Bangladesh has decided to finance the second phase of the Matarbari coal-fired power project with its own resources after Japan withdrew its planned financial support, leaving the government to arrange nearly Tk198.39 billion for the construction of an additional 1,200MW power plant.

The state-owned Coal Power Generation Company Bangladesh Limited (CPGCBL) has prepared a development project proposal (DPP) for installing two additional 600MW units at the Matarbari power hub in Maheshkhali, Cox’s Bazar, according to officials of the Power Division.

The proposed project, known as the ‘Matarbari 2×660 MW Ultra Super Critical Coal Fired Power Project (Phase-2)’, is estimated to cost Tk198.39 billion, equivalent to approximately US$1.61 billion. It is scheduled to start in October 2026 and conclude in September 2030, subject to approval.

Under the proposed financing arrangement, the government will provide Tk175.11 billion from the national exchequer, while CPGCBL will contribute Tk23.28 billion from its own resources. No foreign development assistance has been included in the project proposal.

A senior Power Division official said the government had opted for domestic financing because of the country’s persistent energy shortages and the need to increase electricity-generation capacity.

The official noted that several gas-fired power plants were struggling to secure adequate fuel supplies, making additional coal-based generation an option for addressing the country’s growing electricity demand.

The project proposal has already been submitted to the Planning Commission for approval. Construction work will begin once the necessary clearance is obtained, the official added.

The second phase follows the successful completion of the first phase of the Matarbari power project, which involved the installation of two 600MW units at a cost of Tk518.55 billion. The plant, financed by Japan, began supplying electricity to the national grid in August 2023.

Bangladesh launched the first phase in August 2014 with financial assistance from the Japan International Cooperation Agency (JICA), which was expected to support the second phase as well.

However, Japan subsequently stepped back from financing the additional units, citing environmental concerns, particularly the high carbon emissions associated with coal-fired power generation.

The Matarbari project is part of a broader energy infrastructure development initiative in Maheshkhali, which also includes a coal-handling port, expansion of the sea channel and the development of a township.

The proposed additional capacity is expected to strengthen the national grid, improve the reliability of electricity supply and help ensure energy security by diversifying the country’s fuel mix.

However, the government’s decision to finance the entire project from domestic resources has raised questions about the pressure it could place on public finances. Allocating such a substantial amount to a single power project may narrow the government’s development spending capacity for other important sectors, including education, healthcare and social infrastructure.

The move represents a major change in the financing strategy for the Matarbari project, with Bangladesh now preparing to bear the full investment burden after its longstanding development partner Japan declined to fund the second phase.