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Power & Energy - 3 weeks ago

Private power plants making huge profit

Even under new conditions

Mahfuz Emran: In March 2012, the 100 MW rental power plant installed in Zulda of Chittagong came into production. Acorn Infrastructure’s contract for the center extends for another five years at the end of the first phase. After this, the profit of the company in the last 10 years is Tk 5,613 crores. Out of which Tk 1,493 crores capacity charge.
In April 2022, the government extended the term of Acorn’s power plant for another two years on the condition that it will only get bills if the power is sold. Although there is no obligation to buy electricity, they are doing good business at this time. The accounts of the current financial year have not been finalized. However, in the financial year 2022-23, the government purchased electricity worth Tk 656 crore from the Centre. The company has already been in business for 12 years, having signed a five-year contract. There are currently 10 rental centers operating under new conditions like them. Each is making hundreds of crores of taka in profit. Out of this, the tenure of six furnace oil-based centers is being extended by two years again.
Despite the lack of demand, experts have repeatedly questioned the extension of rental centers. They say that the government has given opportunity to the preferred businessmen to do business with the power plant without tender. Now giving them time to bloat by repeatedly extending the contract. They complain that the center owners are doing the same business as capacity charge even with no electricity and no payment. However, the power department says that the term of these centers is being extended to keep the frequency of the transmission lines fixed.
Among the six power plants in the process of tenure extension are Summit’s Madanganj 102 MW, Orion’s Meghnaghat 100 mw and Siddhirganj 100mw, Khulna Power Company’s (KPCL) Noapara 40 mw and Khulna 115mw and Acorn’s Julda 100 MW. KPCL is jointly owned by Summit and United. The term of Madanganj Center ended on March 22. Meghnaghat, Siddhirganj, Noapara and Khulna centers expired on March 23. Zulda power plant expired on April 16. Apart from this, four other rental centers operating under ‘no electricity no payment’ condition are Sinha Group’s Amanura 50 MW, Power Pack’s Keraniganj 100 mw, Bholaya Venture Group’s 40 mw and Energy Prima’s Fenchuganj 44 MW. Among them, two furnaces in Amanura and Keraniganj are oil fired. Venture and Prima are two gas based centers.
Research Director of the Center for Policy Dialogue (CPD) Khandkar Golam Moazzem said, it is necessary to look into what benefits the government is giving entrepreneurs under the cover of ‘no electricity no payment’ condition. He urged the government to open the information related to this.
Electricity Department’s argument
The summary signed by Habibur Rahman, the senior secretary of the power department sent to the prime minister, states that the power generation capacity including captive, renewable energy has increased to 30,227 megawatts. 24 quick rental and rental power plants have been gradually retired as the country’s electricity situation has improved after the installation of large power plants. Some rental power plants are being extended on ‘no electricity no payment’ basis to protect system frequency, ensure quality power supply and relatively low cost. In the meantime, 9 furnace oil-based power plants of 757 MW and five gas-based power plants of 558 MW capacity have been extended. According to the decision of the board meeting of PDB on March 6, it has been recommended to extend the tenure of six furnace oil based rental power plants by another two years.
It is also said that if the duration of furnace oil-based power plants is extended due to shortage of gas, it will be easier to maintain power supply on an emergency basis. Apart from this, it is necessary to keep Siddhirganj, Meghnaghat and Madanganj rental open to meet the electricity demand of Dhaka and its surrounding areas. Two power plants of KPCL in Khulna region need to be kept operational. On the other hand, electricity is supplied to Halishahar and Shikalbaha in Chittagong from Julda station. Besides, it is necessary to keep these six power plants operational to meet the demand of electricity during the ongoing irrigation and summer season.
Losses in excess production capacity
This summer, the maximum demand for electricity is estimated at 17,500 megawatts. So far, the highest production has been 16,477 MW. But the power generation capacity in the country is 27,515 MW. That is, the production capacity is 36.40 percent more than the demand. Dr. Khandkar Golam Moazzem said, the rate at which the electricity production capacity has increased, the customer has not increased at that rate. Due to excess production capacity, the government has to pay more money as capacity charge.
It is known that in the last 14 years, the government has spent Tk 1 lakh 5 thousand crore as capacity charge for private centers. The capacity charge is the fixed amount that the power plant owners have to pay to the government as per the contract even if they do not buy power.
The sector stakeholders say that the losses in the electricity sector are increasing due to the high production capacity. The government is increasing the price of electricity to cover this loss. According to them, the losses would have been much less had the old centers not been unduly extended.
A former PDB engineer said that while there was no capacity charge under the no-electricity-no-payment condition, operation and maintenance (O&M) charges were increased during the new contract. It is billed as capacity charge.
Vice President of Consumers Association of Bangladesh Professor M Shamsul Alam said that the main reason for the increase in the cost of power generation is faulty management, wrong policies and more capacity than required. The government has given power plants to preferred traders without tendering. There is no opportunity to raise questions about how much money has been spent in this sector and how much profit is being made. Law has given immunity.
Excessive profits for entrepreneurs
Summit’s Madanganj center went into production in April 2011. The first phase of the five-year center was extended by five years. In these 10 years, the center earned Tk 5,763 crore. Of this, Tk 1,563 crore is capacity charge. From March 2022 to this March, it runs on ‘No Electricity No Payment’ basis. Out of this, the center earned Tk 327 crore in the financial year 2022-23. The accounts for the year 2023-24 are not yet available.
In this way Orion’s Siddhirganj center has been doing business for 12 years. From 2011-12 to 2022-23 fiscal year, the income was Tk 6,630 crore. The group’s Meghnaghat rental center earned Tk 6,404 crore. KPCL’s Khulna 115 MW has earned Tk 6,515 crore in 13 years till 2022-23. KPCL’s Noapara center had an income of Tk 2,468 crore till last financial year. Sinha Group Center’s income till last financial year is about Tk 2,000 crore. Up to the last financial year, the income of Keraniganj Center of Power Pack was Tk 4,435 crores. The term of this center is till April next year. Venture Group’s Bhola center’s revenue till last fiscal was Tk 882 crore. The contract period of this center, which came into production in 2012, has increased three times. The extended period will end in July 2026. The income of Energy Prima Fenchuganj center till 2022-23 is Tk 1,065 crore. This rental center from 2012 is still running.
Center runs before final approval
The proposal to extend the tenure of six rental centers has received the Prime Minister’s approval. Now the Cabinet Committee on Purchase will get final approval for the power purchase proposal. Before that, six plants are producing electricity with the verbal approval of the Power Development Board. However, the centers expired last March and April. According to a review of PDB’s website, Orion’s Siddhirganj plant produced up to 67 MW on June 11.

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