How tender rules and a lone bidder stall a $2.5b power plant

Infographics: TBS

Bangladesh's ambitious 1,320-megawatt Patuakhali ultra-supercritical coal-fired power plant stands fully equipped and ready to feed electricity into the national grid. However, months after its two units commenced test runs, this significant investment remains in limbo, plagued by a baffling inability to secure a long-term coal supplier. 

Despite three tender attempts since January last year, the project authority, RPCL-Norinco Int'l Power Limited (RNPL), has repeatedly failed to appoint a long-term provider.

In each instance, only one company, Singapore-based Yongtai Energy Pte Ltd, emerged as a qualified bidder, consistently quoting prices deemed unacceptably high. 

Earlier, RNPL called for procuring 1 million tonnes of coal for the test run of this power plant, and that time too, Yongtai emerged as a qualified bidder and is currently supplying coal to this power plant from Indonesian Bukit Asam mine.

Officials close to the process point to restrictive tender terms, questionable design choices, and strong suspicions of favouritism, all of which appear to have systematically excluded other potential suppliers.

RNPL had initially aimed for commercial generation to begin in May and June 2025. Yet, this $2.54-billion plant, constructed by a Chinese consortium (TEPC-CHEC-CWEC), lies dormant, unable to finalise a five-year coal supply contract estimated to be worth between $50 million and $150 million annually.

Officials at RNPL stated that while 10 companies purchased the tender documents in the third round, only four submitted bids. Of these, only Yongtai was technically qualified, further fuelling concerns over the process's integrity.

Finger-pointing and conflicting accounts

The persistent failure to attract competitive bids has ignited a blame game among key stakeholders.

Md Salim Bhuiyan, managing director (current charge) of RPCL and RNPL, deflected responsibility, telling The Business Standard, "BPDB prepared the tender documents. Our company secretary handled the tender. I'm not even on the evaluation committee."

However, Md Rezaul Karim, chairman of the Bangladesh Power Development Board (BPDB), countered, "As an electricity buyer, BPDB tries to keep the coal price low, as it affects the electricity price. We look after that issue only. The RNPL board, on the other hand, decides everything on tender specifications." 

Mr Karim confirmed that both BPDB and the Power Division had advised RNPL to ease the tender specifications after poor participation in earlier rounds, but "Norinco was pushing for tougher tender conditions."

A Power Division official, speaking anonymously, reinforced this, stating, "Despite repeated pushes for softening tender specifications to attract more bidders, the RNPL board went ahead with largely unchanged criteria."

Tender rules: Designed to exclude?

Insiders within the Power Division claim RNPL used a single-stage, two-envelope tender method, a departure from the more common two-stage, two-envelope process employed for similar major projects like Rampal and Matarbari. 

In the single-stage method, technical and financial proposals are submitted simultaneously. A technical rejection means the financial bid is never opened, offering no second chance.

A critical, exclusionary condition required bidders to submit a coal supply commitment letter directly from the mine owner. This proved to be a significant hurdle for many, as mine authorities are typically unwilling to provide such documents before a bidder has been technically qualified – a step usually reserved for the second stage of tendering in the two-stage method. 

Yongtai Energy, however, provided an "unwavering" commitment letter from Indonesia's Bukit Asam mine, which also supplied coal for the Patuakhali plant's test runs, raising eyebrows about its unique preparedness.

Tender system tailored to one supplier?

A detailed examination of the 186-page tender documents reveals further conditions that industry insiders allege are suspiciously aligned with Yongtai's existing operations. 

For instance, a coal mine's production capacity had to be 7 million tonnes over the past five years, despite the plant needing only 1.3-4 million tonnes annually. Additionally, the mine required a recoverable reserve of 18 million tonnes, and bidders needed to show supply experience of 8 million tonnes over five years, including 5 million tonnes to power plants.

Power Division officials argue these thresholds are excessive and unrealistic for most suppliers, especially those accustomed to providing coal for smaller 350-500MW plants. 

"These specs eliminate competitive bidders by design," a BPDB official stated anonymously. They stressed that any trader with experience supplying 350-500MW plants running at a 90% load factor could easily supply a 1320MW plant, as its full capacity won't be utilised year-round.

No pre-bid meeting, sudden index change

The tender process was also marred by a notable lack of transparency. RNPL did not hold a pre-bid meeting, a standard practice to clarify technical issues and foster broader participation.

Adding to the opacity, RNPL abruptly changed the pricing formula mid-process, switching the coal index from ICI3 to HBA2 – an index unfamiliar to most Indonesian miners. Bidders were given a mere 14 days to respond to this sudden alteration. 

Curiously, only Yongtai appeared prepared for this change, further reinforcing perceptions of an unfair advantage.

An RNPL official even suggested the possibility of "dummy bidders," stating, "It's possible those companies were dummy bidders who submitted incomplete documents intentionally to clear the path for Yongtai."

Tough condition for LC

The tender documents indicate that a Letter of Credit (LC) for each shipment would need to be opened at any scheduled bank of Bangladesh within seven business days before the commencement of Laycan. Laycan, or laydays and cancelling, refers to the specific period during which a vessel is expected to arrive legally and physically at the loading port. It is an abbreviation of "lay days cancelling."

People involved with such activity said it is unlikely that any trader or coal mine owner will begin any transportation activities before the LC is received, until and unless that trader or coal mine authority has previous experience of working with the tenderer.

Yongtai Energy is currently supplying some coal to the Patuakhali 1320MW power plant for technical operation.  

An idle asset and soaring costs

All the while, the Patuakhali power plant remains ready but idle. According to RPCL's May data, Unit 1 began experimental supply on 19 January 2025, with Unit 2 following on 9 June 2025. The plant has recorded a net output of 1244MW.

Yet, without a long-term coal deal, commercial generation is unattainable, costing the country taxpayers' money amidst an ongoing energy crisis.

While coal-fired electricity is generally cheaper, the Patuakhali plant's power is projected to cost nearly Tk12 per unit, significantly higher than the usual Tk6-Tk7. 

This steep cost is attributed to the inflated coal prices due to limited competition and the project's high capital expenditure. Prolonged idleness risks equipment degradation and places a greater burden on the national grid and end-users.

The way forward

BPDB Chairman Rezaul Karim acknowledged the gravity of the situation. He stated that instructions have been issued to relaunch the tender with relaxed conditions, and even to explore a short-term, one-year contract instead of the five-year term. "We can't afford to let a $2.5 billion plant sit idle," he stressed. "If the equipment remains unused, components will start to degrade."