Power ministry seeks $1b and Tk9,000cr urgently to settle energy debts

Amid heightened demand for dollars due to the recent increase in oil and gas imports to meet the country's energy needs, the Ministry of Power, Energy, and Mineral Resources has urgently sought an additional $1 billion (around Tk11,000 crore) from the Ministry of Finance to repay the foreign debt of the energy and power sector.

The ministry wants the amount beyond the regular supply of foreign currency that it gets to import oil and gas.

State Minister for Power, Energy, and Mineral Resources Nasrul Hamid presented the proposals to Finance Minister Abul Hassan Mahmood Ali at a meeting yesterday.

He has also proposed issuing bonds worth Tk9,000 crore to enable the private power plants to repay their bank loans.

An official present at the meeting said the finance minister has assured of carrying out the proposals put forth by the Ministry of Power and Energy.

According to sources from the Power Division and the Energy and Mineral Resources Division, the outstanding debt to foreign suppliers of oil and gas has increased to over $1.3 billion at the end of March 2024. Of this amount, $700 million is owed to the Adani Group of India, $280 million to fuel oil suppliers, and $320 million to gas and LNG suppliers.

Officials in the divisions say there is a shortage of additional dollars available to settle the debts.

While the debt of the country's private power plant can be addressed with bonds in local currency, foreign debt requires US dollars. If the supply of the additional dollars cannot be ensured, it could lead to a crisis in energy imports in the future, similar to what occurred in December last year, they said.

Challenges in finding dollars

Sources say that the Bangladesh Petroleum Corporation (BPC) has been profitable from recent fuel oil sales and has excess liquidity. However, the corporation faces challenges in accessing necessary dollars for fuel oil imports as the Bangladesh Bank is not supplying more than a limited amount of dollars to maintain its foreign exchange reserves according to International Monetary Fund (IMF) conditions.

BPC sources said that 17 to 18 LCs are opened every month to import fuel oil. These LCs cost an average of $500 million. However, on average, only $350 million to $400 million are available from banks and the Bangladesh Bank. Consequently, the remaining amount remains outstanding, which takes 30 to 45 days for payment.

In December last year, several foreign suppliers said that they would stop fuel oil supplies if their dues were not settled. Similar situations arose with LNG and coal supplies. The Rampal power plant and one unit of the Payra power plant were shut down multiple times last year due to the inability to import coal.

While suppliers initially took this cautionary stance during the national election, they have since relaxed their position of withholding supplies despite the recent increase in arrears. However, suppliers are now demanding late payment charges.

In FY23, the Energy Division secured a $1.5 billion loan from the Jeddah-based International Islamic Trade Finance Corporation (ITFC) for fuel oil and LNG imports. Additionally, the division has finalised a $2.1 billion loan from ITFC for the upcoming fiscal year. These loans are non-concessional bearing market-based interest rates.

Dues to private power plants

The government sells power to consumers at a lower price than it purchases from the power plants resulting in a deficit covered by subsidies from the government. The dues of the power plants are settled by allocating funds from the Finance Division. However, in recent years, the Finance Division has faced challenges in paying subsidies on time due to lower-than-expected revenue collection.

Sources say that the Power Development Board (PDB) owes around Tk22,000 crore to private power plants while the bank loans of these power plants amount to about Tk15,000 crore. To prevent the power plants from defaulting on their loans, the Finance Division is issuing bonds to repay these bank loans.

Earlier, the government had issued bonds worth Tk6,565 crore to repay the bank loans of the private sector power companies. Some 24 banks have received these bonds.

Meeting with finance minister 

On Tuesday, State Minister for Power, Energy, and Mineral Resources Nasrul Hamid held a meeting with Power Division Senior Secretary Habibur Rahman, Energy Secretary Md Nurul Alam, as well as the chairmen of PDB, BPC, and Petrobangla in his office. Subsequently, Nasrul Hamid contacted the Finance Minister and requested a meeting for the next day.

The Finance Minister met with the state minister in yesterday's meeting. The Power Division Senior Secretary, Energy Secretary, Finance Secretary Md Khairuzzaman Majumdar, along with senior officials from both ministries, were present at the meeting.

Power Division Senior Secretary Habibur Rahman told The Business Standard, "We discussed the quick release of electricity subsidy funds, payment of arrears to India's Adani Group and other foreign creditors. Additionally, there were academic discussions on how companies can assist in reducing subsidy pressures."

"Currently, two companies in the power sector, Dhaka Electric Supply Company Limited and Power Grid Company of Bangladesh, are listed on the stock market. Discussions were held on how to introduce other companies to the stock market," he added.

However, when reached for comment, Energy Secretary Md Nurul Alam said, "It was a special meeting. No further details can be disclosed at this time."

Load shedding resurfaces as temperatures climb 

The temperature has already started to rise even before the onset of summer leading to an increase in electricity demand and subsequent load shedding.

According to PDB data, on 1 April, the country's power plants generated 10,854 MW during the daytime peak and 13,898 MW during the evening peak. On that day, 40 power plants were not in operation, while 33 were partially operational.

Additionally, 19 power plants are inoperative undergoing long-term renovation.

The country has a total of 176 power plants, but stakeholders note that 25% of the country's power generation capacity cannot be utilised due to fuel shortages.

Officials say that the temperature will rise further in the coming days. It has become very difficult to supply the necessary fuel for producing the required amount of electricity to meet the increased demand. The lack of foreign exchange makes it difficult to import essential fuel.