Adani Power Ltd., a key player in the Indian conglomerate led by billionaire Gautam Adani, is currently grappling with a significant financial challenge. The company is owed approximately $800 million in unpaid dues by Bangladesh for electricity supplied from its coal-fired plant located in the Godda district of Jharkhand. This financial strain arises amidst ongoing economic and political turmoil in Bangladesh, where weeks of violent protests have recently culminated in the ousting of the previous administration.
Adani Power and the Bangladesh Crisis
The unpaid dues to Adani Power stem from the electricity supplied by its coal-fired power plant in Jharkhand. The plant, which started commercial operations in April of last year, is a crucial part of Adani Power’s broader strategy to expand its footprint in South Asia. The plant’s electricity is a vital source of energy for Bangladesh, a country heavily reliant on imported power to meet its growing energy demands. However, the recent upheaval in Bangladesh has led to a delay in payments, putting Adani Power in a precarious financial position.
According to Ahsan H. Mansur, the newly-appointed Governor of Bangladesh Bank, the country owes Adani Power a staggering $800 million. In an interview with Bloomberg News, Mansur emphasized the gravity of the situation, stating, “If we don’t pay them, they will stop providing electricity.” This statement underscores the potential consequences of the unpaid dues, which could disrupt the electricity supply to millions of people in Bangladesh.
While Adani Power has not yet taken steps to cut off the electricity supply, the company is under increasing pressure from lenders and coal suppliers. Sources familiar with the internal discussions at Adani Power, who spoke on the condition of anonymity, revealed that the company may be forced to take drastic measures if the payments remain outstanding. The financial strain on Adani Power is compounded by the broader economic challenges facing Bangladesh, which is struggling with overall arrears of up to $2 billion.
Geopolitical Risks and Adani Power’s International Expansion
The situation in Bangladesh highlights the significant financial and geopolitical risks associated with Adani Power’s international expansion. The company, which is part of the larger Adani Group, has been steadily expanding its global footprint, particularly in neighboring countries such as Sri Lanka, Bhutan, and Nepal. This expansion is often closely aligned with the policy priorities of Indian Prime Minister Narendra Modi, who has sought to strengthen India’s influence in the region.
However, as the delayed payments from Bangladesh demonstrate, this expansion is not without its risks. The financial instability in Bangladesh, coupled with the country’s ongoing political turmoil, has put Adani Power in a difficult position. The company’s reliance on payments from foreign governments, which may be subject to sudden changes in political and economic conditions, exposes it to significant risks.
The current situation also raises broader questions about the sustainability of Adani Power’s business model, which relies heavily on coal-fired power plants. As global energy markets shift towards renewable sources of energy, companies like Adani Power may face increasing pressure to adapt their business strategies. The financial challenges in Bangladesh could be an early warning sign of the difficulties that lie ahead.
In 2022, Gautam Adani shared a post on X (formerly Twitter) celebrating the commissioning of the Godda power project and praising the vision of Bangladesh’s then-Prime Minister Sheikh Hasina. The post reflected Adani Power’s optimism about its future in Bangladesh and its commitment to supporting the country’s energy needs. However, the recent developments have cast a shadow over that optimism, highlighting the complex and often unpredictable nature of international business.
In addition to Adani Power, other Indian state-owned companies, including NTPC Ltd. and PTC India Ltd., also supply electricity to Bangladesh. It remains unclear whether these companies are facing similar challenges with unpaid dues. However, the broader economic crisis in Bangladesh suggests that the situation could have far-reaching implications for India’s energy exports to the region.
Earlier this month, Bangladesh’s powerful army chief and president helped install an interim government in an effort to quell the deadly student-led protests that had forced Prime Minister Sheikh Hasina to flee the country. Despite this, the country continues to face a severe economic crisis, with its foreign exchange reserves rapidly depleting. As of July 31, Bangladesh’s gross reserves stood at $20.5 billion, enough to cover only about three months of imports.
Bangladesh’s Economic Crisis and Its Impact on Adani Power
The interim government in Bangladesh is now seeking additional loans from the International Monetary Fund (IMF) to navigate these economic challenges. Beyond a $4.7-billion program already in place, Bangladesh is trying to secure more funds to stabilize its economy and clear its outstanding arrears. “The message is that we need money,” Mansur emphasized. “We want to clear all the arrears.”
The financial difficulties faced by Bangladesh are a stark reminder of the risks associated with doing business in politically and economically unstable regions. For Adani Power, the unpaid dues from Bangladesh are not just a financial issue but also a reflection of the broader challenges that come with international expansion.
As Adani Power continues to negotiate with Bangladesh’s interim government, the company will need to carefully navigate the complex geopolitical landscape to secure its financial interests and ensure the continuity of its operations. The outcome of these negotiations will likely have significant implications for Adani Power’s future, both in Bangladesh and beyond.
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