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Anil Ambani’s Reliance Power (R-Power) will on Monday seal the power purchase agreement (PPA) with Bangladesh Power Development Board (BPDB) to get the $1-billion first phase of its proposed power project and liquid gas import terminal in Bangladesh off the ground in less than two years of signing the MoU.
The PPA marks a major power stroke by the Indian private sector on the sidelines of Bangladeshi Prime Minister Sheikh Hasina’s visit, indicating that bilateral ties have come of age under her commitment and PM Narendra Modi’s stewardship of India’s relationship with its neighbours.
Indeed, it was during Modi’s June 2015 visit to Bangladesh that R-Power and BPDB had signed the MoU for the three-phase project, altogether worth $3 billion. The $1-billion investment in the first phase of 750MW alone will be the largest by an Indian private sector company. For Bangladesh, it will mark the single-largest FDI.
The power plant will be set up in Narayanganj district’s Meghnaghat area, around 40km southeast of Dhaka, and the floating gas import terminal at Kutubdia island in Chittagong. BPDB has provided land for the power station. A parallel deal is in the works, wherein R-Power will source gas but PetroBangla will use the full capacity of the import terminal and sell fuel to the power plant and other industries.
Bangladesh has a demand of nearly 8,000-9,000MW but produces about 7,000MW. A major chunk of power stations run on fuel oil or diesel, resulting in a tariff of 15-16 cents a unit. Industry analysts said given the current economics of liquid gas price, power from R-Power’s project could be 15-20% cheaper.
Reliance Power plans to move equipment it had imported from US gear-maker GE for a 2,400 mw plant proposed at Samalkot in Andhra Pradesh. Sources said these equipment still remain unpacked and carry guarantee from suppliers. The project was built around the promise of gas from Reliance Industries Ltd’s KG-D6 discovery off the Andhra coast but scrapped after output fell to a tenth of the target.
By 2021, demand for electricity in Bangladesh is expected to touch 24,000 mw and 40,000 mw by 2030. The Bangladesh Vision 2010 document envisages developing 10,000 mw generation capacity.
The Tata group had proposed $3 billion investment to build a coal-fired power station in Bangladesh some 7-8 years ago but scrapped the project citing inordinate delays by the government.
Since then, government-to-government deals have dominated power ties between India and Bangladesh. India supplies some 600 mw through West Bengal and Tripura and is examining the possibility of ramping up wheeling capacity to 1,000 mw. Besides, NTPC and BPDB are jointly building a $1.2 billion coal-fired power plant.
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