Adani Group companies have been in the news for varied reasons. While Adani Green Energy’s Andhra Pradesh deal attracted controversy over allegations of corruption and bribery, Adani Power’s super-critical Godda project in Jharkhand has hit a bump in Bangladesh with only half of the contracted capacity being supplied, forcing it to explore other avenues for the offtake.

Since December, Adani Power has been supplying 800 MW to Bangladesh from its Jharkhand plant, which is the agreed monthly offtake. 

The total committed was 1,600 MW. Bangladesh’s outstanding dues to the Adani group stands at $900 million and it has agreed to repay $70-80 million every month from December. 

“Basically, they are paying against the power supply they are getting. Regarding the remaining 800 MW, Adani group is still undecided on what it will do,” according to sources associated with the project. 

The Godda project in Jharkhand — a 1,600 MW ultra super-critical power plant run on imported coal, is committed to supplying power to Bangladesh through a dedicated transmission corridor, not connected to the Indian grid. 

It was seen as a major project promoting intra-regional trade in energy and set to meet 7-10 per cent of Bangladesh’s baseload power demand. 

The plant, including the associated transmission infrastructure, was set up with an investment of $2 billion and fully commissioned in July 2023. Under the power purchase agreement (PPA) signed in 2017, Adani Power was to supply 1,496 MW net capacity power for 25 years. 

The Jharkhand plant normally runs a receivables cycle of six months. But that was disrupted by the political developments in Bangladesh. 

The PPA with Bangladesh Power Development Board provides protection to the company in the form of letter of credit (equivalent to two months of dues) and a sovereign guarantee from the Bangladesh government as an additional security mechanism. 

Adani Power was crying foul over the delayed payment and mounting dues from Bangladesh, which, it said, was pushing it to run the plant below capacity, making the project unviable. Though payment is now trickling in, the dues still remain huge. Following non-payment, the company reduced the quantum of power supply to Bangladesh. 

Mega deals under lens

The political turmoil in Bangladesh and regime change also brought under scrutiny 11 mega deals inked by the ousted government, including one with Adani Power, on the instructions of the High Court in Dhaka. 

The court has asked the interim government in Bangladesh to hire an international law firm for the purpose. 

Apart from inflated tariffs, the allegation against Adani is that it has not disclosed the tax benefits it received from the Indian government for the project. 

According to Khondaker Golam Moazzem, a leading industrial economist and Research Director at the Centre for Policy Dialogue (CPD), a prominent think tank based in Dhaka, “There are two perspectives to the issue. First, a political change that has happened in Bangladesh. The new regime is scrutinising some of the decisions taken by the earlier regime, questioning how various agreements were inked with different companies including Adani.

“Although scrutiny is across sectors, power sector contracts were mostly being eyed with concern as they were signed without having any competitive deal and some of the terms and conditions are fiscally burdensome. This has happened because the T&C were set by the earlier government without following the open tender public procurement process under the Quick Enhancement Act,” he said. 

Besides, there are questions over Adani charging a higher price for coal compared to other sources. However, the payment that is due to Adani needs to be settled along with the financial issues raised by the Bangladesh side.

Cross-border risks

It is understood that cross-border trade always entails attendant risks, especially when it involves government projects. Delays and contractual issues are common, and the risk is even greater if it is not a strong sovereign. 

“If the contractor wants to exit they can do it, if conditions go bad; no one can question it,” an analyst said, adding, “In this case, it was an acceptable contract for them (Adani Power), but they are making more than what they would have in the Indian market. But a bigger problem is for Bangladesh, which has a power deficit, and the alternative sources are costlier because they don’t have coal resources.” 

From the perspective of both Adani and Bangladesh, it was a good deal because the latter is getting reliable power that is cheaper than from other sources, while the former is making more money than it would have in India 

“The downside risk here, of course, is that the delay in payment would lead to weakening of financial profile,” the analyst said. The conflicting market forces must also be factored in. “Wherever one is dealing with a foreign government, there’s always a risk that some contractual issue might come up. That the rule of law enforcement may not always happen. And any dispute will go to an international court, which will take its own time,” a market watcher said. 

Meanwhile, in a move that can be seen as coming to the rescue of the power exporters to Bangladesh, the Indian government eased the norm to allow projects meant for exports to reroute the supply and sell in the domestic market and power exchange. 

Adani Power has already been toying with the idea of selling power from the Godda plant to a third country, namely Sri Lanka. Also, it has not yet started selling to the national grid, though it has government approval. A decision on this is expected soon. 

Adani Power has operational capacity of 17,550 MW (around 7 per cent of total capacity in the country) against a planned capacity of 30,000 MW by 2030. It has eight projects across Gujarat, Maharashtra, Rajasthan, Karnataka, Chhattisgarh, Jharkhand, and Madhya Pradesh. 

Of Adani Power’s operational portfolio, nearly half is based on imported coal. It has tied up around 83 per cent of its generated power with multiple customers under long-term and medium-term PPAs, with an escalating tariff structure for most of the deals. It also has fuel supply agreements for around 56 per cent of its coal-based thermal power generation capacity. 

For the imported coal-based plants, Adani Power benefits from the group’s presence in overseas coal mines, from which it can source coal to reduce the risk of raw material availability. 

Clearly, Adani Power is hedging its bets.