Importing power from Adani plant in India

| Updated: February 23, 2023 21:38:58

Adani's Godda coal-power plant. —Collected Photo Adani's Godda coal-power plant. —Collected Photo

The 1,600 MW (800 x 2) coal fired power plant under construction (since November 2018) at Godda district, Jharkahnd, India  by Adani Group (Adani Power Jharkhand Ltd. (APJL)) has been attracting international and local media interests for several weeks. Adani Group has been building the power plant in India for exporting electric energy to Bangladesh as an Independent Power Producer (IPP) under contract (signed in 2017) with Bangladesh Power Development Board (BPDB).

The Washington Post ( December 09, 2022) reported that BPDB and Adani (APJL) signed a 25 year Power Purchase Agreement (PPA) for supplying electric energy to Bangladesh (to be generated) from imported coal (from Australia's Carmichael mine via Dhamra port in Odisha and transshipped and transported to the power plant site by train, nearly 700 km away from the Odisha port). Electric energy generated by the Godda power plant will be transmitted by Adani-built 106 km long transmission line from Godda plant site to the Bangladesh-India interconnector point at the border. A further 28 km long transmission line from the border point to Rohanpur (Chapai Nawabganj, Bangladesh) was built by the Power Grid Company of Bangladesh (PGCB) for securing electricity supply to Bangladesh national grid.

The Institute of Energy Economics and Financial Analysis (IEEFA) in a report dated April 2018 claimed that the 'PPA allowed Adani to push the high cost of importing and transporting coal into India, plus the cost for transmitting the electricity across border onto the people of Bangladesh'. The IEEFA report is titled 'Adani Godda Power Project is too expensive, too late and too risky for Bangladesh'. The cost of importing electricity from Godda power plant further attracted attention as BPDB recently sent a letter to Adani Group seeking to revisit PPA 'to make a win-win deal for both the parties'. As per media reports (UNB, The Hindustan Times, February 02, 2023), 'BPDB sought a revision of an Agreement with Adani Power Ltd. for importing electricity from the thermal power plant in Jharkhand over the 'excessive' pricing of coal.' As per published report, BPDB wanted that the Agreement be reviewed and tariff structure adjusted before Bangladesh could start importing electricity. Earlier BPDB officials considered that the Adani quoted coal price for generating power at Godda plant was excessive and as per their expectations it should be in line with the costs BPDB had been paying for imported coal for other coal fired power plants in Bangladesh. The cost of imported coal including handling and transportation costs from the source of supply to the plant will be borne by BPDB and the electricity price from Godda plant is factored into the PPA's tariff structure. The Agreement  for electricity import from Godda (Jharkhand, India) and its cost have been questioned in Bangladesh as its electricity tariff is much higher than the other private power providers (including power plants run with imported coal) in Bangladesh.

Published reports further suggest that Adani Power Ltd., intends to import coal (approximately 7 million tonnes) for generating 1,600 MW power at Godda plant and the total generated power (approximately 1,496 MW excluding 6.5 per cent electric energy for internal plant use) will be exported to Bangladesh. State Minister for Power, Energy and Mineral Resources, Government of Bangladesh, Mr. Nasrul Hamid expected that Bangladesh would start getting power from Godda plant in the first week of March 2023. He further expected that the price of electric energy (from Godda) would be the same as mentioned in the PPA, and that the price would depend on the international coal market prices. So the power price might go up or come down due to changes in coal price. Media reports that Secretary, Power Division Mr. Habibur Rahman informed that a technical team of Adani Power would arrive in Bangladesh soon to discuss the power tariff issue. He expected that the coal price for Adani's Godda plant would not be more than the price of coal for Payra and Rampal power plants in Bangladesh and the issue would be finalised prior to power purchase. He informed that 'Adani Group in principle agreed for such arrangements'.

As the coal price is a component for calculating electricity cost for IPP contracts, it is important to carefully review at what cost Adani's Godda plant receives coal (export coal from Australian mine is likely to be sold at the New Castle index adjusted pricing for the Godda power plant). Usually, imported coal based power plants are  built near the sea ports. But Adani Power has decided to build its power plant at Godda, Jharkhant, nearly 700 km away from the coal import marine port in Odisha. The transportation and handling cost of coal would, therefore,  involve comparatively high costs. Published reports suggest that Adani Power Ltd., has been referring the coal price US$400/tonne (at the plant site) based on New Castle Coal price index for Godda Plant. BPDB generally calculates the imported coal price based on average New Castle (Australia) and ICI (Indonesia) Coal (export) price indexes (adjusted pricing depending on coal quality).  It has been reported that the difference between New Castle and ICI indexes have a nearly US$ 100/tonne difference. Moreover, US$400/tonne was the price for the best steam coal (high calorific value, low ash, low sulfur and low moisture containing coal) for a short period of time in the recent past as per New Castle price index. Steam coal price has significantly been reduced now. The Financial Express, February 08, 2023, reports that the Bangladesh-India Friendship Power Company Limited at Rampal has started receiving coal for the plant through competitive bidding at a cost of US$ 232.33 for each delivered tonne of coal at the power plant jetty (under the ICI coal price Index). A local contractor (Bashundhara Group) has won the bid to supply 8 million tonne  coal to the Rampal power plant at Bagerhat district in Southern Bangladesh. Therefore, there is a strong argument for BPDB for negotiating competitive coal and power costs for importing electricity from the plant.

Whemn BPDB decided to sign an Agreement with Adani Power Ltd., it expected to get power supply within 18 months from the commencement of the plant construction (in 2018). Making available necessary land for power plant and associated infrastructure in Bangladesh remains a challenge for large footprint projects. Adani Group wanted to arrange necessary lands, permits and investment for quick delivery of power to Bangladesh as an IPP. Unfortunately, the construction of the Godda power plant, its rail networks and power transmission networks took longer time than planned. Water supply and environmental impacts for the coal fired power plant were additional concerns for Bangladesh.

If the power supply comes from Adani's Power plant at Godda at a competitive price, it will help address power supply shortages in the country. But if the cost is excessively high and Bangladesh fails to secure comparative advantages for getting power from the PPA with Adani's plant in India, it will negatively impact on BPDB capacity and its financial health. And the consumers in Bangladesh will continue to suffer.

Mushfiqur Rahman is a mining engineer. He writes on energy and environment issues.

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