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Use coal resources or face energy dearth soon

Summit boss Aziz Khan says rental power projects help economy pick up

Sharier Khan
SUMMIT is one of the largest power generation companies producing 560mw, which is one tenth of the national grid, and developing another 800mw. Besides, the group is operating 30 percent of the country's port facilities through Summit Alliance Ports Ltd and laying fibre optic lines for local and global bandwidth through Summit Communications Ltd to cover half of the country's bandwidth.
In this context, The Daily Star recently interviewed Summit chief Muhammed Aziz Khan, a
58-year-old MBA from Dhaka University. Khan sees an increasing power crisis as the country is running short of primary energy, and emphasises developing the coal resources. He defended the rental power schemes and talked about large project financing constraints. Following is the excerpt from the interview:
The Daily Star (TDS): How is the energy shortage in Bangladesh affecting its growth?
Muhammed Aziz Khan (MAK): Every emerging country, with high growth like Bangladesh's 6.3 percent, suffers from energy shortages. Their growth,
given the globalised internet connected communication and global trade via large ports, can easily reach 10 percent like China, only if they could provide local infrastructure including electricity. Energy is the biggest challenge, from primary energy to electricity.
Bangladesh continues to be reliant on natural gas. But the gas supply is limited, and unless Bangladesh can afford and diversify to expensive imported primary fuel or can harness her coal deposits, we unfortunately will have increasing electricity shortages. Everyone wants electricity; yet only 50 percent of the
population has access to electricity.
I believe with a proper coal policy to harness our coal deposits, and with more investment in developing natural gas and electricity generation, we can and we shall achieve equilibrium of demand and supply in electricity.
TDS: Many complain that the rental power projects are devastating the country's economy. What do you say?
MAK: I understand from where they are coming. The sudden increase in the cost of electricity generation is hurtful. But imagine the alternative. We
do not have enough gas to run even the existing gas-fired power plants. Coal-fired plants, imported or mined, take about 7 to 10 years to be implemented. Only liquid fuel-based power plants can be implemented in a short time. If Bangladesh had not implemented liquid fuel-based plants and thus not imported such expensive energy oil, we would now be generating about 3,000mw instead of 6,000mw. That would bring down the GDP growth rate to less than 3 percent and would result in a huge social unrest.
TDS: When are your Bibiyana and Meghnaghat projects coming into generation?
MAK: Meghnaghat is scheduled to begin generation in August 2013 and Bibiyana 2 in May 2014, both as per contractual schedule.
TDS: How are you funding them?
MAK: It is always difficult to fund such large projects, each of about $300 million in a country with a GDP of about $110 billion. The savings of the nation is too low to fund large projects. We require our development partners, multilaterals included, to support such much-needed projects. Fortunately, we could get new sources of financing such as German Development Bank, Belgian Development Bank, Standard Chartered Bank and IDCOL to support Meghnaghat 335mw project at a time when conventional supporters like the World Bank Group could not process their Investment Promotion and Facilitation Fund (IPFF) or Partial Risk Guarantee, which were expected.
I believe that as a Bangladeshi company, Summit did an incredible job by financing Meghnaghat at a time when the local money market tightened and the stockmarket collapsed. Yet we persevered to get the largest ever financing from our local banks — Trust Bank, BRAC Bank, City Bank, Islami Bank Bangladesh and Shahjalal Islami Bank. We are very grateful and proud of our local and international financiers. And the project is on schedule.
TDS: What is about Bibiyana?
MAK: We are already implementing Bibiyana 2. We started as soon as the Bangladesh Power Development Board registered the land to us. Financiers like the IFC and ADB are very likely to support this project. Local banks such as Prime Bank, Dhaka Bank and Janata Bank are also financing this project. For
a local company like Summit, it is an unprecedented way to move forward with the support of the local banks to implement projects ofTk 5,000 crore.
TDS: However, you have not been able to implement Bibiyana 1 and it is alleged that you have taken more than you can digest.
MAK: Well, we are still working on it. It is a rare opportunity for a person or a company to do so much for their country, as Summit and I received by way of requiring to implement the country's largest and the lowest-cost electricity projects. We have the confidence to take up the challenge and we are implementing the projects.
Bibiyana 1 was to be financed by $115 million of the IPFF loan at 3 percent interest with an 18-year tenure and partial risk guarantee of the World Bank Group. None of these came about, not because of Summit's failure but for reasons beyond our control. Yet we are desirous to implement the project but need to restructure the finance. The BPDB also failed to get the land registered. However, as a well wisher of the country, we have informed the government that we are willing to let the project go.
Meanwhile, the government has signed to implement Bibiyana 3 as a government project and allowed a Saudi company to develop yet another project in Bibiyana. So the necessity of Bibiyana 1 may have diminished. However Rural Power Co Ltd of Rural Electrification Board and many other companies are desirous of taking over Bibiyana 1. We are still interested. This is in an ongoing discussion. I am not trying to make excuses but merely saying that such large projects are connected to the country's overall situation.
TDS: How do you evaluate the government's planning and performance in the power sector?
MAK: We have a little load shedding, which is obvious when compared to previous times. However, the government must come up sooner rather than later with a comprehensive plan and policy about coal as well as gas exploration. The policy needs to be such that the local private sector can get involved in harnessing natural gas and coal.
Another aspect, large infrastructure projects need low-cost and long-tenure financing. The government set up Bangladesh Infrastructure Facilitation Fund (BIFF) with a paid-up capital of Tk 1,600 crore, the highest amount for any financial institution, about four years back. However the fund did not or could not invest a single paisa till date. This is a failure. Whereas the government could help implement Bibiyana and other such projects through this fund. In fact, they should have supplemented the fund after disbursing the entire amount successfully. Privatisation of transmission and distribution is crucial to attract greater funds and efficiency. We have seen a little in the way of policy formation for privatisation of transmission and distribution. Import of energy fuel also has not been privatised. These policy vacuums are disappointing.
TDS: Tell us about your family.
MAK: Our children are all grown up and some of them are joining the business. All of them are well educated and settled in life. My wife Anjuman and I have three daughters. Eldest Ayesha, our finance director, is married to Hissam Khandker; they have a daughter.
My second child, Adeeba is pursuing her PhD in law from SOAS, University of London, and is engaged with Atef Hasan. Our youngest, Azeeza recently got married to Naweed Alam Chowdhury. We are all very happy with each other.