4 rental plants to get fresh contracts

The government yesterday decided to renew contracts of four expensive furnace oil-fired private power plants for two years with the condition that they would not get capacity charges.  

The four plants started operation in 2012 and their contracts expired this year.

The Cabinet Committee on Government Purchase, with Agriculture Minister Abdur Razzaque presiding, made the decision yesterday.

The total cost of oil needed for electricity is roughly four times more than that spent on coal and gas. Over the last two years, the tariffs of these four plants have ranged from Tk 6.66 per kwh to Tk 36.73 per kwh, according to BPDB data.

The contracts of all four plants were renewed on "no power, no pay" basis, which stipulates that they would not receive any capacity payment, said Mohammad Hossain, director general (DG) of Power Cell.

Capacity payment is the money paid to plants for ensuring readiness to generate power. The payment must be made even when no power is being generated.

The four plants would however receive payments for operation and maintenance even when not supplying power. Those payments constitute approximately one-third of the total cost of the electricity bought from them, power division officials said.

Capacity charge constitute up to 60 percent of the total cost of power bought from rental power plants, according to Bangladesh Power Development Board (BPDB) data submitted to the parliamentary standing committee on the energy ministry last month.

The rental power plants are Julda 100MW in Chattogram, owned by Acorn Infrastructure Services Ltd; Katakhali 50MW in Rajshahi, owned by Northern Power Solutions Ltd; Mutiara Keraniganj 100MW, owned by Powerpac; and Amnura 50MW in Chapainawabganj, owned by Sinha Power Generation Company Ltd.

"We understand they [the four power plants] have already recovered their investment and henceforth do not need capacity payments, so we will go for no power no pay," said Hossain.

The purchase committee did not reveal the tariff at which the government would buy from these plants, but Hossain said the rate would comprise of the fuel cost and a percentage for operation and maintenance.

"The tariff will be lower than the current rate because there is no capacity charge," said Hossain.

The current average tariff of power from furnace oil based plants is Tk 17 per kilowatt hour, said Imran Karim, president of Bangladesh Independent Power Producers' Association (BIPPA).

Experts, however, caution against the use of expensive furnace-oil based power plants but the BIPPA's president disagree.

"The merit of the extension is that the price of gas for spot purchase is higher at the moment."

Last year, the Katakhali power plant ran at five percent load factor, while the Amnura power plant ran at eight percent, the Julda plant ran at 22 percent and the Mutiara one at 25 percent load factor.

Plant load factor is the ratio of average power generated by the plant to the maximum power that it could have generated.

According to BPDB's annual report last year, plants powered by furnace oil and diesel generated about 23 percent of the total electricity produced.

In addition to the market price of the oil, the BPDB also has to pay a service charge of 9 percent to the furnace oil-run plants because they import their own fuel, said BIPPA President Karim.

"Of this 9 percent, 6 percent is the cost of importing the furnace oil, and three percent is an interest the plants charge the government for unsettled bills. The government always delays payments by up to four months and the interest covers that," he said.

At the purchase committee meeting, the government also approved the food ministry's proposal to import 2 lakh tonnes of sunned rice (atop) from Myanmar under a government-to-government contract. The entire consignment will cost $90.1 million.

In addition, 1.15 lakh tonnes of fertiliser will be imported, decided the committee. 


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