Payra power plant set to be closed for coal crisis, load shedding likely to increase

  • June 1, 2023

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Source: Dhaka Tribune

Due to a currency crisis affecting the payment of coal supplier dues, the Payra power station may be temporarily shuttered beginning June 4.

The power plant, a joint venture between China and Bangladesh, commenced commercial operations in 2020, with the China National Machinery Import and Export Company (CMC) providing loans to purchase coal from Indonesia.

However, the disruption in coal supply occurred after CMC refused to pay outstanding obligations for coal supplies totaling $390 million till April.

The Payra Power Plant’s supervising engineer, Shah Abdul Hasib, claimed, “We had to halt power generation of one unit, with a capacity of 660MW, on May 25 due to the coal crisis.” We presently have 40,000 tons of coal reserves and are running the second unit, which produces 300MW, with the conserved coal.”

“We will be able to operate this unit until June 3-4, at which point the second unit will also have to be shut down,” he added. This is a brief crisis. The Bangladesh government has agreed to provide $100 million, and our Chinese partner CMC has agreed to open a letter of credit for coal.”

If the letter of credit is opened on June 1, however, it will take an extra 25 days to get the coal supply from Indonesia, perhaps resulting in a power outage. As a result, the country may suffer a power supply shortfall beginning June 4.

According to Payra Power Plant officials, the production cost per unit is Tk9, including Tk5.50 for fuel charges, making it the country’s lowest-cost alternative after gas-based energy. The cost of electricity generation in this coal-fired plant includes $127 per ton of coal purchased from Indonesia, $90 per ton of coal covered, transportation charges, taxes, and $27 in miscellaneous expenditures.

The overdue dues for electricity subsidies to the Bangladesh Power Development Board (BPDB) totaling Tk6,500 crore, along with a lack of dollars at the Bangladesh Bank, have resulted in delayed coal supply to the Payra power plant. It should be mentioned that oil-fired power facilities cost Tk4 more per unit than coal-fired units.

The Payra power station generates Tk3 crore units of electricity per day on average. There will be a daily loss of Tk12 crore if the oil-fired power plants are required to compensate for the disruption in supply from the Payra Plant. This equates to a cash loss of Tk300 crore over the course of 25 days.

“Payra plant has already reduced its production from 1300MW to 300MW and is running with the existing stock of coal,” Bangladesh Chinese Power Company Managing Director AM Khorshedul Alam revealed. This decreased output will be maintained until June 3, after which the plant’s output may be temporarily suspended.”

He went on to say, “We have informed our partner that the Bangladesh Bank has agreed to pay $100 million within this month to partially settle the $390 billion dues for coal supply.”

According to Khorshedul Alam, the CMC has received approval from the Chinese government’s Foreign Credit Control Authority to open a letter of credit for importing coal to sustain production for the next two months till the end of July.

In recent months, the Payra Power Plant has supplied 800MW of electricity to Dhaka. If the Payra Power Plant is shut down, Dhaka’s electrical supply will be cut by 1,244MW per day.

In the event of a shutdown, Dhaka will be forced to use load shedding. However, increasing production from liquid fuel-based power plants to compensate will result in a significant financial loss.