PDB in haste to recommend highly expensive private power plant

The Power Development Board (PDB) has recommended an unsolicited private sector offer to build one 300 megawatt (MW) furnace oil based power plant that, according to a senior PDB official, would eat up government subsidy worth Tk.15 billion annually.

If the sponsor of the power project, the United Enterprise and Company Limited UECL), is allowed to implement, it would be the largest furnace oil-fired power plant in the country.  

The BPDB, allegedly, has been acting as the 'catalyst' for pushing ahead unsolicited offers from inefficient private sector sponsors for building large oil-fired power plants.

It has even not been checking necessary documents of private sector sponsors before approval, they added.

The BPDB board last week recommended the power project of UECL without properly checking its papers, a senior official of the BPDB admitted.

The BPDB was 'unusually' prompt to recommend the unsolicited offer for awarding the power plant project to the private sector operator, said sources.

The UECL, a sister concern of the United Group, initially submitted the unsolicited offer to the Power Division under the Ministry of Power, Energy and Mineral Resources (MPEMR) for approval.

The Power Division forwarded it to the BPDB for scrutiny and give opinion.

The United initially had proposed to set up 500-MW capacity furnace oil-fired power plant at Anwara in Chittagong.

The BPDB board recommended for awarding the firm the task of building a 300-MW furnace oil-fired power plant instead of a 500-MW plant.

A senior BPDB official said the project specification as submitted by the United did not support building of a big furnace oil-fired power plant, he said.

The specification was appropriate to build only a 100-MW plant to the maximum, the official said.

"In its proposal, the United stated that the proposed power plant would be equipped with six 18V46 type engines of a globally renowned firm to generate 500 MW of electricity," the official said.

But for a 500-MW furnace oil-fired power plant, the requirement of 18V46 type engine is 30, he added.

It seemed that the private firm had submitted the proposal to the Power Division copying the paper of an already approved 100-MW furnace oil-fired power plant, he said.

The BPDB was in haste to recommend the project proposal and it did not even cross-check the papers submitted, it has been alleged.

Besides, the electricity tariff as proposed by the United at Tk 16.5437 per unit (1 kilowatt-hour) for building the power plant project is higher compared to some other furnace oil-fired power plants, which were selected following competitive biddings.

The power plant sponsor has, unnecessarily, proposed a higher heat rate for the proposed plant, which would increase its electricity production costs.

The company even did not submit any feasibility study report with its proposal. Yet the BPDB has recommended for awarding it the power plant project, the official lamented.

If implemented, the government would require providing around Tk 15 billion as subsidy every year to the BPDB to purchase electricity from the expensive power plant, he added.

The United Group in its proposal fixed the life-span of the power plant project at 22-year period, instead of usual 15-year life-span for a furnace oil-fired power plant.

A 22-year life-span is usually granted for large gas-fired combined cycle power plant.

It did not submit any proposal regarding security deposit for the project as per the norms of a regular request for proposal (RFP).

When contacted, BPDB Chairman Md Abduhu Ruhullah said that he could not say about the mismatch in the papers submitted by the United Group to build the power plant.

"I am not aware of it," he added.

A senior Power Division official said the Division did not go through the proposal of the United Group. Hence it could not detect it.

"It was the BPDB which is responsible for detecting mismatch in documents and other relevant issues," he said.

The official said every issue of the Power Division is dealt with by the government high-ups.

The government in mid-2010 launched a drive to build around three dozens of short-term high-cost oil-fired rental and quick rental power plants bypassing tender process.

The maximum size of the already implemented rental and quick rental power plants is around 100MW.

But the proposed power plant of the United Group would be of longer term and the tariff as proposed is much higher, BPDB officials said.

When contacted, energy expert Professor Badrul Imam said there is no necessity of building such expensive power plant right now.

The government should be keen on installing low-cost base load power plants instead to reduce electricity tariff and cut the burden of subsidy, he said.

He was also critical of the government's increasing dependency on oil-fired power plants to reduce the country's electricity crisis.

The government is out to unduly benefit a certain quarter at the cost of people's hard-earned money, said Mr Imam, who is a professor of the Geology Department of Dhaka University.