IFC likely to lend $190m to Summit, Walton

The International Finance Corporation may invest $190 million in two large companies in Bangladesh to boost the nation's efforts to upgrade infrastructure and diversify exports.

The private sector lending arm of the World Bank Group is considering $170 million for Summit Corporation Ltd and $20 million for Walton Hi-Tech Industries, according to proposals posted on the IFC website. 

Shahana Akhter Shampa, a senior official of Walton Group, and a senior official of Summit Group who sought anonymity, confirmed yesterday that the companies submitted loan proposals to the IFC.

The loan for Summit will be a convertible loan investment and will be used to help the family-run business to set up a holding company in Singapore and meet its equity funding requirements for its future power projects in Bangladesh.

The investment will be in Summit's proposed 715-megawatt power projects over the next three years.

The IFC had previously financed Summit Group's Khulna Power Plant in 1999 and Bibiyana II Project in 2015.

The Summit Bibiyana II plant, which received $210 million from the Asian Development Bank, the IFC and the Islamic Development Bank, is providing electricity at the lowest tariff of Tk 1.51 per unit, which is about a fourth of the country's average electricity generation cost of Tk 6.

In March, Muhammed Aziz Khan, chairman of Summit Group, said the group is eyeing a listing on the Singapore stock exchange to raise capital for future energy projects in Bangladesh.

A senior official of Summit said the group plans to undertake a project that can produce about 1,000MW of electricity. But local lenders will not be able to provide the equity and investment needed for such a major project.

Walton, a maker of refrigerators, air conditioners and motor cycles, plans to expand its manufacturing operations and modernise its existing plant with the IFC financing. The loan will have seven-year tenure, including a one-year grace period.

The loan will be used for balancing, modernisation, rehabilitation and expansion of Walton's manufacturing operations and establishing a compressor plant as part of its backward integration plans, said Shahana Akhter Shampa.

The total project cost is estimated at $70 million and is proposed to be financed with debt: long-term debt of $35 million and equity of $35 million.

Located in Gazipur, the project is expected to create about 800 jobs after it becomes operational, according to the IFC. The next meeting of the IFC board is set for July 28.

In 2013-14, the IFC invested $428 million in 13 projects in Bangladesh.