Interim govt contemplating new bond issuance to clear BPDB’s dues with pvt power producers

The interim government is considering the issuance of additional bonds to address the Bangladesh Power Development Board's (BPDB) mounting unpaid dues to private power producers.

This move aims to ease the financial strain on independent power producers (IPPs) and stabilise the country's power sector.

According to official sources, the state-owned Bangladesh Power Development Board (BPDB) has already initiated a move in this regard and consulted with the Power Division so that it could discuss the issue with the Finance Division.

"We've been calculating BPDB's dues with the private power producers, known as independent power producers (IPPs)," a top official of the BPDB told UNB.

He also noted that currently the BPDB's total unpaid bills amount to about Tk42,000 crore, of which the IPPs will get about Tk7,000 crore.

Of the remaining amount, the gas bill will be about Tk17,000 crore while state-owned public sector power plants will get Tk10,000 crore, and Indian public and private sector including Adani Group will get Tk8,000 crore.

Earlier, in a significant move to stabilise its power sector, the then Awami League government had secured Tk20,620 crore through the issuance of special bonds. This initiative, aimed at clearing outstanding liabilities to private power plants, involved collaboration with two prominent private banks: City Bank and Pubali Bank.

A comprehensive agreement was inked on 25 January, marking a critical step in addressing the financial challenges faced by the power sector.

As per this agreement, the government issued bonds worth Tk19,850 crore to City Bank and Tk77.50 crore to Pubali Bank, as confirmed by the Ministry of Finance.

Sources reveal that the government's inability to disburse subsidy funds has left private power plants struggling to meet their financial obligations, leading some to the brink of insolvency.

To counter this crisis, the government's issuance of special bonds comes with an 8% coupon rate, mirroring the repo rate set by Bangladesh Bank. Notably, any future fluctuations in the repo rate will correspondingly adjust the bond interest rate.

At the term's end, the government will settle the bank dues along with interest, subsequently reclaiming these bonds. Unlike typical 15–20-year bonds, these special bonds have a maximum tenure of 10 years, a move tailored to the urgent needs of the power sector.

Key players in the power sector, including Summit Power, United Power, Confidence Power, Baraka, Kushiara, Doreen, and Akron Power, are among the beneficiaries of this initiative.

The Finance Division also disclosed plans for phased agreements with other banks, including BRAC Bank and Bank Asia, to further address the sector's liabilities.

Reflecting on the agreement's significance, managing directors of several banks expressed optimism. While banks can leverage these bonds with Bangladesh Bank, it provides the government with crucial financial breathing space.