Bangladesh Devises Payment Plan to Avert Adani Power’s Cuts

Wedoany.com Report-Nov 7, Bangladesh is creating a “dynamic payment plan” for all electricity providers, including Adani Power Ltd., the power ministry chief said, as it races to stave off further blackouts after the Indian company halved supply.

The plan can help avert further cuts from the Gautam Adani-led firm a day before Adani Power was expected to stop supplying electricity altogether.

“Payments will be based on the availability of resources and competing needs, irrespective of individual parties and without discrimination,” Muhammad Fouzul Kabir Khan, the head of Bangladesh’s power ministry, said in an interview to Bloomberg News.

Bangladesh, which is recovering from a violent change of regime, paid $97 million to Adani Power last month and opened a letter of credit worth $170 million, according to Khan. “We established an order of priority, given the shortage that we have, so then we allocated it,” he said.

Adani Power, which halved the electricity supply to India’s neighboring nation last week as past dues crossed $850 million, expects a new letter of credit by Thursday, according to people familiar with the matter who asked not to be identified because the discussions are private. This will help allay lender concerns around the company’s ability to service liabilities on this power plant.

A representative for Adani Group didn’t immediately respond to requests for further information.

There may not be any need for drastic steps like cutting the power supply since the Bangladesh administration is working to clear dues, the people said.

The ports-to-power conglomerate has been ratcheting up pressure in recent days, first by reducing the supply and then planning to cut the nation off entirely from Nov. 7 unless progress was made on repayments for the electricity it provides from its 1,600 megawatt coal-fired plant in India’s Jharkhand state.

Staving Off Blackouts

The power-deficit nation of roughly 174 million people needs to tackle its unpaid dues and stave off more blackouts amid billions of dollars in arrears. The interim administration, led by Muhammad Yunus, is battling an energy and foreign reserve crisis after weeks of bloody protests overthrew Sheikh Hasina’s government earlier this year.

The tussle also underscores the geopolitical risks for the Adani Group as the Indian conglomerate expands overseas. The Yunus-led administration is also not pleased with how the issue has blown up in the media.

“Whatever was said was shocking and unfortunate. We have never said that we are going to pay more or less, because it all depends on the availability of resources,” Khan said, adding the government was committed to paying as much as it was able and when it could.

Adani Power’s move last week exacerbated electricity deficit in Bangladesh, which relies on the company for 10% of its power needs.

In an Oct. 28 letter, the company had cautioned Bangladesh Power Development Board that it will start “suspending power supply” without a revised letter of credit or if its dues remain unpaid by Oct. 31 — a warning it followed through by reducing the supplies by half.

Playing Down

Adani Power said in the letter that it was facing working capital strains and had difficulties paying coal suppliers and other vendors.

Khan played down the impact of the reduction in electricity supplies from Adani since last week. “There shouldn’t be any hype about it,” he said.

The resource allocation for repaying past dues to various electricity providers will be based on economic considerations and availability. 

“We ascertain their needs and then fund them as needed and as possible, not because of fear,” Khan said.