The government new policy has thrown an axe in implementing renewable energy projects and private sector's growth in the country as it failed to address the Implementation Agreement (IA) between the investors and the government entity.
After seeing the new policy, the investors expressed their concerns to the authorities concerned twice saying that it is threatening to deter FDI in Renewable Growth and Private Power Projects that also increases power tariffs due to the lack of IA.
The issue came up under the light when Bangladesh Power Development Board (BPDB) floating a bid on December 5, 2024, for the implementation of 12 power projects with a combined generation capacity of 323 MW, but without an Implementation Agreement (IA). On January 8, 2025, BPDB invited bids for the implementation of 10 solar-based power projects with a combined capacity of 500 MW across the country.
As per bid document, once the projects are set up and operational, the government will sign a Power Purchase Agreement (PPA) for a period of 20 years at a fixed tariff rate.
To get rid from the situation, investors and experts in private power generation expressed their concerns during a meeting with the Power Division Secretary Farzana Montez on January 7, 2025.
"The IA is necessary as it takes into account the state's Sovereign Guarantee to mitigate the risk of the investment, everybody knows the financial condition of the BPDB, it is not a state where the foreign investors will feel free to invest without risks, as previously most of the country's plants were implemented under this guarantee. Without the IA, the implementation of projects, especially those involving tariffs, would face substantial increases," said Mostafa Al Mahmud, president of the Bangladesh Sustainable and Renewable Energy Association (BSREA).
Showing the financial book of the The Bangladesh Power Development Board (BPDB) he said it has recorded significant net losses over the past three fiscal years, amounting to Tk 8,764 crore, Tk 11,765 crore, and Tk 3,232 crore, respectively. The BPDB is already burdened with unpaid bills totaling Tk 30,000 crore.
"Given these adverse financial figures, obtaining financing for these projects-both locally and internationally-will be extremely challenging. Such financial difficulties make BPDB a highly risky "Off-take Guarantor" in both domestic and international markets. In the absence of an Investment Agreement (IA), BPDB could be considered "insolvent" by lenders, making it even more difficult to secure funding for the projects," Mostafa Al Mahmud added.
Moody's, in its latest international credit rating report from November 2024, has assigned a negative outlook to Bangladesh's credit. Other international credit rating agencies have also downgraded the country's credit rating, which further complicates the prospects for international financing for such projects, he noted.
"Absence of an IA will increase electricity tariffs. This will put a heavy financial strain and burden on our country," said KM Rezaul Hasnat, President of the Bangladesh Independent Power Producers' Association (BIPPA).
"We have already informed the power division officials about our investors' concerns regarding the absence of the IA in implementing new renewable projects," said Mostafa Al Mahmud.
He mentioned that BIPPA has already requested the power secretary to include the IA as part of the contract, in the best interest of the country and for the development of renewable energy.
While asked the question to the Secretary of Power Division Farzana Montez over the issue she said, "The government is hopeful to get offers from the investors," she said they hope that it will not increase the tariff.
"We had shifted our policy from the previous one, we want to make a competitive condition in doing business here, we hope it will attract the investors," she said without elaboration.
"Now, the BPDB is facing financial difficulties. Therefore, it should implement the projects through consultation with investors to reduce project costs. If the IA helps lower project costs, the government may consider including the IA for implementing a series of renewable projects," said energy expert Prof. M. Tamim.
