Govt revives cancelled Matarbari 1,200MW coal-fired power plant

Matarbari phase-2 

• Planning commission approved the PDPP on 25 May
• Planning instructed the ERD to arrange financer
• Talks are going on with Exim bank of Korea and New Development Bank (NDB) for finance
• Phase-2 cost estimated at Tk25,114cr
• Phase-1 cost Tk57,000cr
• NDB showed interest to finance the project, said Power Division
• Phase-2 project cancelled on environmental ground in 2021

Ready facilities for Phase-2

• Land earmarked and development completed under phase-1
• Ready coal unloading jetty
• Ready power block and coal yard
• environment impact assessment (EIA) done

In a major policy shift, the interim government has revived the proposed phase-2 of the 1,200-megawatt Matarbari coal-fired power plant, reversing the previous government's decision to ditch the project in 2021.

The reversal came considering the cost effectiveness of electricity production as most of the infrastructure development was completed under phase-1 project.

The Planning Commission already approved the project and is now vying for arranging new financiers for this project as Japan International Cooperation Agency (Jica) cancelled the finance of this project in 2022 on ground of environmental impact.

To revive the project, the Power Division on 20 April sent a Preliminary Development Project Proposal to the secretaries of the Planning Commission and Economic Relations Division (ERD).

The Planning Commission already approved the project on 25 May and sent the project to ERD for arranging finance for this project.

Describing the rationale of reviving the project, the Power Division in the letter to Planning Commission said the matarbari phase-2 project will be cost effective and most of the cost was borne by phase-1. 

Md Nazmul Haque, project director of Matarbari coal-fired power plant and managing director (Additional Charge) of Coal Power Generation Company Bangladesh Limited told the Business Standard, "After implementing phase-1 – where we did most of the infrastructure development work for keeping Phase-2 in mind – this project will cost less than half of the phase-1."

Matarbari 1,200MW Power Plant (Phase-1) was built at a cost of Tk57,000 crore and in contrast proposed Matarbari 1,200MW phase-2 will cost less than half of the Phase-1 which is Tk25,114.72 crore.  

The Power Division letter said, "The government has a plan to implement the Matarbari phase-2 project. If the Matarbari phase-2 project is implemented, it will help generate low cost electricity and ensure energy security and diversification of fuels."

After approving the project, the Planning Commission wrote to ERD to engage with development partners for project financing. 

The letter, written on 25 May to ERD Secretary Md Shahriar Kader Siddiky, said, "It is being informed that the PDPP of the proposed 1,200MW coal-fired ultra supercritical power plant (phase-2) has been principally approved by the adviser of the planning ministry to launch a feasibility on how to arrange the project finance for this project from development partners."

Earlier on 27 June, 2021, the Power Division formally annulled the proposed 1200 megawatt Matarbari coal fired power plant, better known as phase-2, along with 9 other power plants amid the widespread criticism from green campaigners against such projects.

Why Power Division thinks Matarbari phase-2 is important

Apart from the already accomplished infrastructure development, Power Division officials said, another rationale of this project is the low cost of generating power. The existing 1,200MW Matarbari power plant is costing Tk8.45 for per unit electricity when oil-fired power plants cost Tk25-45 for per unit of electricity.

They further said, if phase-2 is successfully implemented, power generation cost will reduce further as both plants will use the same coal transport and unloading facilities.   

Land for future extension of Matarbari power plant project phase-2 was earmarked and developed as well as port facilities for coal unloading were created in-line with the phase-2. 

According to Power Division assessment, the existing coal unloading jetty is capable of serving both phases of the Matarbari project.

The environmental impact assessment (EIA) report for the project has been approved by the Department of Environment (DoE).

Considering all the factors, the Power Division said, it is important to implement the phase-2 project to ensure cost effective electricity production,energy security and fuel diversification.

Possible financiers of the project 

The possible development partners mentioned in the proposal are – Exim bank of Korea (KExim), New Development Bank (NDB), Japan Bank for International Cooperation (JBIC), Economic Development Cooperation Fund (EDCF), Asian Development Bank (ADB), Jica, World Bank and others.

The Power Division estimated a cost of around Tk25,114.72 crore for phase-2 project. Of this,  the Power Division hopes some Tk21,625,73 crore to come from development partners, and Tk2,879.61 crore will be financed by the government while Tk609.37 crore will be financed by Coal Power Generation Company. 

Different development partners including New Development Bank (NDB) showed interest to finance the project, Power Division said.

Project cancelled in 2021

In 2021, the AL-led government scrapped 10 coal-powered power plant projects. The scraped power plants are – Patuakhali 1,320MW, Uttarbanga Super Thermal Power Plant Gaibandha 1,200MW, Munshiganj 522MW, two 282MW projects in Dhaka and Chattogram, Khulna 565MW, Two Moheskhali 1,320MW, Singapore-Bangladesh 700MW joint-venture plant and Sumitomo-Corporation joint-venture plant 1,200MW.

About cancellation of the projects, former state Minister for the Ministry of Power Energy And Mineral Resources Nasrul Hamid said, "Cancellation of these projects will have no impact on the electricity supply."

In less than four years of cancellation of the project in 2021, Power Division is having a reversed stance on the proposed 1200MW Matarbari coal fired power plant.