Private power producers under pressure as govt dues top Tk27,000cr

Highlights:

• BPDB owes IPPs over Tk27,000 crore, causing severe delays.

• Payment delays of 6–9 months creating major liquidity pressure.

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• IPPs warn sustainability, fuel procurement, operations increasingly at risk.

• Lenders losing confidence; some producers nearing default without payments.

• BPDB's financial strain driven by subsidies, high costs, low tariffs.

• IPPs supply 40% of power, making delays a national risk.

Bangladesh's independent power producers (IPPs) are struggling with prolonged government payment delays, which they say are disrupting their fuel procurement and financial obligations, and warn that such disruptions could hamper the sector's power supply reliability.

According to officials from the Bangladesh Power Development Board (BPDB) and IPPs, the BPDB now owes more than Tk27,000 crore to over 70 local and foreign IPPs, with nearly Tk17,000 crore owed to local producers and the rest to foreign-backed ventures.

IPP owners said payments are currently delayed by up to 6-7 months beyond the due dates, creating severe liquidity pressures across the sector.

Several private power producers have already written to the BPDB chairman, cautioning that prolonged delays threaten the entire sector's sustainability.

Md Shamim Mia, head of Regulatory Affairs at United Power Generation and Distribution Company, told TBS that continued non-payment of dues could severely affect power production.

"Some of our bills have been outstanding for 6-7 months, and lenders are losing confidence in us. We urge policymakers to step in and resolve the long-standing issues in the power sector," he said.

Imran Karim, vice chairman of Confidence Group, which operates four IPPs under Confidence Power Holdings Limited (total capacity 393.36MW), said payment delay sometimes exceeds nine months, affecting bank repayments, fuel procurement, and operational continuity.

Asked about the outstanding power purchase bills, Power Adviser Fouzul Kabir Khan told TBS, "We are paying the IPPs. But to expedite payments, we have requested funds from the Finance Division and are also arranging resources from elsewhere."

IPP owners said Titas Gas has started issuing formal notices over overdue bills, including interest implications. They added that while BPDB is not paying them on time, it is imposing liquidated damages for power supply failures caused by fuel import delays amid the liquidity crisis.

Infograph: TBS

IPPs' letter to BPDB

TBS has seen several letters from IPPs to BPDB. In a letter to the BPDB chairman on 9 November, Summit Power International Ltd, the largest private power producer operating 18 plants with a total capacity of 2,255MW, warned that prolonged payment delays have pushed the company into a critical financial situation. The letter added, "Our lenders have expressed deep concern and may declare default if payments are not received immediately."

It also stated, "The O&M [operation and management] contractor is struggling to meet payroll for both local and foreign staff, while payments under the long-term service agreement with General Electronics remain pending."

Doreen Power Generations and Systems Ltd raised similar concerns, reporting defaults in loan repayments, inability to open LCs for Heavy Fuel Oil (HFO) and spare parts, unsettled matured LCs, forced loans by banks, and even challenges in paying taxes on fuel imports.

"Our bills have remained outstanding for at least 4-5 months. We have already exhausted all available resources to keep the power plant operational," Mostafa Moin, CEO of Doreen Power, said.

Letters seen by TBS show Summit Power alone is owed Tk4,924 crore. United Power reported outstanding dues of Tk3,078 crore for February-October.

Dorren Power is owed Tk1,378 crore, and Confidence Power around Tk1,400 crore.

BPDB officials told TBS that under the Power Purchase Agreement (PPA), the board is required to pay interest on overdue payments, calculated at the central bank's one-year Treasury note yield plus 4%. They added that if delays continue, total dues with accumulated interest could surpass Tk40,000 crore, further increasing BPDB's financial burden.

BPDB's struggles

BPDB's difficulties in clearing mounting dues stem from several long-standing structural challenges, according to sector analysts.

High generation costs, particularly from imported fuels, continue to put significant pressure. The board's reliance on subsidies, which now exceed Tk40,000 crore annually, further strains the government's fiscal capacity.

A persistent gap between generation costs and retail tariffs has created substantial financial deficits; in FY2023-24, the per-unit generation cost was around Tk12, while the average sale rate was Tk8.50.

Limited foreign currency reserves have delayed fuel imports, directly affecting BPDB's ability to settle bills on time. Additionally, excess installed capacity forces BPDB to make capacity payments even when plants are underutilised, further inflating its liabilities.

Sector-wise generation capacity

Bangladesh currently has 135 power plants connected to the national grid, with a total generation capacity of 27,905MW. Of these, 63 plants are publicly owned, contributing 11,735MW, which accounts for 42% of the country's generation capacity.

In addition, two joint-venture plants generate 2,478MW, representing 9% of the total generation capacity.

The private sector plays a significant role as well, with over 70 IPPs supplying 11,055MW, or 40% of total capacity.

The remaining 2,636MW comes from imported electricity.