2024-11-07 05:45:07 :
MUMBAI: After five days of intense negotiations, Adani Group has lifted a key power supply deadline imposed on the Bangladesh government after the crisis-stricken country conceded electricity worth around $75 billion rupees.
However, two people with direct knowledge of the situation said the Indian conglomerate was working on a Plan B for its only export-focused power plant if Bangladesh’s guarantees were not fulfilled.
Adani Group has set a Nov. 7 deadline for neighboring governments to either clear dues or face power outages that could affect at least 10% of Bangladeshi electricity consumers.
Adani Power Ltd started supplying electricity to Bangladesh through its 1,600 MW Godda Thermal Power Station in Jharkhand last year, marking the group’s entry into multinational power projects. The deal also marks India’s first cross-border power supply project and remains an important part of India-Bangladesh relations.
In Bangladesh, the monthly electricity bill of Adani Power Company alone is as high as US$90-95 million ( $One of the two people mentioned above said that the country has been hit by both economic and political crises and is paying only $20-40 million (Rs 750-800 crore) every month.
With dues rising over the past year and a letter of credit expiring in July, Adani Group decided in October to shut down one of the two units at its Jharkhand plant, halving Bangladesh’s power supply to 750-800 MW.
However, things changed over the weekend.
On Sunday, the Bangladesh government offered to reinstate letters of credit but with forward validity, similar to postdated bank checks.
Adani rejected the offer on the grounds that the group had breached its power purchase agreement (PPA) with Bangladesh. However, since Saturday, the Bangladesh government has agreed to provide new letters of credit worth $170-$180 million, effective immediately, after intense discussions on repayment terms, in addition to partial payment of dues.
“The government has assured that this new letter of credit will be issued on Thursday. The letter of credit will have current validity and will be in compliance with the PPA agreement,” the first person said.
“The letter of credit is essentially meant to provide a level of comfort or assurance to the Adani Group and its lenders that the government is serious about repaying its dues. The group may not invoke the letter of credit, but if the country fails to honor these With the latest commitment discussed today, it may have to take serious steps,” the person said, adding that dues would increase to about $940 million (approximately $7,920 crore) by next month.
“The total value they (Bangladesh government) provided was about 20% of the dues, and they also promised to settle all the dues in the next 2-3 months. The terms now are somewhat favorable,” the person said, without specifying the new terms.
Adani Group and Bangladesh Electricity Development Board did not respond to emails sent on Tuesday.
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backup plan
Based on this assurance, Adani Group not only agreed to continue supplying power to Bangladesh but also planned to restore power to the second unit of the Jharkhand plant, two people said.
“The Bangladesh government expects the International Monetary Fund or the Asian Development Bank to disburse most of the amount in the next few months. On this basis, the Bangladesh Power Development Board has assured the Adani Group that it will be disbursed within the next two to three months. Pay off the debt,” said the second of the two.
Even so, the Adani Group is creating a backup so its Godda Thermal Power Station in Jharkhand state won’t be idle if the guarantees don’t materialise. The plant supplies electricity only to Bangladesh, burning coal imported from Australia and Indonesia.
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“The group must consider the cost of production and cannot leave the factory idle. If Bangladesh does not pay, the group must be responsible to the project’s lenders,” the second person explained.
As a first step in the backup proposal, the Adani Group plans to install a 100-km transmission line from the Godda Thermal Power Station to India’s national grid to be able to sell power on the spot market to local distribution companies.
“The Adani group can use this transmission line to sell excess or surplus power to Indian players once it is established, or use it to sell the entire 1,600 MW in case similar repayment issues (with Bangladesh) recur Or if power supply to Bangladesh is interrupted for any reason,” the first person said.
“The group cannot stand idly by when dues are approaching $1 billion. The reasons for their (Bangladesh) crisis are acceptable, but if large repayments are still required, the group’s credibility and ratings will be affected,” the person added .
In August, India’s power ministry changed rules to allow export-focused generators to sell power domestically in the event of defaults on PPA payments.
Mint reports that Adani Power will be the main beneficiary of the amendment as it is the sole exclusive power supplier in crisis-hit Bangladesh. The amendment came about a week after Bangladesh’s then Prime Minister Sheikh Hasina fled the country for New Delhi after weeks of protests.
Adani Power’s Godda power plant is the largest electricity supplier in Bangladesh, followed by Pala power plant owned by Bangladesh China Power Corporation (BCPC) (1,244 MW), Rampal power plant owned by Bangladesh-India Friendship Power Company (Bangladesh) 1,234 MW) Ltd (BIFPCL) and SS Power I (1,224 MW) plants.
In October, Reuters reported that Bangladesh may put aside pricing concerns and retain its power purchase agreement with Adani Power in the face of supply concerns. Bangladesh’s new government has set up a panel to review contracts signed by the ousted Sheikh Hasina government, including a 25-year agreement to buy power from Adani Group’s Jharkhand plant.
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