BPDB seeks discount from Adani Power

Bangladesh has sought a temporary discount from Adani Power on the price of coal that would fire the thermal power plant in Godda, Jharkhand in light of the escalating prices, said the Indian electricity producer.

On February 3, Adani Power, which is listed on the Bombay Stock Exchange, made a disclosure about receiving communication from the Bangladesh Power Development Board "requesting us to consider a discount on the energy charge as per the Power Purchase Agreement".

A spokesman for Adani Power told The Daily Star yesterday that the discount requested is a temporary one.

"BPDB has written to us to consider discounting the variable energy costs on a temporary basis given the current high thermal-sea borne coal prices, which is under consideration," he said.

But there is no request for revision of the controversial power purchase agreement signed in November 2017 to purchase 1,496 megawatts of electricity from the power plant situated 60 miles from the border in India's north-eastern state of Jharkhand.

"We confirm that there is no revision requested by the Bangladesh Power Development Board [BPDB] on the power purchase agreement [PPA] for supplying power," the Adani Power spokesman said in his written response to The Daily Star.

It is not possible to make any revision to the PPA, said a BPDB official involved in the proceedings, who spoke on the condition of anonymity due to the sensitivity of the matter.

"We are getting a discount on the pricing for all the coal-fired plants in our country. But in the deal with Adani, there is no such option. That's why we sought the discount -- we want to negotiate," he said.

Contacted, Nasrul Hamid, the state minister for power, energy and mineral resources, said: "Energy will be purchased as per contract."

He declined to elaborate further.

A day earlier, at a media briefing held at the secretariat, Hamid said the coal for the Adani plant will be priced as per the Newcastle Index, the main reference point for physical coal contracts in Asia.

The thermal power plant is expected to be fired by coal imported from the Adani-owned Carmichael coal mine in Australia.

Australian coal at Newcastle Port with an energy value of 5,500 kilocalories per kg (kcal/kg), as assessed by commodity price reporting agency Argus, slipped to $129.87 a tonne in the week to January 27, the lowest since the week to January 21, 2022, reports Reuters.

The Godda plant would be running on lesser quality coal with an energy value of 4,600 kcal/kg, so its price is expected to be lower.

BPDB is not willing to pay more than what it pays to Payra and Rampal plants for coal, said another official familiar with the discussions.

At present, it pays $245 per metric tonne for the coal used in the Payra power plant in Patuakhali, $254.38 for the S Alam power plant in Chattogram's Banshkhali and the Rampal power plant in Bagerhat, and $270 for the Barishal 307MW coal-fired power plant.

A Power Cell estimate in January put the Adani plant's coal price at $346 per metric tonne.

The PPA signed with Adani Power stipulates that Bangladesh will pay the market price for the coal used to fire the power plant, reports The Washington Post, which got three industry experts to review the confidential 163-page agreement.

Other agreements with foreign power suppliers, also seen by The Post, include clauses that would put a cap on the prices Bangladesh pays if the cost of coal skyrockets.

"Industry analysts say the coal will probably come on Adani ships to an Adani-owned port in eastern India, then arrive at the plant on a stretch of Adani-built rail. The electricity generated will be sent to the border over an Adani-built high-voltage line. Under the contract, shipping and transmission costs will be passed on to Bangladesh," the report added.