Banks asked to fund Tk 20,000cr to set up rental power plants

Manjurul Ahsan | Published: 22:19, Jun 28,2017

 
 

The government in an unusual move has asked local banks to fund approximately Tk 20,000 crore to facilitate private entrepreneurs to set up a number of rental power plants by March 2018.
The government’s plan includes installation of 17-18 quick rental power plants with 2,000MW combined capacity adding to existing 15 rental plants with 931MW capacity which have already raised power prices by more than 69 per cent since 2010, said power division officials.
At a meeting held on June 21, state minister for power, energy and mineral resources Nasrul Hamid requested the local banks as well as the Bangladesh Bank to provide the funding to the private companies to be awarded contracts for installing 2,000MW power plant in next nine months, they said.
The government plans to award a number of contracts to private companies within a month without bidding to increase the country’s power generation capacity by 2,000MW in next seven to nine months, Power Cell director general Mohammad Hossain told New Age.
The power plants will run on imported liquid fuel, he said.
It would require approximately Tk 20,000 crore investments which is not feasible to source from foreign banking channels in a short time, said Mohammad Hossain.
At the meeting, Mohammad Hossain presented a paper describing the funding requirements in power sector for short-term as well as for long-term. Top executives of local banks and representatives of the Bangladesh Bank and Economic Relations Division attended the meeting.
Bank division secretary Md Eunusur Rahman told the meeting that the local banks were not interested in funding power sector as it required big amount of money for long-term investment although the schemes were attractive.
He, however, said that the bank division would extend its support in this regard.
When asked about the mode of contracts for new power plants, the Power Cell director general denied terming them ‘rental’ or ‘quick rental’ power plants and said that some contracts would be signed for three to five years and some other for 15 years.
He, however, admitted that the rate of capacity payment would be higher than that of the long-term power plants to enable them to realize their investments in a short-term.
Officials of state-run Power Development Board said that the terms and conditions and the method of awarding the proposed contracts would be similar to that of the quick rental power plants.
Like the contracts awarded for quick rental power plants, the fresh ones would be awarded under the Speedy Supply of Power and Energy (Special Provisions) Act 2010 that indemnified officials concerned against prosecution for awarding contracts without tender.
The power division and the state-run Power Development Board are now examining 15 proposals to set up seven barge-mounted and eight land-based power plants with a combined capacity to generate 1,800MW power, said officials.
They also said that the government would allow a few more proposals before initiating negotiations with the companies.
The government took the move after the power board had paid 20 rental power plants with 1,653MW capacity Tk 6,000 crore extra in capacity charge during their original contract period that exhausted between 2013 and 2015, the officials said.
In the face of delays in implementing the mid-term plan, the government extended the power purchase contracts with 15 out of the 20 rental power plants which would accumulate about Tk 2,000 crore extra in capacity charge during the extended contract period to be exhausted between 2018 and 2020, they said.
Now the government plans to extend a good number of contracts to the 15 and
award some fresh contracts which would raise the cost of power generation further, the officials said.
Meanwhile, the government awarded six contracts through bidding to install six furnace oil-fired power plants with more than 600MW capacity, which are expected to come into operation in next one year.
Citing the grounds for increasing power generation costs caused by expensive short-term measures, the Bangladesh Energy Regulatory Commission increased the electricity prices by 69.25 per cent — up from Tk 3.76 per unit to Tk 6.33 — in eight phases between March 2010 and September 2015.
Another move for raising prices of electricity is now under the commission’s consideration, it was learnt. 

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