Tariff renegotiation in power sector a disaster for investors: Chinese Enterprises Association

Factors discouraging foreign investment in renewables

• Sudden policy shift
• Complex banking regulations
• Strict documentation
• Poor coordination among agencies
• Partial digitalisation
• Limited English-language resources

The government's policy of renegotiating tariffs in the power sector is a disaster for investors looking to invest in Bangladesh, Han Kun, president of the Chinese Enterprises Association in Bangladesh, said today (30 June).

"When we made the investment and the plant was ready for commercial operation, we were suddenly informed that tariff structures were going to be changed. Your terms and conditions are changed; that is a disaster for investors who have already invested in the power projects," Han said.

He made the statements at the 3rd Bangladesh-China Renewable Energy Forum dialogue titled "Recent challenges for Chinese overseas investment in Bangladesh's renewable energy sector: Way forward," organised by the Centre for Policy Dialogue (CPD) in Dhaka.

Han Kun added that such decisions discourage new investors. "When someone hears that, after investing, the deal will be renegotiated again, new investors will not come to Bangladesh easily."

He mentioned that major power plants, such as the 1,320MW Patuakhali plant, the Barishal coal-fired power plant, and the SS Power Plant, have recently received notices to renegotiate their tariff structures under existing power purchase agreements.

"This sudden move sends a message of unpredictability to international investors. Past such global experiences show that such actions can undermine long-term investors' confidence and increase financial costs for future infrastructural projects and delay energy transition," he said.

Han also alleged that $1.45 million was deducted from a Chinese-funded power plant's original payment due to a delay in submitting a performance bond, even though the power purchase agreement did not mention such a penalty. 

He added that the Barishal coal-fired power plant is also experiencing arbitrary payment deductions, and the 1,320MW SS power plant is facing delayed payments of over $200 million.

Commenting on Bangladesh's renewable energy goals, Han said the target of producing 20% of electricity from renewables by 2030 and 30% by 2040 is "a little bit ambitious" as the country currently generates only 3% from grid-tied renewables.

The CPD identified key challenges, including administrative hurdles, project implementation delays, and land development complexities, as major barriers to attracting foreign investment in Bangladesh's renewable energy sector.

Khondaker Golam Moazzem, research director of CPD, in his keynote presentation pointed out partial digitalisation, complex rules, and poor coordination among multiple agencies as barriers discouraging investors.

"Some steps are online, many still require physical visits and paper submissions. Inconsistent digital platforms across agencies cause confusion and prolong the process," he said.

He added, "Multiple licensing requirements like trade, TIN, VAT, factory, and environmental clearance certificates are leading to long delays and administrative burdens. Limited English-language resources and complex banking regulations, and strict documentation are making the investment process more daunting."

Wang Weiquan, deputy secretary general of the Chinese Renewable Energy Industries Association, described China's strong policy framework supporting renewables.

"Facilitating incentives, fixed tariff structures, total volume purchases, and special fund policies paved the way for investing in the renewable energy sector in China. Numerous five-year plans, like solar and hydrogen policies, gave a positive signal in the market, which helped attract investors," he said.

Md Shahidur Rahman, country manager of Bangladesh Jinko Solar, said, "In India, Brazil, and other African countries, the government arranges land to set up solar power plants. But in Bangladesh, land is the main barrier to establishing solar-based power plants."

He added, "Unauthorised and substandard solar panel imports hamper generating solar power to its full potential."

Regarding the cancellation of Letters of Intent for 37 earlier solar power plants, SK Md Ruhul Amin, deputy managing director of Chint Solar (Bangladesh) Company Ltd, said, "Those power plants were cancelled due to alleged corruption, but we don't know at which stage the corruption happened."

He added, "After getting approval from the government, we purchased land and arranged funding through the bank. Despite completing all these steps, we have not been given any solution regarding the cancelled power plants."

Masudur Rahim, chief executive officer of Omera Renewable Energy Limited, said, "To attract Chinese investors, Bangladesh needs better infrastructure and easier dividend repatriation, which are currently not investor-friendly here."

"In the open tendering process, the lack of a termination clause, implementation agreements, payment guarantees, and uniform tariff structures discourages investors from investing in Bangladesh's renewable energy sector," he added.