Adani Power Pursues Arbitration Amid Payment Dispute with Bangladesh

Adani Power, a subsidiary of the Adani Group led by Indian billionaire Gautam Adani, has announced its decision to pursue international arbitration to resolve ongoing disputes regarding payment for electricity supplied to Bangladesh. This move comes after prolonged disagreements with the Bangladesh Power Development Board (BPDB) over pending payments from a power purchase agreement established in 2017.

The conflict primarily revolves around the calculation and billing of certain cost elements associated with the electricity supply. According to a spokesperson for Adani Group, both parties have agreed to invoke the dispute resolution process, expressing confidence in achieving a swift and mutually beneficial outcome.

Despite the announcement from Adani Power, Muhammad Fouzul Kabir Khan, the de-facto power minister of Bangladesh, indicated that negotiations are still ongoing. He stated, “Once that process is over, we will move toward international arbitration, if needed,” suggesting that a resolution may still be possible without external intervention.

Adani Power operates a 1,600 megawatt coal-fired power plant located in Godda, eastern India, which supplies nearly ten percent of Bangladesh’s electricity needs. Earlier reports highlighted that the interim government of Bangladesh accused Adani of breaching the power purchase agreement by withholding tax benefits granted to the Godda plant by the Indian government.

The financial implications of this dispute have been significant. Bangladesh has been paying Adani a tariff of 14.87 taka (approximately $0.1220) per unit for power, which is considerably higher than the average tariff of 9.57 taka for electricity supplied by other Indian companies. As of last week, Adani Power reported that its outstanding dues from Bangladesh had decreased to the equivalent of 15 days of tariff payments, a significant reduction from around $900 million in May and nearly $2 billion earlier in the year.

In a recent statement, Adani Power reaffirmed its commitment to the power purchase agreement, emphasizing its dedication to providing “reliable, cost-competitive and high-quality power” to Bangladesh. The company’s proactive approach highlights its intent to maintain strong ties with the Bangladeshi energy market, despite the current challenges in their relationship.

As the arbitration process looms, both parties are under pressure to resolve these financial disputes amicably, with the potential for broader implications on future energy cooperation between India and Bangladesh.