Govt cancellation of 31 renewable power projects ignored HC verdict

Infographic: TBS

The PDB took no time to cancel renewable energy deals with 31 companies signed during the Awami League government under the Quick Energy Supply (Special Provision) Act 2010 and moved ahead with new tenders, ignoring a High Court verdict.

The short verdict of the court annulled two provisions of the Act, but the full judgement condoned past project actions and called for a review in case of any wrongdoing – options that the companies were deprived of due to the PDB's hasty actions.

On 14 November last year, the High Court in response to a writ petition scrapped the two provisions of the Act – Section 6(2) that allowed the power minister to bypass the tendering process and directly negotiate power purchase agreements with plants, and another provision that granted immunity regarding these agreements.

On 18 November, the PDB issued letters to these 31 companies, stating that the government would not purchase electricity from them, even though more than half of these companies had already completed land acquisition and other necessary preparations while the rest had finalised land purchases.

On 24 November, the full judgment, condoning the past actions of the project and keeping a review option, was published.

Despite this, on 5 December, the PDB moved forward with new tenders for some of the projects.

Now, the companies are challenging the PDB actions, citing the full court verdict, arguing that the cancellation of the agreements was premature.

Fifteen of the 31 companies have already filed 11 separate writ petitions with the High Court, contesting the PDB's actions.

The projects encompass 3,287MW of green electricity production, backed by potential foreign investments totalling $6 billion.

Ahsanul Karim, the lawyer for the petitioners and a company law expert, told TBS that the High Court stated if any company entered into the contract through irregularities, the government will look into this. To identify such irregularities, the PDB must form a committee that will review and uncover any wrongdoing.

"However, instead of following this process, the PDB is moving forward with the cancellation of contracts with all the companies," said the lawyer.

PDP's actions and the full HC judgement

In its letters to the 31 companies, the PDB says the procurement process related to the Letters of Intent issued in favour of the companies processed under the said Act is under consideration to be processed through competitive bidding instead of the above Act.

On 24 November, the High Court published its full judgement, where it said that to avoid legal complications related to the contracts and processes, the court provisionally condones all actions taken in good faith by the relevant authorities under the Act.

The court reserves the right to review these actions, the terms and conditions of the contracts, and the related processes in the future, if necessary, the full judgement added.

It further stated that this provisional condonation shall not apply to any offences committed under the contracts entered into, including the processes initiated under Section 6(2) of the Act.

However, on 5 December, the PDB issued tenders for the construction of 10 solar power plants at nine locations in the country, with the submission deadline set for 3 February 2025. The tenders were issued without consideration of the previous agreements with the 31 companies.

What the govt says

Power, Energy and Mineral Resources Affairs Adviser Muhammad Fouzul Kabir Khan told TBS over the phone on 20 January, "We have not violated the court's ruling. According to the judgment, the contracts that the government has entered into with companies have been maintained. A national committee is investigating any irregularities in the contracts. The Letters of Intent (LoI) given to the 31 solar power plants were not final contracts."

Regarding the companies' land acquisitions and project activities, he said, "Since no final contract was made with these 31 solar power plants, the current government has no role in this. However, new tenders have been issued, and they are free to participate in those."

Declining the adviser's comment, lawyer Ahsanul Karim said, "The High Court's ruling clearly mentioned that '…including the processes which have been initiated and are based under Section 6(2) of the Act'. This means the court has condoned even the projects that are still in process."

He said that after receiving the Letters of Intent, the companies have completed nearly all the necessary work for project implementation, as per government directives. Therefore, these projects are still ongoing.

"In this context, the government's invitation for new tenders while excluding the ongoing projects is not legally valid. Cancelling these ongoing contracts under new laws would be in violation of the constitution," he said.

On 18 November, the PDB sent separate letters to the 31 renewable project companies.

Foreign investment involved in the projects

According to the PDB and sources linked with the investors, 90% of these renewable projects, with an estimated total capacity of 3,287 megawatts, are being funded by foreign investors.

They said more than 15 project sponsors have already completed the full acquisition of the required land after receiving the "go-ahead". Of the 31 projects that received Letters of Intent, 2,942MW are solar plants, 320MW are wind-based power plants, and the remaining 25MW are waste-to-energy projects.

Barrister Md Mustafizur Rahman, the lawyer representing the companies, said that private-sector entrepreneurs have already invested around $300 million from foreign lenders through banking channels for these projects.

For the full implementation of the projects, foreign direct investments (FDIs) worth around $6 billion from various countries, including China, France, Malaysia, Singapore, South Korea, Germany, Japan, the USA, the UAE, and Saudi Arabia, are in the pipeline, he said.

Sakir Ahmed, adviser to the international solar company Infraco Asia, told TBS that his company, like many others, invested years of effort, money, and resources to procure land before being asked to participate in new tenders.

He said nearly 30 companies, whose LoIs have been canceled, involve foreign investors who have received no clear answer to their question that "how can an LoI issued by the government be canceled?"

"We expected a review of the cases, actions against bad deals, and fair treatment for genuine investors," he said, adding that foreign investors are dissatisfied with the developments, feeling they are being unfairly associated with the wrongdoings of the previous regime.

Economists and energy experts say if foreign investments in these projects are put at risk or withdrawn, it could deter future foreign investments in Bangladesh.

Economist Dr Khondaker Golam Moazzem, research director at the Centre for Policy Dialogue (CPD), told TBS that the government has the opportunity to renegotiate with these companies.

"If anyone has committed irregularities in signing the agreements, action can be taken against them. However, canceling all the projects would not be the right approach," he said.

Signing of the projects

These renewable energy projects were initiated during the previous government and most of the project sponsors obtained letters of intent from the Power Division under the Ministry of Power, Energy and Mineral Resources and were waiting to ink PPAs with the PDB and implementation agreements with the government.

A senior Power Division official told TBS, these projects are aimed at checking Bangladesh's growing over-dependence on the imports of "expensive" fossil fuels like liquefied natural gas (LNG), petroleum products and coal, to ensure the country's future energy security.

"The initial works of these renewable projects got momentum a couple of years back against the backdrop of scarcity of conventional fuels like petroleum products, natural gas, and LNG and their soaring prices on the international market after the outbreak of Russia-Ukraine war," he says.

How to resolve the issue

CPD Research Director Khondaker Golam Moazzem said the High Court's ruling, if considered in its entirety, could have led to a more amicable resolution.

"Toward the end of the judgment, it is stated that, if necessary, the power development board can renegotiate these contracts. However, instead of taking that route, the decision to unilaterally cancel all the agreements seems, in my view, neither prudent nor well-considered."

He said, "Some of the LOIs had issues, errors, and certain areas required special attention. For those that raise questions, it would have been better to either renegotiate or cancel them through discussions."

He continued, "The electricity prices set with the companies that received the LOIs can now be renegotiated. The clauses related to capacity charges and payments with these companies can also be revisited."

He added, "Many of those who received the approvals had political connections with the previous government, and some of them had no business experience. Due to their political identities, many became members of various company boards."

According to the economist, the government can recommend restructuring the boards of companies with politically appointed directors. It could allow a three-month period for these actions to be completed, during which the companies can submit their proposals for consideration.

Khondoker Moazzem said, "The government could consider including these companies in the open tender process through a 'reverse auction method.' This approach would integrate them into the open tender system. However, the government can cancel the projects of companies that received LoIs but failed to initiate any activities."