Interim government scrapping 39 power plant projects approved without bidding

Companies prepare to challenge government decision in court, citing millions invested in projects

The interim government is set to cancel the approvals for 39 power plants under the Quick Enhancement of Electricity and Energy Rapid Supply Enhancement (Special Provisions) Act, 2010.

Of these, 34 were planned to generate electricity using solar energy, and the remaining five were gas-based.

Muhammad Yunus’s administration is also in the process of repealing the law that allowed these projects.

Two provisions of this law have already been declared illegal by the court.

The solar power plants were expected to generate 2,678 megawatts of electricity, with an estimated investment of $2.4 billion.

However, bdnews24.com was unable to confirm the total production capacity of the remaining five gas-based plants.

Since the interim government took power following the fall of the Awami League government on Aug 5, it has decided to implement all public projects through competitive bidding.

As part of the decision, efforts have been made to bring contract-based power plants under competitive pricing.

Power, Energy and Mineral Resources Advisor Fouzul Kabir Khan has announced plans to cancel the process after meeting with representatives of companies holding Letters of Intent, or LoI, for power plants.

However, several companies are preparing to challenge the move in court, with at least 11 writ petitions already submitted.

A lawyer representing one of the petitioning companies said they believe the already-signed agreements should not be cancelled, as significant investments had been made in the projects.

The lawyer added that scrapping the projects at this stage could make future foreign investments more difficult.

A letter sent on Nov 18 to a consortium of South Korea's Daehan Green Energy Limited Company and Bangladesh's Pabna Solar Power Limited has been obtained by bdnews24.com.

The letter informed the companies that the LoIs issued to them were being considered for processing through a competitive tendering process, in line with the government's new approach.

At least 11 other companies have received similar notifications.

Affected Projects:

• Joules Power Limited’s Cox’s Bazar 50 MW Solar Project

• Consortium of Renewable Energy UK Portfolio Limited, Badal Construction Limited, and G-Tech Solutions Limited’s Basil Tangail 100 MW Solar Project

• Consortium of China Datang Overseas Investment Company Limited and Engreen Engineering Limited’s Goalondo 100 MW Solar Project

• Hong Kong's JT New Energy Company’s Chokoria, Cox’s Bazar 220 MW Wind Project

• Sustainable Energy International Limited’s Satkhira 100 MW Wind Project

• Consortium of Cassiopea Fashion Limited, Xizi Clean Energy Equipment Manufacturing Company Limited and Cassiopea Apparels Limited’s Mymensingh 100 MW Solar Project

• Consortium of ASK New Energy Company Limited, AJ Power, and ATN Solutions Limite’s Dimla Nilphmari 50 MW Solar Project

• Consortium of Green Progress Renewable BV and IRB Associates Limited’s Bochaganj Dinajpur 100 MW Solar Project

• Joint Venture of Energon Renewables (BD) Limited and PWR Energy Trading LLC’s Trishal Mymensingh 240 MW Solar Project

• Joint Venture of Energon Renewables (BD) Limited and PWR Energy Trading LLC’s Gazaria Munshiganj 130 MW Solar Project

• Joint Venture of Energon Renewables (BD) Limited and PWR Energy Trading LLC’s Rupsha Khulna 100 MW Solar Project

The Power Development Board’s, or PDB, IPP [Independent Power Producer] unit Chief Engineer ABM Ziaul Haque told bdnews24.com: “Before sending the letter, the energy advisor and senior officials of PDB had direct discussions with the companies. The letters did not explicitly state the cancellation of the projects. However, the current government has made a policy decision to move away from initiatives taken through non-competitive processes.”

He added, “The remaining steps will proceed through further discussions.”

COMPANIES TO CHALLENGE GOVT’S DECISION IN COURT

Several companies have sent legal notices to the PDB in response to the cancellation of their LoIs and are preparing to take the matter to court.

One such company is Joules Power Limited, which was awarded an LOI for the construction of a 50 MW solar power plant in Cox's Bazar.

A representative from the company told bdnews24.com, “We have acquired 180 acres of land, and the project was already under way. But just as we were moving forward, the government decided to cancel the project.”

Abdullah Mahmud Hasan Rumon, a lawyer for the company, said: “The government may decide to discontinue enforcing the 2010 law, but it does not have the authority to annul agreements already made under that law.”

He continued, “The government is making a policy decision, and instead of applying it in the future, they are applying it retroactively. The court has already ruled on two provisions of that law, but the written copy of the judgment has yet to be released.”

“This initiative is based on a High Court verdict that nullified two provisions of that law, but the written copy of the verdict has not yet been released," the lawyer added.

