How independent power producers started in Bangladesh and why they fail to meet power demand
IPPs are allowed to suspend power supply for up to 876 hours annually for maintenance
The partnership between BPDB and private producers began in 1996 under the Private Sector Power Generation Policy, designed to attract private capital amid frequent load-shedding that disrupted economic growth. The International Finance Corporation (IFC) helped draft standard PPAs, guaranteeing state purchase of electricity from private plants.
The model worked, and private investors rapidly expanded generation capacity, helping reduce load-shedding and support economic growth.
Today, IPPs supply over 60% of Bangladesh's installed generation capacity, forming the backbone of the national electricity supply. The first IPP, the 360MW Haripur combined cycle plant developed by AES Corporation, came online in 1998, setting the stage for decades of private investment.
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However, the Bangladesh Power Development Board (BPDB) has been delaying power purchase payments to independent power producers (IPPs) for up to seven months. Yet, they are still imposing penalties on the IPPs for excess outages.
Speaking to TBS, IPP owners said BPDB has consistently failed to pay electricity bills on time. Settlements were often delayed by six to seven months, and since 2021, following the Covid-19 pandemic, delays have extended to 180 days or more than 300 days in some cases.
Bangladesh Independent Power Producers' Association (BIPPA) President David Hasanat said the situation worsened after the Russia-Ukraine war. "Banks are refusing to open LCs for HFO, lubricants, and spare parts due to BPDB's irregular payments, forcing us to operate at limited capacity. Yet, BPDB is imposing LDs for electricity shortfalls beyond our control."
Other IPP owners noted that fuel accounts for roughly 80% of operating costs. They added that banks are denying term loans because delayed capacity payments leave them unable to cover overheads, operations, maintenance, debt repayment, and other project costs.
Under the PPA, IPPs are allowed to suspend power supply for up to 876 hours annually for maintenance. Beyond this limit, BPDB may impose LDs for excess outages. Section 13.2(j) specifies that if a company's invoices remain unpaid beyond ten business days after the due date, any resulting outages may be considered "forced outages" caused by BPDB.
The section further allows IPPs to withhold electricity if BPDB fails to clear bills within 40 days of invoice submission. BIPPA has repeatedly written to BPDB since 2022, highlighting that delayed payments prevent IPPs from meeting electricity demand.
