China-backed Asian Infrastructure Investment Bank (AIIB) is set to provide US$ 60 million for constructing a 220-megawatt (MW) combined cycle power plant in the southern district of Bhola.
The board of directors of the multilateral development partner has approved the loan last week, AIIB officials revealed on Monday.
This is the third energy project in Bangladesh, financed by the Beijing-based development financier.
Once completed, the plant will increase the country's power generation by around 1,300 gigawatt hours (GWh) annually, AIIB authorities said.
"This investment will help Bangladesh increase its power supply to support industries that are vital to growth. It will also help reduce the number of individuals who currently live without electricity," said AIIB Vice President and Chief Investment Officer D J Pandian.
"The total cost of the project is estimated to be $271 million, out of which, our contribution is $60 million," AIIB's Head of Communications Laurel Ostfield, who is now in the capital, told the media.
The $60 million loan for Bhola Independent Power Producer (IPP) will take AIIB's total loan portfolio in Bangladesh to $285 million, AIIB officials informed.
The IPP project is the first project that AIIB has financed alongside Islamic Development Bank and Infrastructure Development Company Limited.
The project will be developed by Shapoorji Pallonji Infrastructure Capital Company Private Limited through Nutan Bidyut (Bangladesh) Limited, a special-purpose vehicle incorporated in the country for the sole purpose of developing the project, the officials informed.
According to the AIIB website, preliminary construction work for the project began in the fourth quarter of 2017. It will be completed in approximately 26 months, with combined cycle commercial operations is targeted to commence by December 2019.
The project site is around 28 kilometers north of Bhola district headquarters, and around three kilometers from the nearest Borhanuddin town.
The project site is adjacent to an operating 225-MW plant of Bangladesh Power Development Board (BPDB), which has been commissioned in 2015. The project will thus be the second power project to be located within the same Bhola site complex.
"We're investing in this project because it will be one of the most efficient power plants delivering low-cost electricity in Bangladesh," said AIIB Director General Dong-ik Lee.
"This investment will also help mobilize private capital and provide critical long-term financing that is not readily available in Bangladesh for vital infrastructure projects."
The officials concerned also informed that currently a total of five infrastructure projects of Bangladesh are in AIIB pipeline.
"The total worth of these pipeline projects is around $885 million, and they deal with energy, transportation and various infrastructure issues," Ms Ostfield said.
Commencing its operation in January 2016 mainly to meet the huge infrastructure gap in Asia, AIIB has now become a strong development financier with 84 members.
Since its inception, AIIB has approved $4.2 billion loan in infrastructure projects throughout Asia as well as in Egypt. Bangladesh is currently around 6.6 percent of the total AIIB investment portfolio.