The resignation of Bangladesh PM Sheikh Hasina following civil unrest in the country has brought focus on the possible ramifications of a power supply agreement with Adani Power Limited. Experts say that Bangladesh needs power supply and any decision will weigh on investor sentiments.
Under the power purchase agreement (PPA) with Bangladesh Power Development Board (BPDB) executed in 2017, Adani Power is to supply 1,496 MW net capacity for 25 years via 400 kV dedicated transmission system connected to the Bangladesh grid from its Godda power plant in Jharkhand. The project was commissioned in June 2023 and supplies 100% of power to Bangladesh.
There have been concerns in the past over the cost of power provided by Adani Power. In February 2023, authorities in Bangladesh wrote to India seeking a revision of an agreement with Adani Power Ltd over the “excessive” pricing of coal. With a new regime likely to take over, there have been talks on the possible impact on Adani Power. However, experts feel that it is too early to draw any conclusion but the state needs power desperately and thermal is the best, bet keeping in mind volatile gas prices globally.
“Bangladesh needs power and I don’t think canceling a PPA serves a purpose as there are power outages in the country. LNG-based power is expensive. Any harsh decision will also spoil the investor sentiments and no country would want to do that now. Maybe when a stable government comes, they may re-negotiate terms as thermal account or 15-20% of energy mix and rest comes from liquid gas,” says a former top bureaucrat in the power ministry.
Amidst turmoil, Adani Power continues to supply power to the neighbouring nation.
“Adani Power has a PPA with Bangladesh power distribution utility, namely Bangladesh Power Development Board (BPDB), to meet their power requirement. In its normal course of business, BPDB is scheduling the power supply to meet their demand and as per that schedule, Adani Power continues to supply power to the Bangladesh power utility without any disruption. Going forward too, we will remain guided by BPDB’s schedule and as per the provisions of PPA between two utilities,” said the company spokesperson.
According to the company, the electricity supplied from Godda Power Plant has a positive impact on Bangladesh’s power situation by replacing costly power generated from liquid fuel.
Harsh V Pant from the Observer Research Foundation (ORF) says no one knows the political trajectory that Bangladesh will take and all stakeholders are waiting to see how the situation unfolds.
“I don’t think there will be any hurry to move forward with these kinds of contractual obligations. Also, the attitude of the new government towards the project will be keenly watched and you will see a new equation and how political stakeholders react and relate to previous projects and the trajectory of these projects depends on that,” Pant added.
Speaking on similar lines, Partha Sarathi Bhattacharyya, former chairman and managing director of Coal India said everything will depend on how the new government balances the public sentiment with economic realities. “Let the dust settle and initial signals emanate from the interim government. The country will have to weigh the opportunity cost of scrapping the PPA,” he added.
During the investor call on May 2, Adani Power said that on average monthly billing to BPDP is about $90 million. “This month alone, we have received about usd136 million and the inflow has gained momentum now because initially they had to set up certain processes and other procedures and take necessary approvals. Now that SOP is in place, going forward we do not expect this amount to pile up further,” the company said.