Germany to donate 80 million euros for renewable electricity

Germany is to grant the public company Infrastructure Development Company Limited (Idcol) an 80 million euro loan to be paid to entrepreneurs in the renewable energy sector in Bangladesh.

According to officials of the specialized non-banking financial institution, it will provide private sector entrepreneurs with a total of 99 million euros in the form of loans for the implementation of solar power plants and solar irrigation projects under the renewable energy program-2.

The program will be implemented between 2023 and 2027 and for this, the German government’s development bank KfW has agreed to lend 80 million euros. Negotiations have now begun through the Economic Relations Department (ERD) to determine the terms of the loan, they added.

ERD officials said a Tripartite Review Meeting was held on June 28, 2022 at ERD to discuss the indicative terms and conditions of the project titled “Renewable Energy Program-2” which will be implemented. implemented by Idcol with financial support from the KfW Development Bank.

Uttam Kumar Karmaker, Additional Secretary and Wing Head (Europe) at ERD, who chaired the meeting, told The Business Standard: “Negotiations with KfW on the terms and conditions of the loan have now commenced. Having completed all processes, an agreement will be signed soon.”

ERD officials said KfW offered two types of interest rates for the loan. Apart from this, other conditions such as repayment of the loan are somewhat difficult. Idcol offered to reduce loan interest and ease terms. Instead of euros, Idcol also offered a loan in dollars.

The opinion of various organizations was sought before making a decision on these questions. A German KfW delegation is due to visit Bangladesh on the 10th of this month. The terms and conditions can be finalized at that time.

An ERD official said that the financial terms of the loan include a commitment fee of 0.25% on the undisbursed loan amount and a fixed 0.10% management fee on the total loan amount.

KfW offered two options for the interest rate of the loan, a fixed rate of 2.73% or a floating (variable) interest rate of 6 months EURIBOR + 0.35%.

The loan repayment period is up to 20 years, including a five-year grace period, with 31 equal semi-annual installments.

An ERD official said the loan was part of a €95.5m financial package offered by KfW on behalf of the German government, which includes €18.5m in investment grants , 1 million euros in grants for accompanying measures and a development loan of 80 million euros.

An official from the ERD’s Foreign Aid Budget and Accounts (FABA) wing, said on condition of anonymity that although interest rates on previous KfW loans were capped at 2%, l he current offer has a higher fixed interest rate of 2.73%, which can be negotiated.

The FABA wing suggested considering the floating interest rate for the proposed loan, given the current global economic conditions, he added.

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