KPCL asked to shut down two power plants after contract expiry

The Bangladesh Power Development Board (BPDB) has instructed Khulna Power Company Limited (KPCL) to shut down its two power plants after both the power purchase agreements (PPA) expire in the next week.

The listed power producer informed its shareholders on Sunday that the tenure of existing PPA of KPC Unit II 115 MW Plant and KPC 40MW Noapara Plant is going to expire on 31 May 2021 and 28 May 2021 respectively.

Since the BPDB did not renew its PPA with the two private sector power plants,  both will remain shut down from the very next day of PPA expiration.

However, the company is still pursuing a PPA renewal, KPCL said in its filing with the Dhaka Stock Exchange.

KPCL, a joint venture of Summit Group and United Group, is the first Independent Power Producer (IPP) in the country, established under the Private Sector Power Generation Policy of Bangladesh.

Its first plant was a barge mount power plant and it commenced operation in October 1998.

Later in 2011, when Bangladesh heavily opted for rental power to cater to the power hunger of the flourishing economy, the company built two new plants counting on 5-year PPAs and the option for extensions.

However, following the expiration of the first plant's PPA in 2018, now the remaining two are also going off-operation.

Earlier this year, responding to a query, BPDB's Chairman Engineer Md Belayet Hossain said that the government is not renewing PPA with oil-fired plants as those cost more. It instead inspires gas-fired plants to get cheaper power.

On the other hand, KPCL Chairman Hasan Mahmood Raja said the company was optimistic about getting another extension of contracts for the two plants if the government decides to keep furnace oil-fired power plants in this region.

"The power generation cost of state-owned diesel-based power plants is higher than ours, because it is cheaper to use furnace oil as primary fuel to generate electricity. Therefore, if the government considers keeping oil-fired plants here, we hope to get the priority."

If contracts are not renewed later, the company would suffer a revenue drop.

Regarding general investors, Raja had said, "The KPCL acquired 35% shares in the United Payra Power Ltd for Tk115 crore, and this plant is fully prepared to launch commercial operation. So, the investors should not be worried, as they will profit from the new plant's earnings."

The United Payra Power Ltd has built a 150 MW furnace oil-based plant in Patuakhali, which was waiting for the BPDB's approval to begin commercial operation.

KPCL chairman also said they have decided to sell off the first Private Barge Mount 110MW Plant, which retired from service in 2018.

Considering the interest of capital market investors, The Bangladesh Securities and Exchange Commission (BSEC), earlier this year, requested the government to renew PPAs with the listed power companies.   

KPCL was listed with the Dhaka and Chittagong stock exchanges through direct listing in April 2010.