The Bangladesh Independent Power Producers Association (BIPPA) has urged the government to clear half of its overdue payments, amounting to Tk 9,000 crore, within the next 10 days or contend with disruptions to the electricity supply during Ramadan.
In a letter signed by BIPPA President David Hasanat, the association said the Bangladesh Power Development Board (PDB) is obligated under power purchase agreements (PPA) to clear payments within 45 days, according to a media website.
However, payments have been delayed for more than five months and the backlog has persisted for more than three years. "The situation is critical," the letter said, adding that the nation's energy supply chain faces imminent collapse if payments are not received within the timeframe.
This will, in turn, have a severe and widespread impact, jeopardising agricultural production, national food security, industrial output and essential services to households during the crucial periods of the irrigation season, Ramadan and summer, it said. The unpaid dues prevent power producers from importing furnace oil needed for electricity generation, according to Hasanat.
"If we don't get at least half of our payments, we will not be able to open letters of credit to import furnace oil in due time to generate adequate power during Ramadan," the media website quoted Hasanat as saying.
The letter comes after BIPPA leaders met Power Secretary Farzana Mamtaz earlier this week to press home their demand.
"It was the third meeting with the ministry high-ups since November, and we have been notifying [them] continuously to settle the issues before the upcoming Ramadan to keep the power situation normal," Hasanat said.
In the letter, BIPPA also raised concerns about significant financial losses caused by the devaluation of the taka against the dollar. The IPPs have incurred more than Tk 8,000 crore in losses due to taka devaluation and delayed interest payments, the letter said. "These losses have eroded financial confidence among lenders," the letter said.
Hasanat provided an example of how delayed payments exacerbate exchange rate losses. "When we submitted the bills, the exchange rate was Tk 118. But by the time we received the payments, it had risen to Tk 126," he said.
The letter also addressed the imposition of liquidated damages, a form of monetary penalties or compensation, by the PDB on power plants unable to meet electricity demand. BIPPA described the claims as "arbitrary".
According to Section 13.2(j)(i) of the PPA, the PDB's right to dispatch power is suspended if payments remain overdue for more than 10 business days. Despite the provision, IPPs have continued supplying electricity, even while facing significant financial difficulties, the letter said.
BIPPA members recently received notices from the PDB regarding claims for liquidated damages (LDs), which is also referred to as liquidated and ascertained damages (LADs), whose amount the parties designate during the formation of a contract for the injured party to collect as compensation upon a specific breach (e.g., late performance).
