In brief
In an attempt to stabilize its electricity situation, Bangladesh has increased payments to Adani Power after experiencing substantial cuts in electricity supplies. The Indian company, which provides up to 10% of Bangladesh's electricity, reportedly halved its deliveries due to an outstanding $800 million bill, as confirmed by two high-ranking government officials.
The Bangladesh Power Development Board (BPDB) revealed to the BBC that they are actively processing partial payments to Adani. These efforts included issuing a $170 million letter of credit aimed at addressing the ongoing financial issues with the company. Adani, which generates electricity for Bangladesh from its 1,600 megawatt coal-fired plant in eastern India, has not formally responded to inquiries regarding the supply interruptions.There is urgency in the situation, as Adani has warned that it may suspend all supplies by November 7 if payment obligations are not met. However, a BPDB official expressed confidence that a complete cut-off would not occur, indicating a commitment to gradually and regularly address their debt to maintain electricity flow.Fouzul Kabir Khan, energy advisor to the interim government, emphasized that the authorities were taken aback by the power cuts despite their efforts to expedite payments. He firmly stated that the government would not allow any power supplier to leverage their position for financial extortion.Beginning in July, Bangladesh's repayments have escalated from $35 million to $68 million in September, and $97 million in October, as the country grapples with power shortages, particularly in rural regions. The sharp decline in foreign currency reserves has been exacerbated by political upheaval, following recent protests that led to the ousting of the Sheikh Hasina government in August.The new interim administration seeks to improve fiscal stability, engaging the International Monetary Fund (IMF) for an added $3 billion loan on top of its existing $4.7 billion aid. The controversial energy deal with Adani, established in 2015, is under scrutiny as the interim government undertakes a review of several past agreements deemed exorbitant.In addition to Adani Power, other Indian firms like NTPC Ltd and PTC India Ltd also provide electricity to Bangladesh, and payments to these entities are being prioritized as well. Bangladesh is activating some of its gas-fired and oil-fired plants to compensate for supply deficits, though this is expected to further escalate electricity costs.Experts predict that with the arrival of winter, power demands will decrease as air conditioning use wanes, offering a slight relief to the strained grid. Nonetheless, the operational limitations of coal-fired plants running at only 50% capacity and challenges in securing coal due to the dollar crisis make continued reliance on Adani Power critical, albeit at a higher price point. Bangladesh is also preparing for its first nuclear power plant to commence operations in December, aiming to diversify its energy resources—a development financed predominantly through Russian long-term loans.
