Adani Power Jharkhand Limited (APJL), a wholly-owned subsidiary of India's Adani Group, has taken the significant and controversial step of halting half of its power supply to Bangladesh due to an alarming backlog of unpaid bills amounting to $846 million. This pivotal development was reported by local media on Friday, signifying a serious escalation in the ongoing financial disputes that have been brewing between the two entities, which have important economic and energy ties.
According to reports from Power Grid Bangladesh PLC, the reduction in power supply was implemented on the night of Thursday, resulting in a dramatic impact on the energy landscape of Bangladesh. The reduction has affected the delivery from a power plant that originally had a total capacity of 1,496 megawatts (MW). With the supply cut, the plant is now only producing approximately 700 MW from a single operational unit. This sudden cutback has led to Bangladesh grappling with a substantial power shortfall exceeding 1,600 MW, creating potential challenges for energy management, economic activities, and daily life for residents in the region. The implications of such a shortfall can extend to various sectors, including industry, healthcare, and essential services, making this situation particularly pressing.
In a letter dated October 27, which was addressed to the Bangladesh Power Development Board (PDB), Adani Power demanded that the outstanding dues be cleared by the looming deadline of October 30. The letter explicitly warned that failure to settle these bills would result in the immediate suspension of power supply, effective October 31. This ultimatum highlights the severity of the situation and the pressure Adani Power is applying to compel the Bangladeshi authorities to resolve the longstanding financial issues that have accumulated over time.
The company has noted that the PDB has not yet provided a necessary letter of credit (LC) for $170.03 million from Bangladesh Krishi Bank, nor have they settled the total outstanding amount of $846 million. In a response that reflects the complexity of the situation, a PDB official indicated that while a portion of previous dues had been paid, the charges from Adani have increased significantly since July, exacerbating the debt situation and complicating future negotiations. The PDB has reportedly been making payments of approximately $18 million weekly; however, this falls short of the more than $22 million being charged by Adani, leading to an alarming accumulation of unpaid bills that continues to grow.
Compounding the issue is a recent submission by the PDB to Krishi Bank for last week’s payment, which was unsuccessful due to a dollar shortage that hindered the bank's ability to open a letter of credit against the payment. This situation not only reflects the financial strain on the Bangladeshi power sector but also highlights broader economic challenges that the country may be facing. Furthermore, the PDB has raised concerns over coal pricing that has escalated since February of the previous year, when a supplementary agreement was signed. This agreement was meant to ensure that Adani quoted coal prices lower than those charged by other coal-fired power plants. However, with the expiration of this supplementary deal, Adani has reverted to pricing under the original Power Purchase Agreement (PPA), which is linked to the fluctuating averages of coal prices based on indices from Indonesia and Australia, further driving up costs and complicating the fiscal situation for the PDB.
In light of these circumstances, Adani has indicated that during the suspension of supply, it reserves the right to recover capacity payments as stipulated under Section 13.2(1) of the PPA. This move reflects the company's strategy to enforce its financial claims amidst escalating tensions and highlights the legal frameworks that govern such international energy transactions. Adani has also been urging the interim government of Bangladesh to settle the dues since their takeover, which followed the ousting of then-Prime Minister Sheikh Hasina. Following this political shift, an interim government led by Nobel Laureate Professor Muhammad Yunus was established on August 8, leading to Adani's direct communications with the Chief Adviser Yunus regarding the pressing issue of outstanding payments.
The situation remains fluid, and the impact of these developments on the power supply in Bangladesh could have significant ramifications for energy availability and economic stability, highlighting the critical interdependencies between India and Bangladesh in the energy sector. The evolving dynamics of this energy relationship, coupled with financial and political challenges, may necessitate strategic negotiations and compromises from both parties in order to find a resolution that ensures a stable power supply for Bangladesh while addressing the financial interests of Adani Power. As stakeholders on both sides watch closely, the potential for further developments and negotiations in this critical area of international energy trade remains high, with implications that extend beyond mere financial transactions to broader regional stability and cooperation.
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