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India’s Adani Group has warned Bangladesh’s new government that its backlog of overdue payments has become “unsustainable”, as the country falls $500mn behind on dues from a contentious power project.
The overdue power liabilities are threatening an early crisis for the interim government of Nobel Peace Prize laureate Muhammad Yunus, who took over last month after student protesters ousted authoritarian prime minister Sheikh Hasina, a close partner of India.
Yunus’s government blames opaque, expensive infrastructure deals negotiated under Sheikh Hasina for tipping the country of 170mn into a financial hole. Among the most contentious was the deal with Adani, owned by Asia’s second-richest man Gautam Adani, to supply coal power from its 1,600-megawatt Godda plant in India.
Adani Power told the Financial Times: “We are in constant dialogue with the Bangladesh government and have appraised them of this unsustainable situation where we are meeting not just our supply commitment but also [commitments] to our lenders and suppliers in spite of rising receivables.”
The conglomerate said it would “continue to supply reliable and competitively priced power from our Godda facility to Bangladesh, despite mounting dues”.
Muhammad Fouzul Kabir Khan, Yunus’s top energy adviser, told the FT that Bangladesh — which faced total power liabilities of $3.7bn as of the middle of last week — is late on paying $492mn to Adani, to whom it owes as much as $800mn in total.
He said the interim government had approached lenders including the World Bank for billions of dollars in loans to help stabilise its finances. “Since joining [the government]we’ve been firefighting,” Khan said.
Bangladesh, the world’s second-largest garments exporter, has grown rapidly in recent years but has suffered chronic energy shortages due to falling domestic gas reserves. Critics said measures passed by Sheikh Hasina — ostensibly aimed at speeding up projects, such as by bypassing open tendering — facilitated rampant corruption.
Adani is one of India’s most active conglomerates, with investments in everything from ports to data centres. Indian authorities announced last week the group would build a $10bn semiconductor plant with Israel’s Tower Semiconductor.
Short seller Hindenburg Research last year accused the group of “fraud” and stock market manipulation. Adani has denied the allegations.
Adani’s Godda deal was agreed during a 2015 visit by Indian Prime Minister Narendra Modi to Dhaka. Activists have repeatedly criticised the project, which became fully operational last year, saying the high cost of importing power from Godda did not make sense for Bangladesh. Adani said its “cost of power is very competitive when compared to the other imported coal-based power plants”.
Khan said Yunus’s administration would reintroduce competitive bidding, empower regulators and establish an expert committee to re-examine energy deals negotiated under the previous government.
“This is for all the transactions. We don’t want it to be discriminatory,” Khan said.
Yunus’s government has said it does not want to upset relations with India or China. Khan said he told China’s ambassador in Dhaka this month that infrastructure deals negotiated with Beijing had to be more “cost effective”.
The Export-Import Bank of China, for example, helped finance the Banshkhali power plant built by Bangladesh’s S Alam Group, whose chair is now being investigated for money laundering. The company did not respond to a request for comment.
“We didn’t want to give the message . . . that there’s a bull in the china shop,” Khan said. “Bangladesh is open . . . Whoever will give us value for money, the lowest price and good quality, we’ll [choose] them.”
Following Sheikh Hasina’s ousting, India altered its guidelines to allow electricity exporters to sell domestically, a move that could allow Adani to find replacement buyers for its Godda power.
Adani said it did not have plans to divert supplies away from Bangladesh. “Currently our Godda plant is not connected to the Indian grid and hence there is no question of looking for any alternate supply market,” the company said. “We remain steadfast in our commitment . . . and look forward to the Bangladesh government for similar reciprocity.”