Skip to main content

Risky and over subsidised: A financial analysis of the Rampal Power Plant

June 01, 2016
Jai Sharda and Tim Buckley
Download Full Report

Key Findings

The Rampal Power Plant proposal, also known as the Maitree Super Thermal Power Project, is one of eleven coal-fired power stations planned under Bangladesh’s Power Development Board (BPDB) plans for commissioning by 2021.

The proposed project would have a capacity of 1,320 MW, with two 660-MW units, and with a provision for a Stage 2 expansion that could involve installing two more units, each with 660 MW of capacity, taking the project to a potential 2.6GW-capacity.

The proposed Rampal power plant is fraught with unacceptable risk, out of step with the times, and would set Bangladesh back. Adding imported coal-fired power capacity would expose the Bangladeshi electricity system to international coal price and currency fluctuations.

Executive Summary

The Rampal Power Plant is a proposed 1,320-megawatt imported coal-fired power plant promoted by the Bangladesh-India Friendship Power Company Limited (BIFPCL), a joint venture of the Bangladesh Power Development Board (BPDB) and India’s largest power producer, NTPC Limited.

The project is being designed around outdated supercritical technology and is being heavily subsidised by the Indian and Bangladeshi governments. This report highlights a number of risks to taxpayers and electricity customers as well as to project backers in India—not the least of which is the Indian government itself. The Institute for Energy Economics and Financial Analysis (IEEFA) suspects that the project is being promoted as a means to sell Indian coal to Bangladesh and as a way to skirt Indian policy against building a coal plant so near the Sundarbans, a protected forest and World Heritage Site.

This report describes 10 serious flaws in the Rampal proposal:

  1. The plant will lead to higher electricity rates in Bangladesh - The revenue requirements of the Rampal plant would require tariff levels that are 32% higher than the current average cost of electricity production in Bangladesh and will therefore increase electricity rates in Bangladesh. Without subsidies the plant’s generation costs are 62% higher than the current average cost of electricity production in Bangladesh.
  2. The true cost of the plant is being hidden by three subsidies worth more than US$3 billion - First, the Bangladesh government is proposing a 15-year income tax exemption for the plant, an exemption worth US$936m. Second, a below-market-rate loan by Indian EXIM Bank represents a US$988m subsidy effectively paid by Indian taxpayers to Bangladeshi consumers. Third, Bangladesh would be granting an effective annual US$26m subsidy by conducting maintenance dredging to assure coal delivery to the plant.
  3. Delays are all but inevitable, as are further increases in capital costs - Coal-fired power plants regularly take the best part of a decade to proceed through planning and construction to full commercial operation. This project is no exception. Further delays and cost increases beyond those previously disclosed are likely, and will raise the capital cost of the plant and place additional upward pressure on tariffs.
  4. The plant faces major community opposition - Opposition from local residents poses a significant threat to the timely completion of the construction and uninterrupted operation of the plant.
  5. There is no guarantee that the plant will achieve an 80-85% plant load factor as assumed - The average plant load factor (PLF) for coal-fired power plants in China dropped below 50% in 2015, and has been below 60% since 2013. In the U.S., the average coal power plant operates at 55% PLF, and in India, the average coal-fired power plant operated at an estimated 58% in 2015- 16. There is nothing in the Rampal project to suggest it will buck these trends, and the plant, as a result—if built—would be a candidate for stranded-asset status.
  6. The plant's reliance on imported coal will expose consumers to global coal market risk - Global coal prices currently are near multi-year lows and are expected to remain low for the foreseeable future, but any major unforeseen increase in global coal prices and/or the exchange rate would have a major impact on required tariffs. It is more than possible that cost of coal use will increase as the world adopts more stringent carbon policies. Rampal customers would bear the brunt of such increases.
  7. The project is in the "Wind risk zone" and within the path of storm surges - The location in the “Wind risk zone” of Bangladesh represents a significant financial risk, since the plant would be extremely vulnerable to storm surges and, therefore, to outages and damage.
  8. The absence of a clear management plan for accidents and emergencies is of note - The seeming lack of contingency management plans poses a risk to plant operations.
  9. The proposed financing of Rampal debt puts the EXIM Bank at risk - While the Rampal project would expose all project promoters and consumers to financial risk, it poses specific risks to the Indian EXIM Bank. The Rampal project would constitute a large chunk of EXIM Bank’s loan book, it would put the EXIM Bank’s international fund-raising capacity at risk, and the very coal-fired nature of the project would create refinance risk for the EXIM Bank.
  10. The Bangladesh electricity system is already losing nearly US$1 billion per year, an unsustainable situation the Rampal project will probably only make worse - The Bangladesh government in the event of the further budget deficits may no longer fully support electricity-system losses. This constitutes a significant risk to Rampal project backers and customers.

