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Gas supply to a plant of the United Power Generation & Distribution Company (UPGDC) has been resumed two weeks after suspension as the government, under pressure to meet rising energy demand, agreed to address a dispute over gas pricing.
The 82 MW plant located in the Dhaka Export Processing Zone (DEPZ) became fully operational last Thursday following the restoration of gas supply, according to a stock exchange filing.
"A permanent solution will come through further discussions with the government," said Md. Moinul Islam Khan, chief executive officer of the company.
The dispute over gas pricing has been traced back to 2018 when energy ministry officials wrote a letter to the UPGDC saying the company should not be treated as an independent power producer (IPP) for it supplied electricity to private businesses, not to the national grid. And that the UPGDC should be considered a captive power plant.
However, the UPGDC had commenced operations of two plants in Dhaka and Chittagong EPZ in 2009 as an IPP based on a deal signed with the government the year before, said Md. Shamim Mia, head of regulatory affairs at the UPGDC.
According to the contract, the UPGDC will supply electricity at the same rate as the BREB (Bangladesh Rural Electrification Board) and the Bangladesh Power Development Board (BPDB) supply to their clients. At the same time, it will get gas from Titas Gas Transmission and Distribution at the rate applied to IPPs.
But the 2018 letter changed the business equation as the rate at which captive power plants are charged for gas is double that for IPPs.
For example, Titas charges Tk 15.50 per cubic meter for gas supplied to an IPP, whereas the rate is Tk 30.50 per cubic meter for captive power plants.
Subsequently, the government sent a bill worth Tk 400 million in 2019 and another worth Tk 2.5 billion in 2022 as unpaid dues as the company had not paid for gas at the rate applicable to captive power plants.
The company did not make the payment, saying it would not go beyond the 2008 agreement, and continued operations. It then received a court order at the end of 2023 in favour of its status as IPP.
That same year, the government issued an order recognizing the UPGDC as an IPP.
In March this year, the interim government cancelled the 2023 order and asked the power company to clear unpaid dues amounting to Tk 4.78 billion. The order was followed by a suspension of gas supply to the plant as the company refused to comply.
Mr Shamim said the gas supply had been resumed following an advance payment of Tk 500 million, which, the government promised, would be adjusted following a negotiation between the two sides.
Meanwhile, the DEPZ has begun experiencing power supply disruptions with the temperature rising and the government felt the need to resume gas supply to the UPGDC.
With the plant in the DEPZ, the UPGDC has a total generation capacity of 895 MW.
Business performance
The UPGDC gained a 33 per cent year-on-year growth in profit to Tk 4.23 billion in January-March of FY25, riding on an increase in electricity tariffs and stable foreign exchange rates.
It showed a robust profit growth of 83 per cent year-on-year to Tk 10.90 billion in FY21. Later, the profit gradually declined to Tk 8.01 billion in FY23. In FY24, the company reported earnings of Tk 8.12 billion.
The stock of United Power Generation closed at Tk 119.70 per share on Monday, with a rise of 2.75 per cent, on the Dhaka bourse.
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