A power purchase agreement in Bangladesh is, for most independent power producers, a long-term contract with one buyer: the Bangladesh Power Development Board. Everything that makes a project bankable, from tariff to fuel, currency, termination and arbitration, lives in how that contract and its companion agreements share risk.

How a power purchase agreement in Bangladesh is structured

Bangladesh runs a single-buyer power market. Private plants sell their output to the Bangladesh Power Development Board (BPDB), a statutory body created under the Bangladesh Power Development Boards Order 1972. BPDB then sells bulk power to the distribution companies.

A power purchase agreement in Bangladesh is therefore rarely a standalone document. For a typical independent power producer (IPP) it is one contract in a stack of five or six, and the risk allocation only makes sense when you read them together.

The usual contract stack

The Power Cell under the Power Division has historically run IPP procurement, while BPDB signs and administers the PPA. Generation licences are issued by the Bangladesh Energy Regulatory Commission (BERC) under the BERC Act 2003, and the Electricity Act 2018 governs generation, transmission and safety more generally.

Policy documents that still matter

The Private Sector Power Generation Policy of Bangladesh (1996, revised 2004) set the template for most legacy IPP contracts: sovereign-backed payment support, tax holidays and international arbitration. For renewables, the Renewable Energy Policy 2025 now sets the direction, with competitive tenders and a stated goal of sharply increasing the renewable share of generation. Neither policy overrides the contract; they explain why a power purchase agreement in Bangladesh reads as it does.

The 2024 to 2026 reset: what changed for PPAs

Anyone who last looked at a power purchase agreement in Bangladesh before 2024 needs to update their assumptions. Four changes stand out.

End of the special-provision regime

From 2010 many rental, quick-rental and IPP contracts were awarded without open tender under the Speedy Supply of Power and Energy (Special Provision) Act 2010, which also limited court challenges. That Act was repealed by ordinance in late November 2024. Contracts already signed under it were not automatically cancelled, but they became subject to government review. A national review committee was set up to examine past power and energy deals, and it reported anomalies in several of them, including the Adani Godda import contract.

Tariff setting returned to BERC

On 27 August 2024 an ordinance abolished section 34Ka of the BERC Act 2003, which had allowed the Government to change electricity and gas prices by executive order without a BERC public hearing. Retail and bulk price changes now go back through BERC. That does not change a signed IPP tariff, but it does affect BPDB's revenue, and therefore its ability to pay generators on time.

Competitive tenders and no sovereign guarantee

BPDB has moved to open, competitive tenders for new capacity. Its solar rounds from December 2024 offered 20-year offtake to private investors with no government equity. Reports on the April 2026 tender for 495MW of grid-tied solar describe a one-stage, two-envelope process, a 20-year PPA, purchase of all energy produced, and no sovereign guarantee. Industry commentary blamed the weak response to the earlier 5,238MW round largely on that missing guarantee.

Renegotiation of legacy contracts

In May 2025 BPDB asked the owner of the 718MW Meghnaghat LNG-based plant to propose a tariff reduction, describing it as its first such request. Further renegotiation of contracts signed between 2009 and 2024 is widely expected under the new Parliament. Sponsors should assume their existing PPA will be read closely, clause by clause.

Tariff design in a power purchase agreement in Bangladesh

The tariff in a thermal power purchase agreement in Bangladesh usually has two parts. The first, the capacity payment, pays for making the plant available and recovers capital cost, debt service, fixed operation and maintenance and return. The second, the energy payment, pays for each kilowatt-hour actually delivered and passes through fuel and variable operating cost.

The capacity payment is what makes a thermal plant bankable, and it is also what drew public criticism: plants that were available but not dispatched still received it. New solar tenders avoid the issue because they pay only for energy delivered. A solar power purchase agreement in Bangladesh is therefore closer to a pure energy contract, which moves resource and curtailment risk to the generator.

Indexation and currency

Legacy tariffs for foreign-funded plants are often denominated or indexed in US dollars and paid in Taka at the prevailing exchange rate. The sharp depreciation of the Taka since 2022 made that protection very valuable to sponsors and very costly to BPDB. Expect indexation to be a central point in any renegotiation and in new tenders.

Risk allocation with BPDB: the core matrix

The table below summarises how risk is commonly shared in a thermal power purchase agreement in Bangladesh and where newer solar contracts differ. Every project is negotiated, so treat this as a starting map, not a rule.

