Power-sector investors, particularly in the renewable-energy sector, get in dilemmas over government move to renegotiate tariffs as they say contract-time and current costs make a mismatch.
The rate re-fixing is especially disadvantageous for those who have already started electricity generation with a specific business model, stakeholders say.
A number of renewable energy-based power plants received letters from Bangladesh Power Development Board (BPDB) regarding tariff renegotiation in recent weeks.
Some more companies are set to receive such letters.
Government's Power Division in recent months asked the BPDB to renegotiate tariffs with a number of companies that are already producing electricity and about to begin doing so.
It recently asked the BPDB to review and reset the logical tariffs for the 100-megawatt solar power plant of Dynamic Sun Energy Private Ltd.
Located in Pabna, the plant came into commercial operation in October 2024 and is supplying electricity into the national grid. The levelised tariff for the plant is $0.1105/kWh or Tk 14.58. Now the energy division wants to lower the rate to a rational level.
Robiul Islam, company secretary at Paramount Textile Ltd, the owning company of Dynamic Sun Energy, told The Financial Express the project's construction began in 2017. The tariff was fixed as per the market rate in 2017 when a panel price was 30 US cents.
Letters of credit were opened and funding was made based on prices at the time. "If the government now asks me to lower the tariff based on the present equipment rates, is it rational?" He asks.
Mr Islam mentions the project received funding from the Asian Development Bank (ADB). "What will we tell the ADB about the development? We do not understand what we can do at this stage," he laments.
Mostafa Al Mahmud, president at the Bangladesh Sustainable and Renewable Energy Association (BSREA), has said a number of companies have already received letters from the BPDB for tariff renegotiation and contacted the BSREA to convey their concern.
"It is absolutely a wrong move by the government," he told The Financial Express.
He notes that when a state makes a commitment to an investor, it becomes a set contract. "When you try to review the commitments of the previous government, investors lose confidence and stay away from making fresh investment."
Mr Mahmud also says foreign investors in particular are now very worried about the latest developments regarding tariff reviews.
He makes a point here that the government could not lower the tariff of electricity it is buying from India's Adani Power. Rather, the government is paying the dues as per the rate set by the previous regime, he says about the pricing paradoxes.
Mahfuzur Rahman, business-development manager at Sungrow Renewables Development Bangladesh Ltd, mentions that the recent developments in Bangladesh's power-sector policy have stoked concerns among both current and prospective international investors.
He says the cancellation of letters of intent of 31 renewable power plants and the repeal of the Quick Enhancement of Electricity and Energy Supply (Special Provisions) Act have sent mixed signals to the investor community.
"One clear reflection of this uncertainty is the declining participation in international tenders recently floated by the BPDB. Global developers and EPC firms are showing reduced interest, signalling hesitation and concern about policy unpredictability and long-term investment environment in the country."
He further says the letters for potential revisions to the power-purchase agreements are legally binding contracts that provide the financial and legal assurances required to secure large-scale infrastructure financing.
"Any retroactive adjustment to the agreed tariffs could significantly affect the financial viability of these projects," Mr Rahman adds.
Chairman of BPDB Md Rezaul Karim has said there are scopes to lower tariffs of these projects to reduce power-sector subsidies. "We will not turn anyone's investment into a losing concern."
He mentions that the government has noticed the tariffs of many companies are very high, with some even getting up to 18 US cents for per kilowatt hour of electricity.
"We think the tariff can be lowered through discussions if they cooperate with us. We started discussions. Let us see what happens. There are many pockets in these tariffs which can be addressed," says Mr Karim.
syful-islam@outlook.com