part 1: overview of cogeneration and its status in asia - Fire

Summary of country study – Bangladesh 135
Tariff for bulk purchase of power at busbar
The tariff structure would consist of two parts. In the solicited bids, the bidders shall offer
bulk power tariff based on the capacity payment and energy payment and also provide the
equivalent levelized tariff. The capacity payment will be made in Bangladeshi currency
(Taka), but denominated in both Dollars and local currency. This will cover debt service,
return on equity, fixed operation and maintenance cost, insurance and other fixed cost. The
energy payment will be denominated in local currency to the extent to which the variable
costs are in local currency. This will cover the variable costs of operation and maintenance,
including fuel.
Interconnection of IPP to transmission system: The power will be purchased from the IPP at
a specified voltage and frequency at the outgoing terminal of the substation of the power
plant. The cost of interconnecting facilities up to outgoing terminals of the private power
project will be borne by the private power producers.
Fiscal incentives
The private power companies shall be exempted from corporate income tax for 15 years.
Repatriation of equity along with dividends will be allowed freely. Income tax will be
exempted for foreign companies. The foreign investors will be free to enter into joint ventures
but this is optional and not mandatory. The companies will be allowed to import plant and
equipment without payment of customs duties, VAT and any other surcharges. Private
power companies will be exempted from the requirements of obtaining
insurance/reinsurance only from the national Insurance Company and exempted from duty
payments. Power generation companies are eligible for all concessions that are available to
industrial projects. Private parties may raise local and foreign finance in accordance with
regulations applicable to industrial projects as defined by the Board of Investment (BOI).
Local engineering and manufacturing companies shall be encouraged to provide
indigenously manufactured equipment of international standard to private power plants.
Other facilities and incentives for foreign investors: Several other incentives extended by the
government include tax exemption on royalties, technical assistance fees, and facilities for
their repatriation; tax exemption on interest on foreign loans; tax exemption on capital gains
from transfer of shares by the investing company; avoidance of double taxation in case of
foreign investors on the basis of bilateral agreements; exemption of income tax for up to 3
years for the expatriate personnel employed by the industry, etc.
Starting from 1997, the government is considering to install a capacity of 1,500 MW through
IPPs. Four agreements have so far been made, two of which are being implemented while
several other projects are in the pipeline. An Independent Power Producer (IPP) is generally
required to sign four contract agreements. These are the Power Purchase Agreement with
BPDB; Implementation Agreement with the Government; Fuel Supply Agreement with the
buyer and the supplier of fuel; Land Lease Agreement with the buyer.
Many special features included in the IPP contract are very much in favour of the IPP, and
are not extended to BPDB which is working presently with an installed generating capacity of
2,900 MW. The tariff charges in some cases are above the international price.