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Bangladesh’s IDCOL secures €80 million from Germany’s KfW to deploy renewables

Infrastructure Development Co. (IDCOL), a Bangladeshi state infrastructure investor, has secured €80 million ($81.4 million) of loans from Germany’s KfW Development Bank to help companies to install solar plants and solar irrigation pumps.

KfW will provide funds for the “Renewable Energy Programme II” project. The two sides are now negotiating the interest rate and other terms and conditions.

“The grid-tied large projects will get priority in the latest loan program,” a senior IDCOL official told pv magazine.

IDCOL provides low-cost loans to set up of solar home system, domestic biogas, solar irrigation, biomass, and biogas based electricity generation plants. The non-bank financial institution is now offering a range of subsidies and concessionary loans to viable renewable energy projects.

IDCOL has the financial support of the World Bank, Global Environment Facility (GEF), KfW, Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ), the Asian Development Bank, and the Islamic Development Bank. It said the second phase of its Renewable Energy Programme will be implemented between 2023 and 2027.

Anirban Kundu, country director for KfW in Bangladesh, said the €80 million loan is part of a €99.50 million financing package that KFW is providing on behalf of the German government. It also include €18.50 million of investment grants and €1 million of accompanying measure grants.

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Documents show that KfW has sought a commitment fee of 0.25% per annum on the undisbursed loan amount, as well as a management fee of 0.10% flat on the total loan amount. It has offered two options for the interest rate on the loan – a fixed interest rate of 2.73% per annum, or a floating (variable) interest rate. The repayment period of the loan is up to 20 years, with a grace period of five years, with 31 equal semi-annual installments.

“The negotiation on the interest rate and other terms and condition is still ongoing. But we are expecting to sign financial agreement by this year,” said one IDCOL official.

However, IDCOL has asked the KfW to reduce the the interest rate for the proposed loan. It has said that the interest rates for past KfW loans have been limited to 2%, but the current offer has a higher fixed interest rate of 2.73%.

Bangladesh currentls has the capacity to generate 909 MW of electricity from renewables. About 675 MW of the total currently comes from solar.

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Source: pv magazine