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Published by
Bangladesh Working Group on External Debt (BWGED), CLEAN (Coastal Livelihood and Environmental Action Network), NGO Forum on ADB and Recourse
See the full report here
Summary
The Unique Meghnaghat 584 Megawatt (MW) liquefied natural gas (LNG)-based power plant is being developed by Unique Meghnaghat Power Limited (UMPL), a Special Purpose Vehicle (SPV) of Unique Hotel and Resorts Limited (UHRL), GE Capital Global Energy Investments, Nebras Power Investment Management, and Strategic Finance Limited (SFL). The power plant is situated in Dudhghata, Korbanpur, and Chanderchak villages on the right bank of the Meghna River in Pirojpur Union under Sonargaon Upazila in Narayanganj District of Bangladesh.
The initial budget of the project was BDT 4,368 crore (USD 515.7 million), of which BDT 3,276 crore (USD 386.8 million) loan was provided by four state-owned banks led by Agrani Bank Limited. The budget was recalculated as USD 503 million (BDT 4,225.2 crore) in March 2022. The budget was again recalculated as USD 613 million (BDT 6,320 crore) in November 2022. UMPL has not given any explanation for additional expenditure. Standard Chartered Bank (SCB) has been appointed as the Financial Advisor for the project.
In March 2022, UMPL applied for an additional loan of USD 30 million (BDT 285.33 crore) from the Infrastructure Development Company Limited (IDCOL), which is financed by the Asian Infrastructure Investment Bank (AIIB). AIIB included the project in its pipeline in February 2022 for another loan of USD 75 million (BDT 773.25 crore). The amount increased to USD 110 million on 30 November 2022. The project is scheduled to be approved in December 2022 with financing expected to start in the first quarter of 2023.
Key Findings
- The current capacity of the power sector of Bangladesh is 22,512 MW. On the day so far this year with the highest demand for electricity was 14,782 MW (16 April 2022), which means 7,730 MW, or 34.3% of the capacity was kept idle in 2022. This power plant will thus contribute to increasing the existing massive margin of overcapacity;
- The current demand for fossil gas in the power sector is 2,197 million cubic feet per day (mmscfd) while Petrobangla is capable of supplying 964.9 mmscfd on average, which is 44% of the demand. Petrobangla is not in a position to supply the additional demand of 96.192 mmscfd of fossil gas for the project. o, the power plant can only be expected to end up as another stranded asset, and the Bangladesh Government will have to pay an additional capacity charge for the project;
- The current price of DFG for the power sector is BDT 4.45 per cubic meter, while the price of LNG is BDT 27.08 per cubic meter. Meanwhile, the generation cost of electricity from the Unique Meghnaghat Power Plant will be at least BDT 19.10 (USD 0.21) per unit while the latest agreement for solar power was signed at a rate of BDT 6.37 (USD 0.07). In addition, the lack of fuel and the exorbitant fuel rates will create uncertainty about the cost and power supply of this power plant;
- The power plant could take BDT 905.64 crore (USD 87.84 million) as capacity charge annually and BDT 43,024.92 crore (USD 1.93 billion in the variable exchange rate) in its lifetime. To compare, the Government could build one more Bangabandhu Karnaphuli River Tunnel or another Dhaka Metro Rail with this amount of money;
- The power plant will consume 6.875 cubic feet (cft) of gas to generate each unit (kWh) of electricity, which is the highest among the largest gas power plants and 61% higher than the Bibiyana-III combined cycle power plant. As a result, the power plant will emit 2-3 million tonnes of CO2e annually and 47-66 million tonnes in its lifetime which will put Bangladesh in serious carbon lock against the Paris Agreement goals;
- According to the UMPL, the power plant is built on 21.07 acres of land taken from 343 landowners and 7 residents. But the total land taken by the power plant is at least 27.95 acres. It means at least 6.88 acres (32.7%) of land is taken illegally. Out of the land area, at least 3.41 acres are taken from the Meghna river;
- The local landowners were cheated by the sponsors and lost at least BDT 96.22 crore (USD 11.24 million). They were compelled to leave their land by taking an average rate of BDT 4.58 lakh (USD 5,354.11) per decimal while the power plant bought the land from sponsors at a rate of BDT 9.15 lakh (USD 10,686.76) per decimal;
- The project would undermine Bangladesh’s national agenda to shift towards 100% renewable energy (RE) by 2050 under the Mujib Climate Prosperity Plan (MCPP), acting as a clear barrier to this achievement given its technical lifespan will overshoot this timeline.
Key Demands
- Considering the environmental, social, and economic impact of the project, the AIIB must withdraw Unique Meghnaghat Independent Power Plant (Meghnaghat IPP) urgently from the proposed list of AIIB projects and decline on-lending to IDCOL for this project as part of its already approved loan to the IDCOL Multi-Sector On-Lending Facility;
- Focus further energy sector financing for Bangladesh on developing decentralized RE so that the country can achieve 100% RE by 2050, as per its own Mujib Climate Prosperity Plan (MCPP);
- Exclude funding for all fossil fuel projects, including gas projects, from AIIB’s Paris alignment methodology;
- Reevaluate the actual scenario of overcapacity, availability of fuels, the burden of the capacity charge, emission, and potential of RE in Bangladesh; and
- Publicly clarify whether the project is being considered for fast-tracking via provisions of the Accountability Framework of the Bank.