The Asian Development Bank plans to provide India's Reliance Group with $583 million to help set up a power plant and a floating LNG terminal in Bangladesh.

Yesterday, the board of directors of the Manila-based donor approved debt financing and partial risk guarantees to develop the Reliance Bangladesh Liquefied Natural Gas (LNG) and Power Project.

The $1 billion project, which includes a power generation facility in Meghnaghat and an LNG terminal near Kutubdia, will significantly increase power generation and improve energy infrastructure in Bangladesh, ADB said.

“ADB's partnership with Reliance Power will help Bangladesh scale up its energy infrastructure to sustain and support the country's economic growth,” said Michael Barrow, director general of ADB's private sector operations department.

“ADB's role as a direct lender and guarantee provider will enable Reliance Power to mobilise much needed long-term debt financing and help attract new lenders to Bangladesh.”

Diversifying Bangladesh's sources of energy is critical for the country as demands for natural gas have placed significant pressures on the country's domestic gas reserves, the ADB said in a statement.

New LNG import facilities will enable the country's existing gas-dependent infrastructure to remain viable and help the country get natural gas from global markets, according to the statement.

The lender also said its support will help Reliance Power to develop an approximately 750 megawatts of gross power generation capacity and terminal facilities for LNG import.

Reliance Power plans to increase its power generation capacity to around 3,000 MW in Bangladesh.

Energy from the power plant will be sold into the country's electricity grid under a long-term power purchase agreement with Bangladesh Power Development Board (BPDB).

Reliance Power has achieved a major and important milestone with the approval of financing for its landmark project in Bangladesh, said Venugopala Rao, CEO of Reliance Power.

“This is an important step in helping Bangladesh achieve energy security. ADB's leadership in financing will help us to develop this clean and reliable LNG-based power project in Bangladesh.”

Reliance Power, a part of the Reliance Group, is India's leading private sector power generation company.

The company has the largest portfolio of power projects in the Indian private sector—based on coal, gas, hydro and renewable energy—with an operating capacity of 5,945 MW, according to the ADB statement.

In May this year, the cabinet committee on purchase approved the Power Division's proposal for setting up the Meghnaghat power plant.

The government will purchase electricity at US 7.31 cents (Tk 5.85) per KW/h from Reliance under a 15-year contract.

In June 2015, BPDB had signed a memorandum of understanding with Reliance Power in this regard.

According to the Power Division, Reliance will set up an LNG terminal and import LNG. Reliance will have to unload the LNG and convert it into natural gas in Moheshkhali.

The company would require a pipeline to supply the gas to Meghnaghat from Moheshkhali.

The state-run Petrobangla will install a gas pipeline from Moheshkhali to Bakhrabad.

The Gas Transmission Co Ltd (GTCL) will build another gas pipeline from Kutumbupur of Bakhrabad to Meghnaghat with its own fund to supply gas to the power plant.

Reliance will pay charges to GTCL for using the pipeline. The power plant may go into production after 2019.

Under the MoU of 2015, the Indian company has also proposed building three more power plants in Chittagong and Narayanganj to produce another 2,250 MW of electricity. It has estimated a cost of $2.35 billion for setting up the four power plants and the LNG terminal.