Mumbai: After intense five-day negotiations, the Adani Group has lifted a crucial electricity supply deadline imposed on the Bangladesh government after the crisis-hit country conceded new repayment terms for dues worth of approximately ₹7,500 million.

The Indian conglomerate, however, is embarking on a Plan B for its only export-focused power plant if Bangladesh’s assurances do not materialize, said two people with direct knowledge of the matter.

The Adani Group had set November 7 as the deadline for the neighboring country’s government to clear dues or face a power outage that could affect at least 10% of Bangladesh’s electricity consumers.

Adani Power Ltd started supplying electricity to Bangladesh from its 1,600 MW Godda thermal power plant in Jharkhand last year, marking the group’s entry into transnational power projects. The agreement also marked India’s first transnational power project and remains a vital part of India-Bangladesh relations.

While Bangladesh’s monthly electricity bill, just for supplying Adani Power, amounts to $90-95 million ( ₹$750 million to $800 million), the country, hit by both an economic and political crisis, was paying only $20 million to $40 million each month, one of the two people mentioned above said.

While contributions have continued to increase over the past year and after the expiration of a letter of credit in July, the Adani group decided in October to close one of the two units of its power plant of Jharkhand, thereby halving its electricity supply to Bangladesh, bringing it to 750-800 MW.

However, things changed over the weekend.

On Sunday, the Bangladesh government proposed to reinstate the letter of credit, but with a post-dated validity, similar to a post-dated bank check.

Adani rejected the offer, citing a breach of the group’s power purchase agreement (PPA) with Bangladesh. But after intense discussions since Saturday on the repayment terms, beyond the partial payment of contributions, the Bangladeshi government has agreed to offer a new letter of credit in the amount of $170 to $180 million with immediate validity.

“This new letter of credit will arrive on Thursday itself,” assured the government. This letter of credit will have current validity and will be in accordance with the PPA agreement,” the first person said.

“The letter of credit is essentially intended to provide some degree of reassurance or assurance to the Adani Group and its lenders that the government is serious about repaying its debts. “The group may not invoke the letter of credit, but it may have to take serious action if the country does not meet its latest commitments discussed in recent days,” the person said, adding that dues will amount to around $940 million (approximately $940 million). ₹7,920 crore) by next month.

“The total value offered by them (Bangladesh government) is around 20% of the dues, while committing to clear all dues within the next 2-3 months. The conditions are now quite favorable,” this person said, without specifying the new conditions.

Adani Group and the Bangladesh Power Development Board did not respond to emails sent on Tuesday.

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The backup plan

With this assurance, the Adani Group has not only agreed to continue supplying electricity to Bangladesh but also plans to resume supply from the second unit of its Jharkhand plant, according to the two people.

“The Bangladesh government expects a large portion of payments from the International Monetary Fund or the Asian Development Bank in the coming months. Based on this, the Bangladesh Power Development Board has given assurance to the Adani Group that it will refund the outstanding dues within the next two to three months,” said the second of the two people.

Even so, the Adani group is in the process of creating a reserve, so that its Godda thermal power plant in Jharkhand will not remain idle if the assurances do not materialize. The plant supplies electricity only to Bangladesh, using coal imported from Australia and Indonesia.

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“The group must cover production costs and cannot afford to leave the factory idle. The group must answer to the project lenders if Bangladesh does not pay,” the second person said.

As a first step in the relief proposal, the Adani Group plans to install a 100 km transmission line from the Godda thermal power plant to India’s national grid to be able to sell electricity to local power distribution companies on the spot market.

“The Adani Group can use this transmission line, once installed, to sell either surplus or excess electricity to Indian players or use it to sell the entire 1,600 MW of electricity in case of power issues. Similar repayments (with Bangladesh) would recur or if supply to Bangladesh is interrupted for any reason,” the first person said.

“The group cannot sit idly by while contributions approach a billion dollars. The reason for the (Bangladesh) crisis is acceptable, but the group’s solvency and rating will be affected if large repayments remain due,” the person added.

In August, India’s power ministry changed its rules to allow export-focused power plants to sell electricity within the country if they default on payments under power purchase agreements .

Mint reported that Adani Power would be one of the main beneficiaries of the amendment as it was the only exclusive electricity supplier in crisis-hit Bangladesh. The amendment came about a week after Bangladesh’s then-Prime Minister Sheikh Hasina fled the country for New Delhi following weeks of protests.

Adani Power’s Godda Power Plant is Bangladesh’s largest electricity supplier, followed by Payra Power Plant (1,244 MW), which is owned by Bangladesh-China Power Co. (BCPC), and Rampal Power Plant (1,234 MW) owned by Bangladesh India Friendship Power Co. Ltd (BIFPCL) and SS Power I plant (1,224 MW).

In October, Reuters reported that Bangladesh was likely to put aside its price concerns and retain a power purchase agreement with Adani Power in the face of supply problems. The new Bangladeshi government had set up a committee responsible for evaluating the contracts concluded by the deposed administration of Sheikh Hasina, in particular that of purchasing electricity for 25 years from the Adani group’s power station in Jharkhand.