CPD calls for reviewing 31 cancelled solar power deals

The Centre for Policy Dialogue (CPD) yesterday urged the interim government to review its cancellation of 31 letters of intent (LOI) which the past regime signed with potential investors of solar power projects without adopting any tender process.

A letter of intent is a document outlining the preliminary understanding between two or more parties who intend to enter into a formal agreement.

It is essentially a blueprint for a deal, setting out key terms and conditions before a legally binding contract is finalised.

The CPD said most of the investors had made investments and purchased land, but now can recoup neither of those.

On the other hand, the government floated tenders seeking bidders interested in setting up solar plants, but the number of bids has been very low, it said.

In such a situation, the CPD said the government should renegotiate with the investors of the cancelled projects to reduce the costs mentioned in the letters of intent as per the current market situation.

"Since a number of transitions took place and a government gave them primary approval means the government almost agreed to purchase power from them," said Khondaker Golam Moazzem, research director at the CPD.

"Some companies have invested in this direction. In such a situation, we think the projects may be reviewed," he said.

He said the review does not mean the revival and acceptance of those letters of intent, but rather an analysis of the purchase prices and costs with current trends.

Some of the projects were initiated in 2017 or 2019, when the prices of power from solar were quite high, said Moazzem.

"The interim government should have an interim arrangement to accelerate the renewable energy establishments…investors have already invested around $300 million from foreign lenders through banking channels for these projects," he added.

Moazzem said the letters of intent which genuinely deserve merit should be taken up for implementation while those with political intent may be taken up for revisions.

Those 31 projects represent 3,287 megawatts of solar power and involve potential foreign investment worth $6 billion, according to a keynote paper presented by Moazzem and CPD Programme Associate Abrar Ahammed Buiyan at Hotel Lakeshore, Dhaka.

The keynote paper, titled "Addressing Institutional Challenges in the Investment Cycle of Renewable Energy: Case of Chinese Overseas Investment" identified some investment challenges in Bangladesh.

Those include complex procedures to form companies, partial digitalised government processes, multiple licensing requirements each with separate procedures and the necessity to submit the same documents multiple times at different offices.

While the open tender process is a positive step toward transparency, several operational and structural issues remain, it said.

The process remains partially paper-based, requiring submission of documents physically, which increases the risk of administrative delays and errors, especially for foreign investors without a local office to support the process, it read.

Prolonged and multi-layered approval processes were also blamed, for which approvals took years whereas in India it took just three to four months, as per the study.

The paper recommended a central support system to guide the foreign investors in the full industry setup process.

The PDB's tender process disqualifies proposals over minor technicalities or formatting errors, even if otherwise viable, it said.

There is no system to notify bidders of incomplete submissions. Additionally, there is no active bidder helpline or FAQ section on official websites, the study added.

Han Kun, president of the Chinese Enterprises Association in Bangladesh, said land was the most critical matter in power sector in Bangladesh.

When the investor already purchased land and managed the government's different wings' approvals, they took financial risks, he said.

The projects have been suspended at a time when they were about to receive final funding and go through tariff negotiations, he added.

Jalal Ahmed, chairman of Bangladesh Energy Regulatory Commission, said the government was working to overcome all challenges for achieving the target to generate 20 percent of power demand from renewable sources by 2030.

"The recommendation from the study will help us to overcome the challenges," he said.

Weiquan Wang, deputy secretary general of Chinese Renewable Energy Industries Association, said China has established a comprehensive framework that includes sustainable energy development goals supported by its national policy.

"Facilitating incentives, fixed tariff structures, total volume purchases, and special fund policies paved the way for investment in China's renewable energy sector," he said.

Nahian Rahman Rochi, head of business development at Bangladesh Investment Development Authority, said they were going to open sector-based desk or team to ensure facilitation of investments into the country.

"There was no sector-based desk or team. We have already selected 19 priority sectors. Renewable energy is one of the top priority sectors," he added.