Explained: India's First Transnational Power Project By Adani And Why It Is Crucial For Energy-Starved Bangladesh

The Adani group on Saturday (15 July) announced that it has commenced the full-load power supply to Bangladesh from its 1,600 MW Ultra Super-Critical Thermal Power Plant (USCTPP) in Godda in Jharkhand.

The Godda USCTPP, which marks the Adani Group’s entry into transnational power projects, is India’s first commissioned transnational power project where 100 per cent of the generated power is supplied to another nation.

The news is a major reprieve for the besieged Adani Group which has been in the dock due to Hindenburg Research’s brutal investigation into the group.

The importance of the project can be gauged from the fact that Adani Group chairman Gautam Adani, himself, met with Bangladesh Prime Minister Sheikh Hasina in Dhaka on 15 July at the handover of Godda power plant.

“Honoured to have met Bangladesh PM Sheikh Hasina on full load commencement and handover of the 1,600 MW Ultra Super-Critical Godda Power Plant. I salute the dedicated teams from India and Bangladesh who braved COVID to commission the plant in a record time of three-and-a-half years,” said Adani in a social media post. 

Background To Adani power deal

The groundwork for Adani’s Godda plant was laid during Prime minister Narendra Modi’s first state visit to Bangladesh in June 2015. The text of the Indian PM's statement in the joint press briefing by the two leaders stated, “we can do more together in the power sector, here and in India”.

Subsequently, in Aug 2015, Bangladesh Power Development Board (BPDB)  — the state-owned entity that purchases electricity on behalf of the government — signed an MoU with Adani Power Limited (APL) to set up a coal-power plant at a suitable location in India to supply electricity to Bangladesh.

APL incorporated a subsidiary, Adani Power Jharkhand Ltd (APJL), on 18 December 2015 for setting up 1,600 MW thermal power plant in Godda in Jharkhand. This was followed by the signing of a long-term Power Purchase Agreement (PPA) between BPDB and Adani Power Jharkhand Ltd in November 2017.

APJL will supply 1,496 MW from the Godda USCTPP under the PPA with the Bangladesh Power Development Board, executed for a period of 25 years, via a 400 kV dedicated transmission system connected to the Bangladesh grid.

Near To Border

The Godda power plant, located about 100 km from the Bangladesh border, has two units of 800 MW each based on Ultra-supercritical technology. Ultra Super-Critical Power Plants generate electricity in the most efficient way with minimum impact on the environment

The plant has been commissioned in a record time of just three-and-a-half years after from its financial closure.

The achievement is particularly noteworthy given the considerable logistical challenges the project encompassed, including the establishment of a 105 km-long 400 kV Double Circuit Transmission Line, the construction of a private railway line, and the implementation of an extensive water pipeline from the Ganges.

As 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 in equal measure from two public sector finance companies – Rural Electrification Corporation (REC) and Power Finance Corporation (PFC).

Timeline

The first unit was finally commissioned on April 6 and the second on 26 June.

However, while the units become fully functional and started providing power, the Godda plant was awaiting the green light from the BPDB to begin power transmission to the neighbouring country.

It was on 12 July that the APJL completed the dependable capacity test for the Godda plant following which the plant began full-load commencement.

The dependable capacity test, a mandatory requirement under the PPA, was conducted over the stipulated period of six hours to evaluate the simultaneous functioning of both units of the plant after they began supplying electricity.

Reduced Tariffs

The Adani Group in a statement has said that the electricity supplied from its Godda plant will significantly improve the situation in Bangladesh as it will replace expensive power generated from liquid fuel, bringing down the average cost of power purchased.

It is worth noting that Bangladesh has one of the largest liquid fuel-based power generation plants in the Indian subcontinent, with a 34 per cent share in the total installed capacity. The installed capacity of heavy fuel oil (HFO)-based plants is about 6,329 MW and high-speed diesel (HSD)-based plants is about 1,290 MW, totaling to over 7,600 MW.

According to the BPDB’s annual report for the FY 2021-22, the total tariff of HFO-based plants is approximately BDT 22.10/kWh (USC 21/KWh), while the total tariff of HSD-based power plants is around BDT 154.11/kWh (USC 149/KWh).

In comparison, the energy cost of power generated by the Godda Power Plant in India is estimated to be around 9 cents/kWh, making it a far more cost-effective source of electricity for Bangladesh.

Shot in the Arm

The commencement of power supply from Adani group is a shot-in the arm for the South Asian nation of 170 million people which is facing its worst electricity crisis since 2013.

The country has been forced to cut power for 114 days in the first five months of 2023, as the government is unable to import fuel due to a decline in foreign exchange reserves and the depreciating value of the Bangladeshi taka which depreciated about 25 percent against the US dollar last year.

To put this in perspective, at least 53 of the country’s 153 power plants were shut in June for maintenance or a lack of fuel due to the dollar shortage, data from the state-owned Power Grid Company of Bangladesh said.

The power supply from Godda, is also expected to help country’s crucial ready-made garments (RMG) sector, which accounts for more than 80 percent of its export earnings, and has been hit hard by power outages.

Fair Share of Controversies

The power plant has drawn flak in Dhaka for the “lopsided nature” of the PPA that a number of experts say has favored the Adani group on several fronts.

Much of the controversy relates to Dhaka paying significantly higher prices – in comparison to what it pays for its other coal-based power – for lower-grade coal, thereby increasing the power tariff.

But such fears were allayed by the Adani group that said there would be no cost rise in electricity supplied from Godda. The price of electricity from the plant, would be $0.1363 per kilowatt-hour at the current coal rate in the international market, Adani Group said in a statement on 2 April.

What Lies Ahead

The Godda Power Plant is being hailed as a strategic asset in the India-Bangladesh's long-standing relationship, which will ease the power supply in Bangladesh, making its industries and ecosystem more competitive.

"The commissioning of Godda USCTPP marks a significant milestone for Adani Group, BPDB as well as for the economic co-relations between both nations. Adani Power has become a partner in the economic growth and prosperity of Bangladesh by supplying uninterrupted and reliable electricity at competitive tariffs. This collaboration shall boost the growth of industries in Bangladesh and ultimately Bangladesh's economy will get stronger," the company said in its statement.

India’s first transnational power project that started three months ago is a major step towards ensuring Bangladesh's energy security and may be a testament of broader energy partnership in South Asia.