Australian firm offers $16bn loan for high-speed rail projects

Australia's Providus Investments has come up with an attractive lending offer for implementing Bangladesh's two megaprojects – the Dhaka-Chattogram high-speed train lines and the Bhanga-Payra rail link.

The multinational lender will provide $16 billion – the entire funding for the two projects – with a 30-year repayment period, according to the investment proposal sent to the Ministry of Railways.

Sources at the Bangladesh Railway have told The Business Standard that Providus has offered a lower interest for the loan than multiple foreign lenders, including Chinese corporations, have offered.

The Australian investor will supply the fund through the bespoke portfolio – a process to raise money from the global money market, said officials at the Bangladesh Railway.

On 7 October 2020, Providus wrote to the railways ministry, expressing its interest in providing the loan.

On 9 March 2021, the investor apprised Railways Minister Md Nurul Islam Sujan and ministry high-ups of its investment plan through a PowerPoint presentation.

Terming the investment proposal "more attractive" than those from other lenders, the railways ministry has already sent it to the finance ministry's Economic Relations Division (ERD) for assessment, sources said.

"It does not matter what we think about the proposal as the ERD will take the final decision," Railways Minister Nurul Islam Sujan told The Business Standard.

"We only informed the ERD about how much money we need for the projects, that is all," added the minister.

The government has taken up a number of mega-projects to make the state-run rail transport company, Bangladesh Railway, modern and profitable. The Dhaka-Chattogram high-speed train and the Bhanga-Payra rail link are two major initiatives among the projects.

Alongside land acquisition, the two projects will cost the government around $15.8 billion. The cost for the high-speed rail line has been estimated at $11.4 billion while the Bhanga-Payra rail link will require $4.4 billion.

According to Providus, it will not charge interest on the loans during the project implementation period and there will not be any hard conditions such as contractor appointment. Moreover, the projects will directly be handed over to the railway on completion.

In the meantime, a potential home-grown investor who is interested in joint financing with Providus in the two projects praised the nature of the Australian loan.

A high official of the local venture said, "The Providus loan proposal is easy to understand, more attractive and comes with lower interest than what the previous lenders offered."

Bangladesh Railway is currently implementing a project to run the feasibility study and to design the proposed high-speed train lines from Dhaka to Chattogram via Cumilla.

The 227.3km new route will have seven stops – Dhaka, Dhaka Depot, Narayanganj, Cumilla, Feni, Pahartali and Chattogram. Travel time between Dhaka and Chattogram will be 73 minutes for trains stopping at the intermediate stations, and 55 minutes for non-stop trains.

The trains, which will run at a top speed of 300km per hour, can carry approximately 50,000 passengers each way daily. The China Railway Design Corporation and local Majumder Enterprise will submit the design to the railway soon.

On the other hand, the Bhanga-Payra rail link project will be 213.3km long – 189.5km main line from Bhanga to Payra port and 23.8km from Payra to Kuakata. The project will have 19 stations, 22 major and 50 minor bridges and 434 underpasses and box culverts.

Railway sources said multiple foreign lenders previously proposed funding under the Public Private Partnership (PPP) and Build-Operate and Transfer (BOT) arrangements.

The Chinese contractors said they will arrange the funding for the project implementation, while Providus says it will implement the projects with the Engineering, Procurement and Construction (EPC) collaboration with the railways ministry.

Md Jahangir Hossain, general manager of Eastern Railway, said they have received a couple of investment proposals for the two mega-projects. "I think the most qualified firm will get the work," he added.

Providus has already provided about $70 billion in loan assistance to various countries, including Australia, the United States, and Tanzania. With Providus funding, the lender proposed the railways ministry to carry out the projects by reputed multinational constructors such as Webuild, Laing O'Rourke, Bechtel, Hyundai or Fluor.

Chinese corporations interested in high-speed train

Two Chinese corporations – the China Railway Construction Corporation (CRCC) and the China Civil Engineering Construction Corporation (CCECC) – have shown interests in constructing the Dhaka-Chittagong-Cox's Bazar high-speed railway lines.

The two corporations said they will jointly form a company to implement the project. The proposed company will arrange the loans for the project, and hand over the rail lines to the Bangladesh Railway after operating for five years.

On 9 October last year, a proposal in this regard was sent to the railways ministry through the Embassy of the People's Republic of China in Dhaka and the Public-Private Partnership Authority Bangladesh.

According to the proposal, the loan that the proposed company will arrange will cover the implementation cost plus interest, spending for maintenance and operation of trains and the profit of the company.

The CRCC and the CCECC will also arrange bank loans with a 20-year repayment period. The Bangladesh Railway will have to repay the loans in 40 installments – two installments per year. The finance ministry will be the guarantor of the loans.

UK firm interested in Bhanga-Payra rail investment

In 2019, London-based IM Power Plc proposed implementing the "Integrated Rail and Energy Project" in Bangladesh.

In the proposal submitted to the Bangladesh Investment Development Authority (Bida), IM Power expressed interest in constructing a double-track electric rail line from Payra Port to Dhaka via Bhanga in the first phase for transporting containers and other items.

The engineering consultant proposed $11.7 billion investment in the project in three phases. The engineering consultant hinted at implementing the project on the PPP basis through a contract group or consortium.

IM Power proposed the construction in the design-build-operate-and-maintain model with a 50-year tenure.