This report finds also that renewable energyespecially solar energyis a commercially viable alternative to Rampal for several reasons:

  1. Utility solar should be a key focus for Bangladesh, despite land constraints applying to all major developments - Bangladesh has a potential to generate 380TWh electricity per annum through solar PV installations and IEEFA believes that utility solar should be the focus of policy makers. Although land availability in Bangladesh is a constraint, just 0.15% of Bangladesh land would be required, for even an ambitious goal of 10GW of utility solar by 2025.
  2. Momentum in Bangladesh is toward off-grid solar growth - Bangladesh has one of the most successful distributed solar rooftop programs in the world. Over 4.3 million households, or 10% of the country’s total households, have installed Solar Home Systems, and investment continues to grow. Rooftop solar can bring electricity immediately to the one-third of Bangladeshis who have no access to the centralized grid; it underpins a democratic, easily scalable, distributed energy system; it avoids the massive water usage, pollution, and waste-ash disposal problems that come from coal mining and thermal power generation; it does not create air and particulate pollution; nor does it bring the associated health costs; it allows speed of implementation, taking less than a day rather than a decade to commission; it can tap into global financial capital flows designated to facilitate emergingmarket low-carbon emissions investment; its has almost zero operational costs once built; it avoids land acquisition and resettlement issues; and its presence in the industrial and commercial sectors can be up-scaled rapidly as well.
  3. Bangladesh has made gains in grid-connected utility-scale solar power and stands to gain more - The government of Bangladesh has begun to seriously pursue grid-connected solar power generation, aiming for 1.7GW of solar capacity by 2021 and 6GW by 2030. It has drawn investment capital proposals from around the world in this sector, and could move significantly faster.
  4. Bangladesh can benefit heavily from trends toward declines in solar costs and expanded utility-size deployment - IEEFA sees annual solar capacity addition exceeding 60GW globally in 2016, a 15% year-on-year increase. This continues a trend of double-digit annual growth in installations driven by continuous technology innovation and the benefits of economies of scale, both of which are drastically lowering the cost of solar. There is every reason to believe that Bangladesh can benefit directly by leveraging off the major solar-installation trends established in India.
  5. Solar brings expanded capital access to global financial institutions - Solar programs in Bangladesh would attract expanded financial support from the Asian Development Bank, new debt capital support from the Asian Infrastructure and Infrastructure Bank (AIIB) and/or the New Development (BRICS) Bank and from the rapidly developing global green bond market. It would also likely attract equity capital investments from the World Bank’s newly established Climate Investment Fund's Clean Technology Fund, the Green Climate Fund, as well as global electricity corporations like Softbank and SkyPower of Canada.

IEEFA’s research indicates that the Indian establishment can better promote Indian interests by supporting a renewable-energy program in Bangladesh, to be executed by Indian firms. Such a move would significantly boost India’s fledgling solar manufacturing export industry, as well as the government of India’s “Make in India” program and leverage India’s announcement at COP21 Paris that it will show leadership toward a global solar alliance.


The proposed Rampal power plant is fraught with unacceptable risk, out of step with the times, and would set Bangladesh back. Adding imported coal-fired power capacity would expose the Bangladeshi electricity system to international coal price and currency fluctuations while renewable energy—especially solar—makes strategic sense by de-risking power generation from fuel price risk and building on the success of Bangladesh’s world-leading off-grid rooftop solar program. Bangladesh can leverage on India’s experience to quickly bring down cost of grid connected utility scale solar power to be a lower cost solution than imported coal. The Rampal plant should be cancelled.

Press release: Rampal Coal-Fired Proposal for Bangladesh Puts Ratepayers and Investors at Risk, Relies on Outdated Technology, Is ‘Out of Step With Times’

Please view full report PDF for references and sources.

Jai Sharda

Former IEEFA Consultant Jai Sharda is the managing partner at Equitorials, a financial research firm in Mumbai.

Go to Profile

Tim Buckley

Tim Buckley, Director, Climate Energy Finance (CEF) has 30 years of financial market experience covering the Australian, Asian and global equity markets from both a buy and sell side perspective.

Go to Profile

Join our newsletter

Keep up to date with all the latest from IEEFA