Bangladesh: Public-Private Infrastructure Development Facility (PPIDF)

Finance - Infrastructure finance and investment funds

The Public-Private Infrastructure Development Facility (PPIDF) includes and $82 million loan from ADB's ordinary capital resources (OCR), an $83 million equivalent loan from ADB's special funds resources and a technical assistance grant of $500,000 for capacity building and supporting project implementation.

Component A will use ADB's OCR funds of $82 million to provide financing to the Government of Bangladesh for relending to the Infrastructure Development Company Limited (IDCOL) to finance private sector-sponsored large infrastructure subprojects with a subproject size of more than $30 million.

Component B will provide ADF support of $50 million equivalent to the Government for relending in local currency to IDCOL to finance small and medium-sized infrastructure subprojects primarily located in rural and semiurban areas, especially in the energy sector.

Component C will provide ADB funding of $33 million equivalent for the purpose of promoting renewable energy systems in Bangladesh. IDCOL will finance the set-up of renewable energy systems such as solar home systems and/or biomass installations through a microfinance-based, direct sales program.

1) 1 medium-sized subproject with private financing of at least $30 million each by 2013

Component B: PPIDF disbursed $3.6 million to a broadband wireless access network subproject having private financing of $43.9 million. Additionally, this component funded $1.4 million for setting up a nationwide telecommunication transmission network, with a total project cost of $14.5 million.

2) At least 200,000 solar energy home systems, 15 biomass power plants, and 100 biogas power plants installed by the private sector by 2013

PPIDF financed installation of 349,199 solar home systems (SHS) in remote off-grid rural areas of Bangladesh.

3) 3 large subprojects with private financing of at least $100 million each by 2013

ADB approved three subprojects where ADB share is $82 million (Component A):

(i) 108 MW power plant: $30 million

(ii) 108 MW power plant: $30 million

(iii) 335 MW power plant: $22 million

4) Reduction of at least 258,750 tons of CO2 emissions at the end of project period (5 years)

ADB-financed SHSs are expected to reduce carbon dioxide emissions by 161,443 tons each year. Over a five year period, the SHSs would reduce 807,214 tons of carbon dioxide emissions.

1. Improved lending terms of IDCOL for infrastructure subprojects

2. Improved ability of IDCOL to mobilize long-term capital

3. Enhanced governance at IDCOL

4. Enhanced capacity for application of environmental and social safeguards standards

5. Enhanced efficiency of IDCOL in developing and financing infrastructure subprojects

1a) Increase in tenor of available financing provided by IDCOL to 25 years by 2013

As per current lending policy of IDCOL, maximum tenor is 15 years including a maximum grace period of 3 years.

1b) Reduction in average borrowing costs by 20% for IDCOL by 2013

IDCOL reduced its weighted average borrowing cost from 3.29% in FY2011 to 2.93% in FY2015 (a reduction of 10.9%).

2a) Issuance of at least 2 debt market instruments by IDCOL by 2013

IDCOL is yet to issue debt instruments.

2b) At least 5 syndications by IDCOL for the financing of infrastructure subprojects by 2013

IDCOL has arranged syndicated loans for 8 infrastructure subprojects 4 power subprojects, 2 central effluent treatment plants, 1 land port and 1 ICT infrastructure. IDCOL co-arranged 3 additional subprojects in power and telecommunications sectors.

3a) Improved local credit rating of IDCOL from AA to AAA by 2009

In 2015, IDCOL has obtained AAA rating by a local credit rating agency and this rating has been sustained until now.

3b) IDCOL obtains a credit rating from an internationally accepted agency in 2010

IDCOL will consider obtaining credit rating from an internationally accepted agency once it intends to raise additional funds from the international capital market.

4a) ESSF reports from 2008 onwards

ESSF has been updated and posted on IDCOL's website since 2012.

4b) Year-on-year increase in number of subprojects assessed for compliance under ESSF by 10% annually

IDCOL has applied the ESSF for all its subprojects under PPIDF.

5a) Reduction in processing time for new proposals from 6 months to 4 months by 2010

The processing time, among other things, depends on the complexity of projects and scope of due diligence required. For the three large subprojects financed under PPIDF, the average processing time (i.e. from the date IDCOL received proposal to IDCOL Board approval) was approximately 12 months, on average. While processing time for smaller projects or projects funded using IDCOL's own resources are often within 4 months.

For subprojects to be financed out of component A, IDCOL will required its sub-borrowers to adopt internationally competitive bidding procedures in accordance with ADB's Procurement Guidelines as amended from time to time, and the Government's guidelines, policies, and regulations.

For subprojects to be financed out of components B and C, ADB will encourage IDCOL to require its sub-borrowers to adopt international competitive bidding procedures in accordance with ADB Procurement Guidelines as amended from time to time when the amount of the investment is unusually large and economy and efficiency can be gained by such procedures.

For procurement of goods and services to be financed by subloans out of the loan proceeds, the sub-borrower will ensure, and certify to ADB if requested, that goods and services obtained are suitable for the subloans, that the price paid is least-cost, and that account is taken of factors such as time of delivery, efficiency, and the reliability of goods.

For build-operate-transfer subprojects and variants, if the subproject sponsor or engineering, procurement, and construction contractor is selected through competitive bidding amount international entities in accordance with procedures acceptable to ADB, such subproject sponsore or contractor may apply its own procedures for procurement provided that such procurement is for goods, services, and works supplied from, or produced in, ADB member countries. Moreover, such subproject sponsors or contractors must only be nationals of ADB member countries.