The PDB chief Rezaul Karim told bdnews24.com, “The government has taken this initiative to reduce additional costs and introduce a competitive process. Companies whose agreements are being cancelled can participate in the bidding process to keep their projects running. However, the government’s policy is clear—no projects will proceed without open tenders.”

An LoI is a very preliminary agreement in the construction of power plants. After this, several more certifications are obtained, and the tariff or pricing is determined following approval in multiple board meetings.

The latest LoI, issued on Jun 2 for a 100 MW solar power plant in Khulna’s Rupsha, to a Joint Venture of Energon Renewables (BD) Limited and PWR Energy Trading LLC, illustrates the process.

According to the LoI terms, the company must sign two agreements—an implementation agreement and a power purchase agreement—with the government, Power Grid Bangladesh, and PDB by a set deadline. Failure to do so would allow the PDB to cancel the LoI.

If a company fails to execute the Project Agreement, or PA, within seven days of receiving the PDB's notice, the LoI can be revoked.

Clause 8 of the cancellation terms specifies that if the PDB cancels the agreement due to any breach of terms, the company or its shareholders cannot claim compensation from the PDB or any government agency.

WILL IT IMPACT INVESTMENT?

Shamsul Alam, energy advisor of the Consumers Association of Bangladesh, or CAB, which has been vocal against uncompetitive projects in the power sector, told bdnews24.com: "We are also in favour of cancelling the projects implemented under the Quick Enhancement of Electricity and Energy Rapid Supply Enhancement Act.

“The 'plundering' costs set in these projects must be reviewed and scrapped. Action should be taken against those who have been overcharging,” he added.

However, Mostafa Al Mahmud, senior vice president of the Bangladesh Sustainable and Renewable Energy Association, or BSREA, and owner of GITEX Solar, believes the government's decision will create a crisis in the energy sector.

“By cancelling ongoing renewable energy projects, the crisis has been exacerbated. We are questioning whether we’ve set back by another five years,” he told bdnews24.com

Mostafa added, “The projects already in progress should be considered. There is no room for stubbornness. A minimal review is needed to find a way forward for these projects.”

He pointed out that companies had already invested $200 million after receiving the LOIs.

Mostafa said, “It is absurd to reopen the bidding process. If someone has wrongfully inflated costs, they should be penalised. But how can foreign investors be penalised like this?”

“Due to the complications, many investors have pulled back. They are not engaging anymore. The whole situation has become entangled in complexity,” he added.

Shafiqul Alam, lead analyst at the Institute for Energy Economics and Financial Analysis, or IEEFA, said: “The government plans to make renewable energy projects competitive with the primary goal of reducing costs. Foreign investors, especially, will lose trust.”

“Therefore, negotiations may be necessary for projects that are at an advanced stage. For those where work has not yet started, a review could be done. The most crucial aspect is to expedite the process,” he added.

The Power Division has already formed a committee to review the projects that were accepted through the unsolicited process, bypassing the tendering procedure.

An official from the committee said preparations for inviting open tenders are under way. Certain tax exemptions are being considered, and actions will be taken promptly.

CAB's Energy Advisor Shamsul once again opposed large-scale solar projects.

"We are talking about small entrepreneurs and rooftop solar. These will protect the land and benefit small investors," he said.

SECTIONS OF THE LAW DECLARED ‘ILLEGAL’

The Awami League government, which assumed office in 2009 amid a severe power crisis, focused on boosting power generation.

Private sector companies were granted permission to set up plants through negotiations, bypassing the tender process.

To facilitate this, a law was enacted in 2010, which effectively blocked any challenges to project approvals in court. However, the cancellation of this provision has now opened the door for any approved project to be legally contested in court.

Although significant progress has been made in power generation over the past 15 years, the approval of projects outside the tender process has faced criticism.

Critics argue that such approvals have led to higher electricity prices.

Following the fall of the Awami League government, a writ petition was filed, leading to a High Court order on Nov 14, declaring two sections (6(2) and 9) of the Quick Enhancement of Electricity and Energy Rapid Supply Enhancement (Special Provisions) Act, 2010, as illegal.

Section 6(2) of the law states that, notwithstanding anything contained in sub-section (1), the Processing Committee mentioned in section 5 shall consult and bargain with a single or limited number of organisations about any purchase, investment plan or proposal and, with approval of the minister, Ministry of Power, Energy & Mineral Resources, select an organisation for the said work and take steps to forward the same to the Cabinet Committee on Economic Affairs or the Cabinet Committee on Government Purchase in accordance with the procedure mentioned in section 7.

Section 9 of the law states that no question regarding the validity of any act done or purported to be done, any action taken or any order issued or direction given under this Act shall be raised in any court.

[Writing in English by Sheikh Fariha Bristy]