The pattern is clear. Older contracts placed most market and political risk on the state. Newer ones push more onto the private side. Lenders price that shift, and sponsors must decide whether the tariff they bid covers it.

Fuel supply and dispatch risk

Gas shortage is the defining commercial risk for thermal plants. In May 2025 Petrobangla was reported to be supplying around 1,024 mmcfd against demand of about 2,420 mmcfd. Three large combined-cycle plants at Meghnaghat were reported to be nearly idle for lack of gas and incomplete evacuation infrastructure.

Matching the PPA to the fuel contract

The single most important drafting task in a thermal power purchase agreement in Bangladesh is to make the PPA and the fuel supply agreement fit together. If the fuel supplier can curtail gas without liability, but the PPA treats the resulting unavailability as the generator's fault, the generator is squeezed between two contracts. The fix is a clear rule in the PPA that fuel shortfall caused by the designated supplier counts as BPDB risk, with deemed availability or deemed energy payments.

Dispatch instructions

Plants are dispatched by the National Load Despatch Centre operated by the Power Grid Company of Bangladesh. The PPA should say how instructions are given and recorded, how ramp rates and minimum load are treated, and what happens to revenue when the plant is backed down for grid reasons. For renewables, curtailment caps and compensation for curtailment above a threshold are now essential terms.

Payment security and currency risk

BPDB buys power at a cost well above what it recovers from bulk tariffs, and the gap is covered by government subsidy. When subsidy releases slow, BPDB payments to IPPs fall behind. Arrears to private generators, including the Adani dispute over roughly 496 million US dollars reported in late 2025, show that payment risk is real.

Sponsors and lenders should look for layered protection in any power purchase agreement in Bangladesh:

• Payment terms. A fixed invoicing cycle, a short due date and a clear disputed-invoice procedure, so that undisputed sums are paid while the rest is resolved.
• Late-payment interest. A defined rate that accrues automatically, with no requirement to serve demands first.
• Security instrument. A revolving letter of credit, escrow account or other liquidity support sized to a set number of months of payments.
• Government support. Where available, an obligation in the implementation agreement for the Government to fund BPDB's payment obligations. Recent tenders say this will not be offered, so check what alternative assurance is described.
• Convertibility. Comfort on conversion and remittance of foreign-currency debt service and dividends through the banking channel, in line with Bangladesh Bank foreign exchange rules.

Foreign loans and Bangladesh Bank

Foreign-currency project debt must meet Bangladesh Bank requirements and, for long-term private foreign borrowing, the scrutiny process now run with Invest Bangladesh (which absorbed BIDA in August 2026). Build approval timelines into the financing plan; a power purchase agreement in Bangladesh that is signed before the loan structure is cleared can leave the project without funds at financial close.

Change in law, tax and force majeure

A long-term power purchase agreement in Bangladesh will outlive several governments and many Finance Acts. The change-in-law clause decides who pays when the rules move.

Change in law

A good clause defines "law" widely (statutes, ordinances, SROs, BERC orders, Bangladesh Bank circulars), covers changes in interpretation by a competent authority, and gives a tariff adjustment or compensation formula with a minimum threshold. It should also cover the loss of a tax exemption promised in the implementation agreement. For renewable plants reaching commercial operation between July 2025 and June 2030, a stepped income tax exemption over fifteen years was announced; confirm the current notification before relying on it.

Force majeure

A power purchase agreement in Bangladesh usually splits force majeure into natural events (floods, cyclones, earthquakes) and political events (war, strikes, expropriation, government action). The difference matters: during political force majeure the state side commonly continues capacity payments, while during natural force majeure each side bears its own loss. Make sure prolonged force majeure gives a right to terminate with a defined payment, and that the force majeure regime in the fuel contract mirrors the PPA.

Termination, buy-out and lender protection

Termination provisions are where a power purchase agreement in Bangladesh turns from a sales contract into a credit instrument. Lenders lend against the termination payment as much as against the tariff.

Events of default

Generator defaults typically include failure to reach commercial operation by a long-stop date, sustained low availability, abandonment and insolvency. BPDB defaults include payment failure beyond a cure period and breach of material obligations. Government events, such as expropriation or a change in law that makes performance unlawful, sit with the state side.

Termination payments

The common structure is a buy-out by BPDB or the Government. On BPDB or Government default, the payment covers outstanding debt, breakage costs and equity return. On generator default, it is usually limited to some or all of the outstanding senior debt, so that lenders are protected even when the sponsor fails. On prolonged force majeure, it often sits in between.

