The interim government has directed three joint venture coal-fired power plants—Bangladesh-India Friendship Power Company, Bangladesh-China Power Company, and RPCL-Norinco Power Plant—to review inconsistencies in their Power Purchase Agreements (PPAs), as part of a broader initiative to enhance transparency and accountability in the power sector.
Additionally, 23 publicly owned power units under the North-West Power Generation Company Ltd. (NWPGCL), Ashuganj Power Station Company Ltd. (APSCL), Electricity Generation Company of Bangladesh (EGCB), Rural Power Company Ltd. (RPCL), and B-R Powergen Ltd. (BRPL) have also been directed to assess their PPAs.
The review is expected to help save approximately Tk 2,630.31 crore annually.
Basis for Review
A committee headed by Additional Power Secretary AKM Ali Reza was formed in December 2024 to scrutinize the PPAs signed with publicly and jointly owned power generation companies and to identify opportunities for cost reduction.
As per the committee’s first meeting, letters were issued to the companies under the Bangladesh Power Development Board (BPDB), requesting Excel-based financial models related to PPA tariffs and five-year audited financials.
By its third meeting on March 19, 2025, the committee identified inconsistencies in the PPAs, proposed a revised tariff structure, and drafted a report. This was finalized during the fourth meeting on April 7, 2025.
Key Findings
The committee found that the power companies are earning excessive profits due to the high return on equity (RoE), overstated operation and maintenance (O&M) costs, and inflated heat rate.
The RoE was set at 12% in most tariff agreements—unusually high for government-owned companies while the O&M rate in the agreements is significantly higher than actual expenses and the heat rate used in tariff calculations exceeds the actual performance of the plants.
Potential Savings from RoE Reduction
The analysis showed that if the RoE is reduced from 12% to 6%, BPDB could save approximately Tk 319.73 crore annually.
A summary of potential savings include NWPGCL (6 plants) Tk 139.90 crore, APSCL (5 plants): Tk 75.75 crore, EGCB (3 plants) Tk 32.86 crore, RPCL (4 plants) Tk 43.41 crore, and BRPL (2 plants) Tk 27.79 crore. APSCL’s 50MW Engine Plant already has a 4% RoE.
Key Saving Measures
Key saving measures include Tk 319.73 crore from reducing the RoE of public companies, Tk 432.41 crore by cutting Fixed O&M charges—foreign escalable rates trimmed to $1.40/kW/month and local escalable rates to Tk 50/kW/month, Tk 55.85 crore by capping payments to a maximum of 50% of the revised Fixed O&M for plants operating below a 10% plant factor, and Tk 684.55 crore through cancelling RoE payments during the project construction period for joint venture companies.
They also include Tk 462.14 crore by revising the RoE rate downward to 12% from the previous 16% or 18%, Tk 539.96 crore by reducing the heat rate by 100 kCal/kWh, thereby improving fuel efficiency, and Tk 165.67 crore by rationalising or fixing O&M tariffs at the real rate for the Bangladesh-China Power Company Limited (BCPCL), excluding the Bangladesh-India Friendship Power Company Limited (BIFPCL).
Other Cost Reduction Measures
Interest on working capital is currently set at 8.40% for most companies. However, BR Powergen’s Kadda plant charges 15%. Standardizing this to 8.40% could save Tk 150–200 crore annually.
Disparities were found in both foreign and local escalable fixed O&M charges. Rates range from 1.25 to 2.43 USD/kW-month (foreign) and 20.82 to 97.65 Tk/kW-month (local). The committee recommends capping these at US$ 1.40 and Tk 50 respectively, saving about Tk 1,444.88 crore annually.
Also, the tariff should reflect actual heat rate, potentially leading to significant savings. Tariffs should align with actual O&M costs, especially for publicly owned power plants excluding older units of APSCL and EGCB.
For joint venture plants, BCPCL, BIFPCL, and RPCL-Norinco, reducing RoE to 12%, adjusting heat rate by 100 Kcal/KWh, and aligning O&M costs with actuals could result in combined annual savings of Tk 104–115 crore.
For BIFPCL, all expenses, including O&M, should be jointly managed by officials from BPDB and NTPC (India) to improve transparency.
Reactions from Companies
In interviews with Just Energy News, managing directors of both public and joint venture power plants stated that RoE should ideally vary by plant.
They acknowledged that revising public plant PPAs with 6% RoE is feasible, though it may affect break-even points. However, in joint ventures, especially coal-based plants, revisions are more complex and require consent from the foreign partners.
“We have already received a letter from the Bangladesh Power Development Board (BPDB) requesting a review of the power tariff from our joint venture coal-fired plant,” the managing director of the plant told Just Energy News.
He said the plant’s board will make the final decision on the BPDB’s tariff review proposal.
The managing directors at a meeting also urged the government to consider plant-specific financial conditions while reviewing O&M and Heat Rate terms.
Government’s Position
Power and Energy Adviser Muhammad Fouzul Kabir Khan emphasized the government’s intent to reform both public and private sector PPAs for greater accountability.
“We encourage private power companies to voluntarily revisit their PPAs,” he told Just Energy News. “Correcting PPA inconsistencies is essential for tariff transparency.”
He noted that current selling prices are significantly lower than purchase prices—BPDB sells power at Tk 8.95 per kWh while buying it at Tk 12—resulting in a subsidy of Tk 3.05 per kWh. “How long can the country sustain this?” he asked.
“We are following a democratic process—there is no coercion to reduce tariffs,” he asserted.
The Government Procurement Committee has already approved a power tariff of Tk 8.4475 per kWh for the state-owned 1,200 MW Matarbari ultra-supercritical coal plant. “We hope other coal-fired plants will follow this benchmark,” he said.
He added that the Power Division would seek explanations from any coal plant operator unwilling to review its tariff structure.