The tussle between the Bangladesh Power Development Board (BPDB) and the Indian conglomerate Adani Group over the pending electricity bill has been resolved amicably, with both sides relenting to each other’s demands. BPDB will make the overdue payment that skyrocketed to a whopping $850 million as soon as possible; at the same time Adani Power will continue to supply from one of the 800 MW units from its ultra-super-critical coal-fired Godda unit to Bangladesh, currently reeling from a political and economic crisis. Presumably, the power supply will resume in full - 1,496MW - from Adani’s Godda unit, built with an investment of $2 billion in Jharkhand, meant exclusively for supply to Bangladesh, once the beleaguered country clears the entire pending dues and recovers from the current phase of uncertainty and turmoil.

After shooting a couple of letters requesting the interim government that took the reins of the beleaguered country in August, Gautam Adani-led Adani Power last week cut the cross-border power supply to Bangladesh from its Godda unit by half and set a November 7 deadline for the neighbouring country’s interim government to clear the dues amounting to $850 million. The Indian conglomerate had also threatened to stop supply in the event of non-payment, sending shivers to the interim Bangladesh government.

Adani Group is the largest power supplier in Bangladesh, supplying between 7-10% of Bangladesh’s baseload power demand of 13GW. As of September end, the BPDB owed close to $800 million. Adani received around $350 million payment in the prior six months. Bangladesh also paid $97 in October, nearly double of what it paid the previous month. The beleaguered nation recently issued a $173 million line of credit, fulfilling Adani’s demand.

Payments problems began post-Hasina 

In November 2017, Adani Power entered a 25-year Power Purchase Agreement (PPA) with BPDB to supply 1,496 MW of electricity from the Godda ultra-super-critical coal-fired thermal power plant. A wholly-owned subsidiary, Adani Power Jharkhand Ltd (APJL), was formed to implement the 1,600 MW (2x800 MW) in Godda, Jharkhand. APJL commercialised operations of the first unit on April 6, 2023, followed by the second on June 26, 2023. On July 12, 2023, a dependable capacity test, as mandated under the PPA, was conducted to evaluate the simultaneous functioning of both units after they began supplying electricity. Since then, the plant was supplying 100% of the electricity generated from the unit to Bangladesh.

The problem with the payment started following the ouster of the Sheikh Hasina government in August. Amid economic and political instability, forex-starved Bangladesh was paying around $20-40 million against a monthly bill of $90-100 million. This impacted Adani’s ability to procure coal for power generation and make obligatory payments. Adani had warned Dhaka to settle the bills, citing it as an “unsustainable situation, where we are meeting not only our supply commitments but also those to our lenders and suppliers, despite rising receivables.” The mounting receivable was also making a dent in its credit profile, potentially hiking the cost of funds to its entire fleet.

Adani’s demand is apt and just. A business is a business where the bottom line matters.  It is only desirable that the user pays on time as per the agreed price. In the event of chronic defaults from the user, the service provider is bound to take steps not just for itself but for those associated with the project, including vendors and workers.

Will Adani look for other options?   

An unabated power supply is a win-win for both Bangladesh and Adani. While Adani Power remains the largest power supplier to Bangladesh, a country of 170 million, the Godda unit is not connected to India’s domestic grid. However, that does not prevent the company from exploring such an option, particularly as the Indian government has recently allowed exporting power plants to connect to the national grid. If Bangladesh continues to delay its payment commitment, Adani can then sell the power within India.

“So as of now, we hope that there will be no further deterioration in terms of the outstanding, and as of now, we don't think that we need to look at that option, but if required, we can consider it,” said Nishit Dave, AVP, Investor Relations at Adani Power in a recent earnings call with the investors.

Also, the Godda plant uses imported coal. The unit is located near India’s coal reserves and can hence benefit from lower logistical costs. Adani can streamline its operations by focusing on the domestic market and reducing associated costs such as cross-border transmission losses and logistical expenses. In this context Adani can gain considerably by redirecting its power supply to the Indian market rather than continuing to fulfil its obligations under the existing PPA with Bangladesh. However, breaking an international agreement could have diplomatic repercussions and impact Adani's reputation globally.

There are voices within Bangladesh calling for the PPA to be renegotiated, as every decision by the previous government is now being scrutinized with a vengeance. Also, there is a section in Bangladesh that believes that the power supplied by Adani was the costliest compared with four other imported coal-based power generators. Though the Adani Group has challenged this narrative, time will only tell whether the Adanis will go for a renegotiation of the agreement.

(The author is an independent journalist specialising in economic matters pertaining to the region. Views expressed are personal. Linkedin: https://www.linkedin.com/in/surya-sarathi-ray-4b10a513b/)