Indian power company Bhel has been selected to construct the 1,320-megawatt coal power plant in Rampal close to the Sundarbans.

The Bangladesh-India Friendship Company has chosen Bhel out of three bidders and issued it with a notification award for the $1.5 billion job.

The signing of the contract is expected to take place within a few days, says a well-placed source in the Friendship company. “Construction of the power plant would start immediately,” the source adds.

Bhel would have to arrange the finance from the Indian Exim Bank on behalf of the Friendship company. Of this finance, $1.39 billion will be in foreign currency and another $101 million in local currency.

The loan terms of this finance is being negotiated now. “The interest rates are likely to be very low and beneficial for Bangladesh,” says a competent source of the Friendship Company without specifying the interest rates or other terms.

Bhel and Japanese and Indian consortium Marubeni and Larsen & Toubro and Chinese Harbin, Alstom China and Etern submitted their bids in September. The Friendship company has finalised the bid evaluation and is now preparing for signing of the Engineering, Procurement and Construction (EPC) contract with Bhel.

“The exact financing of the project can be disclosed after completing the financial closure. It usually takes 12 to 14 months to complete the financial closure. However, we have taken some advance preparations which would help us close the finances by July,” informs the source.

As the government wishes the company to install the Rampal power plant within its tenure, the Friendship company aims at completing the task by the end of 2019.

The company has been formed with equal stakes of Bangladesh Power Development Board (BPDB) and India's National Thermal Power Corporation (NTPC).

The project was originally expected to be awarded by early 2014 with the target to begin commercial power generation from 2017. But in the face of environmental concerns, the authorities took extra time to refine tender guidelines and requirements.

The Friendship company will fund 30 percent of the project cost and the rest comes in the form of loans.

Located 14 kilometres northwest off the Sundarbans and four kilometres from the declared ecologically critical area (ECA), the selection of the Rampal site for a coal power plant drew a lot of flak.

While the government keeps on defending the plant saying its emission would not harm the forest, most critics believe the damage would take place while transporting coal to the plant site through the rivers inside the Sundarbans.

The plant will need 3.2 million tonnes of coal a year. Imported coal on 80,000-tonne capacity ships will anchor at the Akram Point. From there, lighter ships will load coal containers with maximum 10,000-tonne capacity and transport those to the power plant's jetty on the Passur river.

In other words, several smaller vessels carrying coal will ply the rivers every day, all the year round.

As per a government decision, for every kilowatt power sales from this plant, the Rampal locality will get Tk 0.03. This roughly totals Tk 27 crore or more a year. This fund will be used for building roads, hospitals and other infrastructures in Rampal.