Matarbari power plant eyes G2G coal deal with Indonesia after quality setbacks

Highlights:

• Matarbari plant seeks G2G coal deal with Indonesia's state mines
• Substandard coal damaged plant; one unit remains idle since April
• Experts warn G2G deal bypasses tender, reduces price transparency, competition
• G2G contract aims for better coal quality, lower transport costs
• Supplier's contaminated coal shipment rejected; no firm action taken yet
• Experts urge blacklisting supplier; BPDB says accountability under review now

After receiving substandard coal from a private supplier, authorities of the 1,200MW Matarbari thermal power plant in Maheshkhali are pursuing a government-to-government (G2G) deal with Indonesia to secure coal directly from state-owned mines.

While officials of Coal Power Generation Company Bangladesh Limited (CPGCBL), which operates the plant, see the G2G approach as cost-effective and quality-assured, experts warn that bypassing open tenders could undermine competition and price transparency.

The move follows damage caused to the plant by substandard coal supplied earlier this year by a consortium of Meghna Group's Unique Cement Industries Ltd and Aditya Birla Global Trading (Singapore), said a CPGCBL official, on condition of anonymity. 

He told TBS that a March shipment containing soil-contaminated coal was rejected. 

In a board meeting on 28 May, CPGCBL decided to proceed with the G2G approach. The proposal, presented by acting superintendent engineer (Procurement) Dipayan Pal, recommended signing a contract with Indonesian state-owned mines, such as Bukit Asam. 

The contract would define coal quality standards, annual demand, and price based on international indices. Coal would be purchased under FOB (Free on Board) terms, with shipping handled by the Bangladesh Shipping Corporation (BSC), the official said.

The plant's current coal supply agreement ends in October. Since April, one of its 600MW units has remained idle due to the rejected coal shipment. 

In two earlier board meetings, held on 30 April and 17 May, the possibility of floating tenders for two shipments was discussed, and tender document preparation is underway.

Attempts to reach Md Nazmul Haque, acting managing director of CPGCBL, over the phone were unsuccessful despite multiple tries. 

But, acting superintendent engineer (Procurement) Dipayan Pal told TBS, "The tender documents are still being prepared, so it's too early to comment. Work is also underway on the G2G agreement, as per the board's decision."

CPGCBL expects the G2G deal will ensure consistent coal quality and eliminate the need for middlemen, thereby reducing overall costs. 

Transporting coal through the Bangladesh Shipping Corporation (BSC) is projected to lower freight costs to $10.69 per tonne, compared to the current average of $18–$20. The plant requires about 35 lakh tonnes of coal annually.

Experts oppose G2G deal, urge open tender

Experts have opposed the plan to procure coal through a G2G deal, saying it lacks precedent in Bangladesh and undermines competitive pricing.

Energy expert and former caretaker government adviser M Tamim told TBS, "A G2G deal removes competition and limits the government's ability to get the best price." 

He added that G2G agreements are usually meant for financing or technology transfers, not routine coal supply. 

"The substandard coal issue at Matarbari was an exception. Legal action can be taken if a supplier violates the contract. Coal should be procured through open tenders," he said.

Power and Energy Adviser Fouzul Kabir Khan told TBS that while open tender, G2G, and PPP are all valid procurement methods, a syndicate seems to dominate the coal supply for Matarbari.

"The same company keeps winning the tender despite multiple bids. That's why we're exploring the G2G option — to ensure supply from the most cost-effective source," he said.

Low-quality coal damages plant, but no action yet

The Matarbari power plant has suffered operational damage from low-grade coal supplied by the consortium, contracted through open tender for one year starting November 2024.

On 17 March, the plant rejected the 11th coal shipment after it was found to contain excessive soil, stones, reddish particles, and water. 

CPGCBL had earlier withheld 10% payment from each of the first 10 shipments for failing to meet the specified quality standards. 

Use of such coal also caused corrosion in one unit's seals and tubes and led to slag accumulation, forcing the 600MW unit offline for over six weeks.

Despite these issues, no action has been taken against the supplier. 

Instead, the authorities have allowed the previously rejected shipment to be unloaded under five conditions, including removal of impurities at the supplier's expense, deduction for excess moisture, payment of port overstay fees, compensation for conveyor damage, and penalties for supply or production disruptions.

An official of the Matarbari plant expressed concern over the lack of accountability, calling the situation suspicious.

Energy expert M Tamim said the supplier should be penalised and blacklisted for contract violations to deter future misconduct.

When contacted, Bangladesh Power Development Board (BPDB) Chairman Md Rezaul Karim said the matter is still under assessment.

Energy Adviser Fouzul Kabir said, "We are now prioritising plant operations. The current supplier will be reviewed for faulty coal supply, and action will be taken accordingly."