Orion Group to secure $712m foreign loans

Orion Group, a leading conglomerate in the country, is going to secure $712 million in foreign loans for Orion Power Dhaka-2 Ltd, a coal-fired power plant being set up in Munshiganj’s Gajaria.

This is an ultra-supercritical power plant with a net capacity of 635MW, as per industry insiders.

The project proposal of Orion says the industrial group will secure the long-term loans from Cargill Financial Services International Inc in the US, Siraj Holding LLC in Dubai, and the State Bank of India in Dubai.

Of the fund, $400 million will come from Siraj Holding, $183 million from Cargill Financial Services, and the remaining $129 million from the State Bank of India in Dubai, read the project proposal. The interest rate of the foreign loans is below 5 per cent.

The tenure of the loans will be 10 years. State-run Agrani Bank and Janata Bank will issue bank guarantees against $535 million of the fund.

In July last year, both banks approved the standby letter of credit in favour of Orion Group at their board meetings. Agrani is the lead arranger for the project funding, said officials of the banks.

A standby letter of credit is a legal document that guarantees a bank’s commitment of payment to a seller in the event that the buyer – or the bank’s client – defaults on the agreement.

A total of $883 million will be provided in loans for the project. Apart from the $712 million in foreign funding, $171 million will come from Agrani and Janata, including $89 million in interest during the construction period, said the proposal.

Agrani Bank Managing Director and Chief Executive Officer Mohammad Shams-Ul Islam told The Business Post that Orion Group had got approval from the Bangladesh Investment Development Authority (BIDA) and the Bangladesh Bank for the foreign loans. “But the loans are yet to be disbursed as some documentation is still in process.”

He said foreign loans are comparatively cheap and easy than local ones, and that is why the group is taking the former. “However, the central bank’s process concerning foreign loans is very lengthy, which is why it is taking time.”

Not only Orion Group, but most of the local industrial groups, including Akij and PRAN-RFL, are also going to take foreign loans, he added.

The Bangladesh Bank in November last year issued no objection certificates to Agrani and Janata to issue bank guarantees against Orion’s foreign loans, said a high official of the central bank.

He said the no objection certificates were issued after verifying several documents, including the agreement between Orion and the government, the pact between the conglomerate and the foreign funding organisations, and the approval notes of the Agrani and Janata boards.

Bangladesh Bank Executive Director and spokesperson Md Serajul Islam told The Business Post that approval had been given to Agrani and Janata to provide guarantees against Orion’s overseas loans as BIDA is also positive about the matter.

Choudhury Khaled Masood, executive director of Orion Group, told The Business Post the foreign loans were under process and nothing could be disclosed about this now.

Orion Group is one of the leading private sector power generation companies in the country. The industrial group already completed three units of power plants, each generating 100MW. It has recently won three coal-based power plants to generate about 1,600MW and another 850MW LNG based IPPs, as per its website.