February 24, 2023
DHAKA – Adani Group has started discussions to resolve the issues on “coal pricing mechanism of the power purchase agreement (PPA)”.
According to highly placed sources at the state-owned Bangladesh Power Development Board (BPDB), a five-member delegation of Adani Group arrived in Dhaka and held a meeting with the top officials of BPDB today.
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A chief executive and a chief procurement officer of Adani were among the five-member delegation while one official from Adani’s Dhaka office also joined the meeting, said the source without mentioning their names.
A number of BPDB officials including the member (company affairs) and the member (finance) were present at the meeting, it said.
“The meeting started in the afternoon at Biduyt Bhaban and lasted for more than an hour,” a top official of the BPDB told UNB.
The issue of the meeting was kept secret as it was sensitive for both sides.
Sources said both the sides heard each other and they presented their points in favour of their respective sides on the issue.
“But both sides expressed interest to continue discussion,” said the sources adding that Adani’s representative informed them that they would communicate BPDB’s stance on the coal pricing mechanism of the PPA to their top management and they will sit in more follow-up meetings.
“Adani officials are convinced with the BPDB’s points on the issue,” said the official preferring anonymity.
“We’re hopeful that Adani will finally accept Bangladesh’s request for revising the PPA to set a new coal pricing mechanism,” he said.
Following the meeting, the Adani team met the BPDB chairman.
Sources said the Adani team has a plan to meet State Minister for Power and Energy Nasrul Hamid and also Prime Minister’s Energy Advisor Dr Tawfiq-e-Elahi Chowdhury.
Earlier, the Bangladesh government sought a revision to the power purchase agreement (PPA) it signed with Adani Power Ltd for importing electricity from its thermal power plant in Jharkhand, India.
The BPDB, the government agency tasked with overseeing the development of the country’s power sector, has already sent a letter to the Indian company in this regard, according to officials familiar with the deal.
It seems the price of coal to be purchased as fuel for the project has emerged as the prime bone of contention.
The BPDB sent a letter to the Adani Group following a request it received in relation to opening LCs (in India) to import the coal that will be used as fuel for the 1,600MW plant in Jharkhand,” a highly-placed official of BPDB told UNB, in return for anonymity to discuss the sensitive matter.
Since practically all the power generated by the plant located in the Godda district of Jharkhand state will be exported to Bangladesh, Adani Power requires a demand note from BPDB that it can present to Indian authorities before opening LCs against the coal import.
The cost incurred to import the coal, including transport from port to plant, will ultimately be borne by Bangladesh, with the price factored into the PPA’s tariff structure.
Adani Power recently sent a request for BPDB to issue the demand note, where the coal price is quoted at $400 per metric tonne (MT) – far above what BPDB officials believe it should be given the present state of the international market.
“In our view, the coal price they have quoted ($400/MT) is excessive — it should be less than $250/MT, which is what we are paying for the imported coal at our other thermal power plants,” the official said.
The BPDB official referred to the coal procurement of Rampal Power Plant where the supplier Bashundhara Group won the contract to supply coal at $232.33 per ton to reach the product to the jetty.
The same sources also said Bangladesh’s stance on the issue was communicated to Adani Power officials during the visit of a delegation led by State Minister for Power, Energy and Mineral Resources Nasrul Hamid to the site of the power plant, that took place in the first week of January.
Publicly however, the state minister gave no indication of any such issue during the visit, instead telling reporters that Bangladesh would start importing the power generated by one of the two units at the plant, some 750 MW, from March.
The subsequent letter counts as BPDB’s formal request for the PPA to be reviewed and the tariff structure to be adjusted before it can start importing the electricity, officials said.
A number of BPDB officials told UNB it was the absence of a provision for discounts on the purchase of coal in the PPA signed with Adani Power, that allowed the Indian firm to quote such a steep bill for the coal.