Bangladesh has reinstated payment guarantees for renewable energy projects to boost investor confidence and attract local and international financing. Industry stakeholders say the move could improve project bankability, unlock new solar projects and help ease the country’s ongoing power crisis.
The government of Bangladesh has restored the provision of payment guarantees for renewable energy projects to attract new investment amid a severe energy crisis. The provision was reinstated following repeated requests from industry stakeholders, two years after it was scrapped by the previous government.
The absence of a government payment guarantee had deterred local and foreign investors from making new investments, amid uncertainty over payments for electricity supplied to the grid.
The Power Division signs payment guarantees with independent power producers (IPPs) on behalf of the government, while the Bangladesh Power Development Board (BPDB) signs power purchase agreements with them. A payment guarantee from the Power Division helps IPPs secure financing from local and international banks to develop power plants.
The Power Division recently instructed the BPDB to include payment guarantees in future tender documents. The directive was issued in a letter signed by Muhammad Abul Lyse, deputy secretary of the Power Division.
