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Commercial operations of Adani’s Godda thermal power plant likely to be delayed again

The impasse over the thermal power plant comes at a time when the entire Adani group has been plunged into a crisis following the Hindenburg report.

February 04, 2023 / 01:44 PM IST
(Representative image)

(Representative image)

The commercial operations date (COD) of Adani Group’s 1,600 megawatt (MW) thermal power station in Jharkhand’s Godda district is likely to be delayed again due to Bangladesh’s concerns over the “excessive” pricing of the coal to be used in the plant. (leading to the high price of the electricity supplied by it). Bangladesh is scheduled to procure power from the project.

Senior officials of the state-run REC (formerly Rural Electrification Corporation) and Power Finance Corporation (PFC) said an extension of the COD is the only possible alternative given the current stalemate between Adani Power and the Bangladesh Power Development Board (BPDB) over the cost of electricity supplied by the plant.

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Per a 2020 report by Brickwork Ratings, the total cost of Adani’s Godda coal-fired power project is approximately Rs 14,817 crore, which has been funded in a debt to equity ratio of 68:32. The debt of Rs 10,075.42 crore has been raised from REC (50 percent) and PFC (50 percent).

“It is likely that the project will be extended by another six months, but the exact period would be decided by a separate committee. Both the lenders (REC and PFC) are expecting that by then Adani Power and BPDB will reach a mutually acceptable decision on the latter’s request to renegotiate the power purchase agreement (PPA),” said a senior official privy to the development, requesting anonymity.

An email query sent to Adani Group remained unanswered.

If the COD of the Godda project is indeed delayed, this will be the third time that that would’ve happened. The first unit of the plant was supposed to be operational on January 5, 2022.

The commercial operations date was then moved to December 16, which too was missed. Next, on January 3, 2023, Adani Power Managing Director Anil Sardana said he wanted to start supplying power from March 26, the Independence Day of Bangladesh. Now the deadline is likely to be pushed further.

In November 2017, the BPDB signed a 25-year PPA with Adani Power to supply 1,496 MW of electricity from the Godda plant. The plant has two units of 800 MW each.

On February 2, Bangladesh’s Power Minister Nasrul Hamid said the BPDB had sent a letter to Adani Power to negotiate a lower import price for coal under the PPA. “We are following the Newcastle index pricing for importing coal. Now that we are getting a discount on the pricing for other coal-fired plants, such as the Payra power plant, we want to open the door for negotiations with Adani too. We have sent them a letter to discuss the issue,” Hamid said.

A second official privy to the development said Bangladesh has stated that the per unit cost of electricity from Adani’s Godda plant will cost them at least 8-10 Taka more than what they are paying for power from other coal-based power plants in their country.

The issue has arisen because Adani Power is importing coal for the thermal power plant in spite it being located in Jharkhand, which is rich in coal reserves. Explaining the reason behind this, Sardana told reporters on January 3 that the Indian government’s policy does not allow exporting electricity generated by domestic coal. Hence, the company decided to import coal for the plant from Adani’s Carmichael coal mine in Australia, he said.

The impasse over the Godda power plant has emerged at a time when the entire Adani group has been plunged into a crisis following a report by US-based Hindenburg Research, which alleged gaps in the group's financials, high debt burden, and overvaluation. The result has been a collapse in the share prices of the group's companies, which forced the group to cancel its Rs 20,000-crore follow-on share sale.

Since the release of the Hindenburg report on January 24, Gautam Adani's conglomerate has erased around $117 billion in market cap, one of the worst in history. This is almost half of the group's combined market value.

Sweta Goswami