Power Supply Agreement Between Bangladesh and Adani Power in the Wake of Political Turmoil
Following the resignation of Bangladesh Prime Minister Sheikh Hasina, concerns have been raised about the future of the power supply agreement between Bangladesh and Adani Power Limited. Experts believe that Bangladesh's need for power will outweigh any potential political considerations, and that the agreement is likely to remain in place.
Under the agreement, signed in 2017, Adani Power is obligated to supply 1,496 MW of power to Bangladesh for 25 years. The project, commissioned in June 2023, supplies 100% of its power to Bangladesh.
However, the agreement has faced criticism in the past due to the high cost of power. In February 2023, Bangladesh authorities requested a revision of the agreement, citing "excessive" coal pricing.
With a new government likely to take over, there is uncertainty about the future of the agreement. However, experts believe that it is too early to draw any conclusions. They point out that Bangladesh desperately needs power, and that thermal power is the most viable option given the current volatility in global gas prices.
"Bangladesh needs power, and I don't think canceling the PPA would be wise, given the power outages the country is facing," said a former top bureaucrat in the power ministry. "LNG-based power is expensive, and any harsh decision would also damage investor sentiment. Maybe when a stable government comes in, they can renegotiate the terms."
Adani Power has assured that it will continue to supply power to Bangladesh as per the agreement. The company spokesperson stated that they are guided by the Bangladesh Power Development Board's schedule and the provisions of the PPA.
Experts believe that the new government will take a cautious approach, waiting to see how the situation unfolds before making any decisions about the agreement. They also point out that the new government's attitude towards the project will be closely watched, and that the trajectory of the project will depend on how political stakeholders react.
"The country will have to weigh the opportunity cost of scrapping the PPA," said Partha Sarathi Bhattacharyya, former chairman and managing director of Coal India. "Let the dust settle and initial signals emanate from the interim government."
As of May 2, Adani Power reported that its average monthly billing to Bangladesh Power Development Board is about $90 million. The company expects this amount to stabilize as the initial setup processes are completed.