Direct agreements and step-in

Lenders need a direct agreement under which BPDB and the Government must notify them of any default, give them extra time to cure, and allow them or a substitute to step in and take over the project company's rights. Without it, a terminated PPA leaves the lenders with a plant that has no buyer.

Disputes under a power purchase agreement in Bangladesh

Most PPAs provide for escalation to senior management, then an expert for technical and billing questions, then arbitration. Smaller and older contracts often choose arbitration seated in Dhaka under the Arbitration Act 2001. Larger foreign-financed projects commonly choose a seat such as Singapore or London and institutional rules such as SIAC, ICC or UNCITRAL.

Lessons from recent disputes

In November 2025 the High Court Division reportedly stayed a Singapore-seated arbitration started by Adani against BPDB until a court-ordered committee examining the contract had reported. Whatever the final outcome, the episode shows that a foreign seat does not stop a party from going to the Bangladeshi courts, and that allegations of corruption in contract formation can delay arbitration for months.

Drafting points

• Include an express waiver of sovereign immunity from suit and execution by BPDB and the Government, limited as needed to commercial assets.
• Choose the seat deliberately; it decides which court supervises the arbitration and whether section 7A of the Arbitration Act 2001 (interim relief) can be used.
• Remember that a foreign award must be enforced in Bangladesh through the courts under the Arbitration Act 2001, which gives effect to the New York Convention. Our team at enforcement of awards handles that stage.

Responding to a renegotiation request from BPDB

Sponsors of legacy projects increasingly receive letters asking them to reduce tariffs, waive arrears or accept a review. A signed power purchase agreement in Bangladesh remains binding, and BPDB cannot amend it unilaterally. But refusing to engage carries political and payment risk. A structured response protects your position.

1. Read the whole contract stack. Check the PPA, implementation agreement, direct agreements and finance documents for amendment, consent and notice requirements before replying.
2. Notify lenders early. Most loan agreements prohibit amending the PPA without lender consent. Silence can itself be a breach.
3. Reserve rights in writing. Reply that you will discuss the proposal without waiving any right under the PPA, including to interest on late payments.
4. Separate undisputed sums. Insist that undisputed invoices continue to be paid while any review proceeds.
5. Prepare the evidence. Assemble the tender file, approvals, board minutes and the financial model, since any review will test how the contract was awarded and priced.
6. Model the trade. Value what you are asked to give up against what you could secure: faster payment, a guarantee, an extended term or clarity on fuel supply.
7. Document any change formally. Use a written amendment approved by the competent authorities and, where required, by BERC, so that the new terms are binding on both sides.

Checklist for new bidders in 2026

For a new tender, the bid documents largely dictate the form of contract, but there is usually room to clarify through pre-bid queries. Before committing to a 2026 power purchase agreement in Bangladesh, confirm the following:

• What security replaces a sovereign guarantee, and whether lenders will accept it.
• Whether the tariff is paid in Taka, dollars or Taka indexed to dollars, and how the exchange rate is set.
• Who builds and pays for the evacuation line, and what happens if the substation is not ready.
• How curtailment is measured and compensated.
• Whether land is provided by the state or must be acquired privately, and how title is verified.
• Which approvals are needed from BERC, the Department of Environment and Invest Bangladesh, and who bears delay.
• The governing law, the arbitration seat and the immunity waiver.

Our separate guide to arbitration in Bangladesh explains how Dhaka-seated proceedings run if you accept a local seat.

Frequently asked questions about power purchase agreement in Bangladesh

How we can help

We advise sponsors, lenders and contractors on every stage of a power purchase agreement in Bangladesh: bid review and pre-bid queries, negotiation with BPDB and the Power Division, financing and security, renegotiation requests and arbitration. Learn more about our project finance practice and our wider infrastructure and energy work.

Primary sources: the BERC Act 2003, Electricity Act 2018 and Arbitration Act 2001 on the Laws of Bangladesh portal; tender notices from the Bangladesh Power Development Board; tariff orders from the Bangladesh Energy Regulatory Commission; reporting in The Financial Express (May 2025) and The Business Standard (April 2026).

This article is general information about Bangladeshi law as of October 2026 and is not legal advice. Power sector policy, tender terms and the status of legacy contracts are changing quickly; take specific advice on your project documents before acting.