Bangladesh Bank allows $3.2m facility for SS Power to open new LC

Bangladesh Bank has granted special permission to SS Power-1 Limited, owned by the S Alam Group, to withdraw approximately $3.2 million and open a new letter of credit (LC), citing the need to keep electricity generation operational.

The central bank issued a circular on Wednesday (19 August) through its Banking Regulation and Policy Department-2.

The directive, sent to the chief executives of all banks, said approval had been granted for the release of the remaining $3,197,561 under a foreign-currency syndicated loan approved for SS Power-1 through Rupali Bank, as well as for opening new LCs.

The company had also received a similar approval from Bangladesh Bank last Sunday.

The circular, signed by Bangladesh Bank Deputy Governor Md Kabir Ahmed, said that under the powers granted by Section 121 of the Bank Company Act, 1991, the provisions of Section 27KaKa(3) of the Act would not apply to the release of the loan and opening of the LCs.

However, the central bank imposed specific conditions.

The circular made it clear that Bangladesh Bank would not incur any liability against the facility and that Rupali Bank would not be permitted to seek any financial assistance from the central bank in the future against the LCs.

Risk of disruption to national grid
Officials at Bangladesh Bank said the power plant, located in Banshkhali, Chattogram, is currently operational and regularly supplying electricity to the national grid.

They said a shortage of raw materials could force the plant to suspend generation, potentially causing disruption to the national grid. The special facility has therefore been granted to SS Power-1 despite the S Alam Group's loan-default status, primarily to ensure uninterrupted power generation.

Officials added that similar special facilities have been granted to various companies in the past in the public interest and to protect employment and production.

The 1,320MW coal-fired power plant in the Gandamara area of Banshkhali was developed as a joint venture between the S Alam Group and two Chinese companies.

The S Alam Group holds a 70% stake, while the remaining 30% is jointly owned by China's SEPCO III and HTG Development Group.

The plant began commercial operations in September 2023 through two 660MW units.

According to Bangladesh Bank data, the total amount of loans taken by various entities of the S Alam Group, both directly and through other names, currently exceeds Tk225,000 crore.

A substantial portion of these loans has already become classified as defaulted.

Under existing regulations, defaulting companies are generally not eligible to receive new loans or open new LCs.

However, Bangladesh Bank has relaxed the restriction in the case of SS Power in an effort to prevent a potential electricity shortage and maintain power generation.