Home ›› 07 Mar 2023 ›› Front
Adani Power (Jharkhand) Limited (APJL) is scheduled to supply electricity to Bangladesh from its plant in Godda from the first week of March, amid calls from experts for a sustainable solution to the company’s controversial demand for high prices for low-grade coal.
Experts have also been urging the authorities concerned to update the questionable power purchase agreement (PPA) signed between APJL and Bangladesh Power Development Board (BPDB) in 2017.
They said APJL should sign a long-term contract – like the ones Payra and Rampal plants have – with its sister concerns coal mines in Australia, Indonesia, and India to maintain coal supply at competitive prices.
Otherwise, BPDB itself should source coal at the right prices for the Godda plant, said energy and mining expert Dr Mohammad Tamim, also a professor at Bangladesh University of Engineering and Technology.
BPDB officials also said they want a permanent solution to this problem. Otherwise, Bangladesh will suffer dearly during the 25-year power purchase tenure. During this period, coal will be imported in line with the floating market benchmark.
BPDB officials said they do not want to take responsibility for the agreement with APJL as it was decided by the top level of the government. They said the government would now have to handle the matter. Power Secretary Md Habibur Rahman declined to comment on this.
Several BPDB officials said if Adani Group is given higher prices for low-quality coal, the domestic plants, including Payra, Rampal, and the upcoming SS Banshkhali, may also demand higher coal prices. BPDB Member (Generation) SM Wazed Ali Sardar said, “We run plants according to their merit orders, which is determined by fuel costs. If Adani charges higher coal prices, we cannot bear that.”
“Maybe the Godda plant will then sit idle, but the money will still have to be paid. This problem requires a permanent solution.”
Experts and BPDB sources said there are two methods for constructing coal-fired plants to reduce costs. One way is to build them at the mouth of coal mines, like Barapukuria in Dinajpur, and another is doing so in the coastline area where imported coal will be used.
Though imported coal will be used at the Godda plant, it has been constructed at a distance of 600 kilometres from the coastline. Due to that, costs have jumped further.
Meanwhile, long-term coal import agreements with coal suppliers are needed, said experts. In many cases, power plant owners buy entire mines to reduce costs. For example, many coal mines in Indonesia are owned by Chinese power plants. In such cases, even if energy prices fluctuate internationally, supply will not be disrupted while prices will also remain reasonable.
The BPDB’s company affairs department said Bangladesh-China Power Company (Pvt) Limited (BCPCL) had signed a 10-year contract with Indonesia’s state-owned coal company PT Bayan Resources Tbk for the Payra plant in Patuakhali to reduce costs. The Rampal plant has a five-year contract with Indonesia.
That is why BCPCL is now buying coal at a 45 per cent discount despite price hikes. According to the Indonesia Coal Index (ICI), the free on board (FOB) price of 5,500-5,800 calorific coal is $123 per tonne. But the Payra plant is buying at $115 per tonne, including shipping costs, due to the long-term contract, which includes discount.
Adani Group is demanding $400 for per tonne 4,600 calorific coal, which is only $94.27 in ICI. The current price of high calorific coal is around $204 per tonne, according to the Newcastle index.
A senior official at the BPDB’s company affairs department said as Adani Group is demanding higher coal prices at the beginning, it will continue to do so in the future.
“It would be possible to get coal at a discount if there is a long-term contract. The government should approach Adani to sign a long-term contract for coal supply.”
Adani Power recently requested BPDB to issue the demand note to get electricity from the Godda plant, where the coal price was quoted $400
per tonne.
As per the PPA with Adani Group, coal prices will be pass-through, meaning Bangladesh will have to pay the market price for coal imports without any price ceiling or discount provision.
BPDB officials found Adani’s quoted price is around 60 per cent higher than the cost of coal with the same heating value that has been used in the Payra plant.
Prof Tamim said the Godda plant will run on imported coal but it is surprising that there is no long-term contract for fuel supply.
“Since Adani Group will run the plant where it will use its own coal, it has taken every opportunity to get maximum advantage. But it could have given more discount as it is using its own coal.”
Bangladesh to bear the brunt
BPDB’s contract with Adani Group shows APJL will have to be paid $473.16 million in capacity payment annually. BPDB will have to pay penalty if 34 per cent of power is not taken from APJL.
If the plant is run at a 50 per cent plant factor, Adani will charge an additional cost of 4.5 lakh tonnes of coal annually. Currently, the price of this amount of coal is Tk 6,000 crore.
Adani will have to be paid coal prices, shipping costs, and port charges if BPDB takes less electricity than what is mentioned in the demand note. Also, Adani will charge for 1.1 per cent coal system loss, which is over Tk 1,000 crore yearly.
Bangladesh currently has six coal-fired plants in the private sector. Among these, Payra, Rampal, and Barishal 350MW plant have started production. None of the six plants were given the benefits that Adani will get for the Godda plant.
