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Bangladesh plans to build the second phase of the Matarbari coal-fired power project with domestic funding after Japan declined to finance the expansion, citing concerns over carbon emissions, officials said.

The state-owned Coal Power Generation Company Bangladesh Ltd (CPGCBL) has proposed a Tk198.39 billion project to construct two 600MW ultra-supercritical coal-fired units at the Matarbari energy hub in Maheshkhali, Cox’s Bazar.

The move marks a major shift in financing for one of the country’s largest power-generation projects. While the first phase was built with support from the Japan International Cooperation Agency (JICA), the government will now bear the full cost of the second phase.

Under the proposed financing structure, the government will provide Tk175.11 billion from the national exchequer, while CPGCBL will contribute Tk23.28 billion from its own funds. The total investment is estimated at around $1.61 billion.

The proposed project, titled Matarbari 2x660MW Ultra Super Critical Coal Fired Power Project (Phase-2), is scheduled to begin in October 2026 and be completed by September 2030. Project documents have already been submitted to the Planning Commission for approval.

Officials say the additional 1,200MW capacity is intended to help ease energy shortages and strengthen power security as gas-fired plants continue to face fuel supply constraints.

The first phase of the Matarbari project, comprising two 600MW units, was developed at a cost of Tk518.55 billion and has been supplying electricity to the national grid since August 2023. The broader Matarbari infrastructure complex also includes a coal-handling port, an expanded navigation channel and supporting township facilities.

Originally, JICA had been expected to finance the second phase alongside the existing plant. However, the Japanese agency later withdrew from the plan due to environmental concerns linked to coal-fired generation.

The government argues that the new plant will improve electricity supply reliability, expand generating capacity and enhance energy security through a more diversified fuel mix.

Analysts, however, note that financing such a large project from domestic resources could put additional pressure on the government’s development budget and limit funding available for other priority sectors, including education, healthcare and social infrastructure.

Once completed, the second phase is expected to significantly boost power generation capacity and help meet Bangladesh’s growing electricity demand.