Power Division seeks Tk1,744cr to avoid default on Patuakhali plant loan

The Power Division has requested the Finance Division to release Tk1,744 crore in subsidy to pay the first loan instalment for the Patuakhali coal-fired power plant, warning that failure to arrange the funds could put the government at risk of default as a sovereign guarantor.

In a letter sent yesterday, the Power Division said the first instalment of the plant's loan, worth $143 million, must be repaid by 27 March.

A senior Finance Division official, speaking on condition of anonymity, said the subsidy funds had not yet been released because the per-unit tariff for electricity from the plant had not been approved by the Cabinet Committee on Government Purchase.

"If the power company fails to arrange the instalment from its own funds, the government will arrange the money from other sources beyond the subsidy," the official said. "Bangladesh has never failed to repay a loan so far, and that record will be maintained."

The official added that the proposal from the Power Division had just been received and a decision would be taken after reviewing the matter through discussions.

The 1,320-megawatt coal-fired plant, located near Payra Port in Patuakhali, was developed as a joint venture between Bangladesh's Rural Power Company Limited (RPCL) and China's NORINCO International Cooperation Ltd. It is operated by RPCL-NORINCO International Power Limited (RNPL), in which the two partners hold equal 50:50 ownership.

According to the Power Division, the project was implemented at a cost of $2.539 billion under a 70:30 debt-to-equity structure. RPCL and NORINCO jointly provided 30% of the project cost as equity, while the remaining 70% was financed through loans from a syndicate led by the Export-Import Bank of China.

The loan was approved by the government's Standing Committee on Non-Concessional Loans, and the Finance Division provided a sovereign guarantee covering 50% of RPCL's share of the loan.

The plant's two units together supply 1,320MW of electricity to the national grid. The first unit began supplying electricity on 19 January 2025, while the second started generating on 9 April the same year. The plant's initial operation date has been set at 30 September 2025.

The Power Division said the Bangladesh Power Development Board (BPDB) signed a Power Purchase Agreement (PPA) with the plant on 20 February 2019. Although the agreement does not specify a fixed tariff, electricity is to be purchased under a cost-based tariff mechanism with a defined tariff formula.

Under the agreement, provisional bills submitted by the company can be paid until the commercial operation date is finalised. Once the commercial operation date is determined, the tariff will be calculated according to the agreed formula and approved by the Cabinet Committee on Government Purchase.

Sources said RNPL had submitted bills worth Tk2,947 crore to BPDB as of January this year.

A Power Division official, who wished not to be named, said funds were urgently required both to service the loan and to import coal needed for continued operation.

"BPDB is not releasing payments, and the government subsidy is also yet to be disbursed. In such a situation, keeping the plant operational has become a challenge," the official said.

However, an RNPL official said the company currently has sufficient funds to cover loan repayments and other expenses. The Chinese partner, he added, is mainly pressing for the settlement of electricity bills by BPDB and the release of government subsidies.