment 4 Public Infrastructure Percent GDP of Percent 3 Investment 2 1 0 Plan Year Source: Sixth Five4 year Plan 50 45 Total Investment 40 Requirement: - Low $74 billion 35 - High $100 billion 30 ($ billion) ($ 25 Low 20 High Investment Investment 15 10 5 0 Transport Electricity WSS Solid Waste Telecom Irrigation 5 Source: Reducing Poverty by Closing South Asia’s Infrastructure Gap, World Bank, Dec. 2013 The Financing Circle Public Private Sector Financing Sector (ADP) Financing 1 (PSF)1 44 (P3F) Infrastructure Monopoly PPP Non- 2 (PSF)2 3 (PIF) Infrastructure Competitive, or Competitive or free market Free market Infrastructure can be carried out through two financing types We should have sectoral Master Plans that plan for both PSF and P3F projects simultaneously PART B: Selected PPP Projects Carried Out (given as examples of PPP projects in Bangladesh) 8 Names of the PPP Projects Discussed Number Sector Name of PPP Project Status Operational Project No. 1 Power NEPC Barge Mounted IPP since June 1999 AES Haripur 360 MW Combined Operational ProjectNo. 2 Power Cycle Power Plant since Dec 2001 Telecom- Operational Project No. 3 PGCB Optical Fiber Cable Network munications since 2006 Operational Project No. 4 Land ports Development of Land ports Since 2007 Court case Project No. 5 Sea ports Patenga Container Terminal stopped project in Nov. 2002 Commun- Dhaka Elevated Expressway PPP Undergoing Project No. 6 ications Project financial closure NEPC Barge Mounted IPP, Haripur (1 of 2 Slides) • BPDB speeded up procurement by avoiding pre- qualification • A joint Ministry/BPDB committee carried out tender evaluation. • Unique Group of Bangladesh joined with a UK-based company, New England Power Company (NEPC) • NEPC submitted tenders for the barge-mounted plant and won the order for the plant at Haripur. • The Power Purchase Agreement and the Implementation Agreement for the project were signed between BPDB and NEPC on 10th March 1998 • Commercial operation was started on 30 June, 1999. • The Plant can operate on dual fuel i.e. Gas & Furnace Oil • Total electricity generation capacity of the plant is 122 MW NEPC Barge Mounted IPP, Haripur (2 of 2 Slides) . Financing was arranged by Wartsila, through OPIC, USA. The loan was about $87 million with a long (13 yrs) repayment period. Total project cost was $124 million. It is a BOO type of project with a 15 years life span. Wartsila Oy, Finland, bought out Unique Group’s share and subsequently also purchased the shares of New England Power Company. Later Wartsila Oy, in turn, sold most of its shares to two power generation companies of USA. El Paso, Houston purchased 50% of the shares and Ogden, New Jersey purchased 45% of the shares. Wartsila reduced its shares to 5% but retained their interest in supplying the engines for the power plant. Haripur 360 MW Combined Cycle Power Plant (1 of 2 Slides) . Developer AES Haripur (Pvt) Ltd. Location Haripur, Narayanganj . Project Cost US$ 176.5 million . Power plant 1 gas turbine, 1 steam turbine & 1 boiler . Net Capacity 360 MW . Contracts signed PPA, IA, GSA, and LLA signed on 17 September 1998 . Commercial Operations 1 Dec 2001 . Term 22 yrs . Fuel Natural Gas Haripur 360 MW Combined Cycle Power Plant (2 of 2 Slides) Plant Output Guaranteed output of 360 MW achieved and maintained over its 12 years of operation Plant Availability Guaranteed availability of 90% achieved Heat Rate Performed better than the Guaranteed Heat Rate of 7336 kJ/kWh Power price Lowest power price amongst all BPDB power plants. Also the lowest power price in the world Power Grid Co. of Bangladesh (PGCB) Optic Fibre Network (1 of 2 Slides) Phase I: In Phase I, the installation of Dhaka- Chittagong link, 245 km was completed. Phase II: The network in the rest of the country is being installed as shown in the picture on the right. Installation of Chittagong- Cox’s Bazar link, 145 km, has already been completed. PGCB leased out one dark pair of OFC between Dhaka and Chittagong through open tender. IIFC was engaged by PGCB in August 2004 to act as the transaction advisor. Power Grid Co. of Bangladesh (PGCB) Optic Fibre Network (2 of 2 Slides) Business Around Lessee Lessee’s Revenue from sublease PGCB Leases the OFC to Lessee PSTN Operators PGCB Lessee Cellular Operators Lease Agreement ISPs Corporate Users The Lessee Subleases Lessee keeps Lessee’s the Bandwidth for Revenue Bandwidth Own Use from Own Customers Own Use Contractual Flow Payment Flow Power Grid’s Optic Fiber Cable Network SSAB Patenga and Pangaon Container Terminals (1 of 2 Slides) . Stevedoring Services of America (Bangladesh) Ltd (SSAB) submitted an unsolicited proposal for the construction and operation of a container-handling terminal at Patenga in Chittagong . The project was proposed for a BOO basis. The terminal was proposed to have a capacity of 300,000 TEUs (twenty-foot container equivalent units). The proposed project would be through a US/Bangladesh joint venture company named SSA Bangladesh Limited (SSAB). The investors proposed taking the full commercial and other risk without any involvement of the government. The total estimated cost of the project was US$ 438 million. The original lease period demanded was very long (2x99 years). Finally negotiated to restrict this period to 30 years. SSAB Patenga and Pangaon Container Terminals (2 of 2 Slides) Dec. 1997 Submission of a proposal for construction of an integrated container terminal project by SSAB to the Ministry of Shipping (MoS). March/April Approval by Cabinet Committee on Economic Affairs (CCEA) and issue 1998 of letter of approval December Land Lease and Operating Agreement signed for establishment of 1998 Container Terminal at Pangaon, by BIWTA January 2000 MOS formed an inter-ministerial Negotiation Committee. September Court case filed in the High Court based on lack of transparency 2000 and that the project would create problems in the navigability of the river. December Negotiations with SSAB undertaken, on the Implementation 2000 Agreement, with over 85 lengthy sessions, during the whole year October The Govt. formed a six-member committee at the Secy. level. 2001 May 2002 Negotiations held between the Six-Secretary Committee and SSAB on 12 major issues. All points revisited and agreed after intense negotiations. November High Court decision stops project. 2002 Dhaka Elevated Expressway PPP Project (1 of 2 Slides) . Bangladesh Bridge Authority (BBA) under Ministry of Communications is the Executing Agency for the Dhaka Elevated Expressway (DEE) PPP project. The Dhaka Elevated Expressway (DEE), a project recommended in the Strategic Transport Plan (STP) for Dhaka city, will initially be a 26 kilometer (approx.) long, four lane dual carriageway, with 2 elevated links, 7 interchanges, 35 ramps and with a design speed of 80 kilometers per hour. The purpose of the Expressway is to: improve road connectivity to link the northern part of Dhaka city with the central, south and south eastern parts, linking important commercial and business centers of the city. increase traffic capacity and reduce travel times for people living in and around Dhaka City.