The National Board of Revenue (NBR) is set to approve in February the conditions mentioned in the $964-million financial closure for the capital dredging of the Payra Deep Sea Port project.
In December last year, the port authority sent the documents of the financial closure to the revenue board for final approval.
The financial closure has been delayed by several months as the Payra Port Authority was taking time to settle various conditions regarding the loan agreement for the project to be executed by Belgian contractor Jan De Nul.
Financial closure is a stage when all the conditions of a financing agreement are fulfilled prior to the initial availability of funds.
In a Public-Private Partnership (PPP) project, financial closure indicates the commencement of the Concession Period – the span of time granted by the government to the private sector within which the private sector is responsible for the financing, construction and operation of a project.
The date on which financial closure is achieved is the appointed date, which is deemed to be the date of commencement of the concession period.
When the government signed a deal with Jan De Nul on January 14 last year, the company was expected to complete the technical survey for dredging and long term maintenance within 14 months.
But due to delays, the technical works will now start in April this year after the financial closure is approved in February.
"All the paper works have already been completed for the financial closure. Hopefully, it will be fixed by February," Shipping Secretary Md Abdus Samad told The Business Standard.
He said the capital dredging work of the port will take more one and a half years to start. Till then, Jan De Nul will work to maintain the navigability for the plying of coal-laden vessels.
Meanwhile, under a sub-contract with the government, the Belgian company has dredged a 52-km-long seabed at Ramnabad channel in Patuakhali to facilitate the import of coal for the 1,320-megawatt Payra Power Project.
The seaway required dredging as its navigation depth was mostly 4 metres, which did not allow heavy ships laden with as much as 30,000 tonnes of coal to reach the shore.
With Jan De Nul's work, the minimum depth of the channel now stands at 6 metres and the maximum depth is 8 metres. This has eased coal transport both in terms of cost and time.
Who is financing the project?
The Payra Port Authority signed a €865 million ($964 million) deal with Jan De Nul for capital dredging of a 75-km-long and 100 to 125-metre-wide main channel.
According to the shipping ministry, the Hong Kong and Shanghai Banking Corporation (HSBC) and its consortium banks will provide loans for the dredging project.
Jan De Nul will invest in the project where the loan must be approved by Jan De Nul's subsidiary Payra Dredging Company Limited and the Bangladesh government.
But due to a bargain between Payra Dredging Company Limited and the Payra Port Authority on various conditions of the loan agreement, the financial closure is yet to be done.
Payra Dredging Company wants exemption of all applicable taxes in Bangladesh, as the loan excludes financing of taxes and since the offer is exclusive of any tax, according to sources.
Normally, the NBR considers the customs duty, value-added tax and advance tax on the import of the equipment on the condition of re-export, said an NBR official.
The revenue board also exempts all kinds of taxes according to the PPP agreement.
"After year-long discussions and bargaining with different parties including the Payra Port Authority, ministries concerned, law firms, and banks, Payra Dredging submitted all finance documents to the port authority and the shipping ministry in mid-December 2019, and it now awaits final approval," said a source at the Payra Dredging Company Limited.
The source further said they are ready with the vessels for technical survey of the port. Once the conditions of the financial closure is approved, we will start dredging works.
"We can begin working based on that data we have already collected from the previous surveys done for the Payra Coal Power Plant project," he added.
"We have called upon the NBR to exempt all taxes from the contractor firm. We hope the revenue board will consider the issue," said Shipping Secretary Samad.
He said the first phase of the dredging, which is to check the siltation rate in the river channel, will start by April this year and continue until 2021.
"After the study is over, Jan De Nul will start dredging the main channel to prepare it for the plying of large-sized vessels," he said.
As per the agreement, Jan De Nul is responsible for the development, dredging and commissioning of the access channel, and turning basins, anchorage, and berthing areas to accommodate larger sea-going vessels.
Once the capital dredging works are completed, Jan De Nul will perform maintenance dredging for 10 years.
Best dredging technology
For the capital dredging works, Jan De Nul will deploy up to nine dredgers from its fleet, among which some are the most powerful Cutter Suction Dredgers in the world.
The company has already mobilised three of its Trailing Suction Hopper Dredgers – the Bougainville, Diogo Cao and Tristao da Cunha – to carry out the work.
Two of the three Trailing Suction Hopper Dredgers are so-called ultra-low emission hopper dredgers.
These vessels are equipped with an ingenious system of filtering that removes or eliminates toxic substances from exhaust gases.
"In a world of climate change, and overall environmental consciousness, Jan De Nul Group has chosen to equip its latest generation of dredging vessels with an ingenious system of filtering to remove or eliminate the toxic substance from exhaust gases," said Wim Van Dyck, project Manager of its Bangladesh branch.
What the dredging work includes
Till last October, the lowest depth of the Ramnabad channel was 4 metres. But once the port is dredged and developed, the depth of the port will be 10.50 meters and the width of the channel will be 124.13 meters.
Following the design, different areas and access channels will be constructed in different phases of the project to increase navigability.
During the first phase – the separable portion I – Trailing Suction Hopper Dredgers will dredge five base sea-layer at the outer channel and discharge the dredged material into the designated underwater disposal areas and partly also on land.
The dredgers will also dig up materials from the outer channel onshore through a floating pipeline to create land for Jan De Nul's temporary site facilities.
But dredging and disposal areas are extensively monitored.
During the separable portion II, the inner and outer channels will be instructed. The material of the inner channel will be dredged by a large suction.
Materials of the first outer channel will be pumped into the offshore reclamation area to create new land.
The materials of the area G, which is the deep-sea, will be dredged and come through the pipeline and spray into the underwater disposal areas.
Once the inner and outer channels of Payra Port is developed, during the separable portion III, multiple Trailing Suction Hopper Dredgers will continue to dredge materials and siltation within the channels for another six months to ensure safe navigability of the designated vessels.