Adani Power Pursues Arbitration Over Bangladesh Payment Dispute

Adani Power, a subsidiary of the Indian conglomerate Adani Group, has initiated an international arbitration process to resolve a payment dispute with Bangladesh regarding electricity supply. This decision comes after ongoing disagreements over pending payments between Adani Power and the Bangladesh Power Development Board (BPDB) related to a power purchase agreement established in 2017.

The company, led by billionaire Gautam Adani, has been at odds with the BPDB over the calculation and billing of certain cost elements associated with the power supplied. An Adani Group spokesperson stated, “There are disagreements in the way certain cost elements are calculated and billed. Hence, both partners have agreed to invoke the dispute resolution process and are confident of a quick, smooth and mutually beneficial resolution.”

Ongoing Negotiations and Financial Context

Despite the move towards arbitration, Bangladesh’s de facto power minister, Muhammad Fouzul Kabir Khan, indicated to Reuters that negotiations are still underway. He noted, “Once that process is over, we will move toward international arbitration, if needed.” This highlights the complexity of the situation and the ongoing discussions aimed at resolving the issues before resorting to arbitration.

Adani Power operates the 1,600 megawatt Godda power plant located in eastern India, which supplies nearly ten percent of Bangladesh’s electricity needs. Recent reports have indicated that the interim government of Bangladesh accused Adani of breaching the power purchase agreement by withholding tax benefits that the Godda plant received from India, a claim that has added further tension to the negotiations.

During the fiscal year ending June 30, 2024, Bangladesh paid Adani a tariff of 14.87 taka (approximately $0.1220) per unit of electricity. This rate is significantly higher than the average tariff of 9.57 taka for power supplied by other Indian companies. Such discrepancies in tariff rates have contributed to the financial disagreements between the two parties.

Financial Adjustments and Future Commitments

In a recent statement, Adani Power reported that its dues from Bangladesh have narrowed considerably to the equivalent of 15 days of tariff, down from about $900 million in May and nearly $2 billion earlier this year. This reduction in outstanding payments signifies progress, albeit amid ongoing disputes.

In conclusion, Adani Power has reaffirmed its commitment to the power purchase agreement and expressed its intention to continue supplying Bangladesh with reliable, cost-competitive, and high-quality electricity. The situation remains dynamic, with both sides hopeful for a resolution that can mitigate further financial and operational disruptions.