HFO-based plants surviving on parent firms’ profits: Power producers
They apprehend that if the government doesn't take measures to clear the due payment it would lead to a shortfall in power generation in the coming summer
More than half of the power plants based on heavy-fuel oil (HFO) would have defaulted on bank loans had their owners not injected profits from other businesses, the Bangladesh Independent Power Producers' Association (BIPPA) said.
Financial shocks from multiple exchange rates and ongoing payment delays by the Bangladesh Power Development Board (BPDB) have caused cumulative losses of Tk150 crore to Tk200 crore per 100MW capacity over the past 30 months, BIPPA President David Hasanat said during a press conference in the capital on Thursday (23 January).
"Banks are no longer willing to finance the plants due to the risk of default," former BIPPA president Imran Karim stated. He added, "HFO-based power plants urgently need their overdue payments cleared to import fuel and prevent load shedding in March, when demand will peak due to Ramadan, irrigation needs, and high temperatures."
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"As patriots, we have been subsidising HFO plants since mid-2022, but we can no longer bear this burden," Hasanat said. "The government should nationalise our plants if a 16%-17% annual return on investment cannot be ensured, especially when borrowing rates are at 14%-15%."
Only a few plants that benefited from high tariffs or capacity payments under the previous government may be using their past profits to subsidise current losses. For newer plants, this is no longer feasible, as they now face challenges in servicing debts, Karim noted, emphasising the need for sustainability.
IPPs have incurred around Tk5,500 crore in foreign exchange losses over the past two and a half years, as the BPDB paid for power based on the official dollar rate, while companies had to pay 10%-12% more for dollars to import HFO.
BPDB, which was supposed to settle bills within 30-45 days, now takes over 180 days for most plants, with some cases stretching beyond 200 days. This delay forces IPPs to borrow more for working capital, increasing interest burdens and raising their cumulative losses to around Tk8,500 crore, according to BIPPA.
The government should immediately clear Tk5,000 crore of the much larger overdue amount to keep the plants operational in March, Hasanat urged.
Karim also criticised the excessively high 34% duties on HFO imports, calling for immediate reforms
