Private power producers fear Tk4,400cr loss due to delay, payment in devalued taka

• IPPs may be hit by Tk4,400cr losses
• True-Up payment system a way out
• Payment made to adjust for any difference between the purchase price
• BPDB's payable to IPPs around $1.6 billion
• Previously bills would be cleared within 45-60 days
• Bhutan, Nepal can be explored for renewables

Due to payment delays and exchange rate fluctuations, private power producers are worried of incurring around Tk4,400 crore loss in the running calendar year.

Generally, the Independent Power Producers (IPP) used to receive the bill within 45 to 60 days of invoice submission.

But due to volatile energy prices in the global market, insufficient subsidy disbursement from the Finance Division and lower retail price of electricity, IPPs are yet to be paid the bill of April and the Bangladesh Power Development Board's payable to them is around $1.6 billion.

Besides delay, private power producers are hit high by the fluctuation of exchange rate as they are paid in devalued taka, Imran Karim, president of the Bangladesh Independent Power Producers' Association (BIPPA), told The Business Standard in an exclusive interview.

Therefore, the entrepreneurs are now negotiating "True-Up" with the Bangladesh Power Development Board (BPDB) to compensate for losses they have digested in importing furnace oil to run power plants.

True-Up payment is one where balance is adjusted to match the actual value.

"Being native investors, we accepted this delay. But the exchange rate fluctuation has become a concern for us," said Imran Karim, who is also the vice-chairman of the Confidence Group that has electricity generation facilities of 393.36 megawatts under Confidence Power Holdings Limited.

He said for January, the official rate of the dollar was Tk86, which has now shot up to Tk95 whereas the market rate is higher.

"Because of the devaluation of taka against the dollar, the HFO-based private power producers are digesting a deficit of Tk12 to Tk14 per dollar. So, if this continues, a 100MW HFO-based power plant's owner will incur a loss of Tk100 crore to Tk 120 crore in one year," said Imran.

"As there are around 40 HFO-based IPP power plants with 5,500MW capacity, the total loss would be around Tk4,400 crore annually," he added.

Imran Karim went on saying that True-Up payment is the only solution for IPPs to make up for such losses and True-Up is an extension of pass through provision which is qualitatively mentioned in the HFO contracts.

"We can claim the true-up payment if the dollar rate fluctuates between the day we submit the invoice and the day the BPDB pays us the bill. The BPDB can also claim the provision if it is in favour of them," he said.

All Bangladesh investors in HFO-fired power plants get payment in dollar denominated Taka while foreign investors are getting payment in dollars, he added.

"We hope that if True-Up is used, the complexity will be eased. The matter is now under government consideration."

Talking about the "No-Electricity, No Payment" contracts, the BIPPA president said BPDB has implemented a fantastic mechanism under such contracts.

"No electricity, no payment" is a very BPDB-biased contract. "The state has very much benefited from these contracts," he said.

But the entrepreneurs are in trouble because they have to keep fuel supply, manpower and spare parts available, he added.

Talking about investment in renewable energy, Imran Karim said that they are promoting their members towards renewable energy, though there are some limitations like land and availability of renewable energy.

To have renewable projects like 2,000MW we need to go to Nepal and Bhutan and have bilateral power trade. We will go as investors and we will be the owner of those power plants.

Through a proper power trade like what happens in Europe, we will evacuate electricity from Nepal and Bhutan and will send it there in winter when they generate electricity by burning oil, he said.

Talking about the way outs of the current crisis, he said, "We have seen the worst. We will be comfortable ahead.

"By 2026, the price of gas will come down to a real normal trend," he optimistically said.