Report: Adani Godda Power project too expensive for Bangladesh

The proposed coal-based Godda Power Project might not be a financially viable venture for Bangladesh. A report published on April 9 by the Institute for Energy Economics and Financial Analysis (IEEFA) made the disclosure, stating that the power plant would not be a good strategic fit. The IEEFA study titled “Adani Godda Power Project: Too Expensive, Too Late, and Too Risky for Bangladesh” also stated that the project is being endorsed by Adani Group, an Indian multinational conglomerate company, to defend its struggling Carmichael coal project in Australia. In a press release issued the same day, Tim Buckley, IEEFA’s director of energy finance studies, Australasia pointed out that Adani sees the Godda project as a way to provide an alternative destination for coal from Carmichael, for which it has so far failed to secure any funding. Buckley added that Carmichael coal was originally intended for Adani Power’s import-coal-fired Mundra plant in India, which is not doing very well. The IEEFA director warned that Godda would be a policy catastrophe for its target market. The power plant is being proposed as a way for India to export power from Jharkhand State into neighbouring Bangladesh. The report states that both India and Bangladesh would be better off if Bangladesh were to import power on a technology-agnostic basis from existing plants. Addressing the viability of the proposed project, Buckley commented that Godda would lock Bangladesh into expensive electricity with high emissions at a time when cleaner, cheaper alternative sources of energy are rapidly being deployed across India. He further commented that importing coal from Australia and then railing it 700 kilometers past the largest coal reserves in India would simply make any electricity produced at Godda too expensive. The report notes that Adani Australia Chief Executive Jeyakumar Janakaraj has pushed for a Carmichael-supplied Godda as a way to lift millions of Bangladeshis out of poverty. However, the power purchase agreement struck with India’s neighbor is geared primarily toward assisting Adani companies at the expense of Bangladesh. Buckley commented that the logistics of the proposal can only work because the power purchase agreement allows Adani Power to pass the full cost of importing the coal onto Bangladesh.” He also noted that the estimated Godda tariff of Rs6.65/kWh (A$0.13/kWh) would be higher than Indian state-owned utility NTPC’s thermal power tariff of Rs3.21/kWh (A$0.06/kWh).

Adani Power’s financial state

IEEFA’s report also highlights the dire financial state of Adani Power. According to Buckley, the company is in clear financial distress with net debt of over US$7 billion, and its share price has fallen almost 80% now to a near 10-year low. He added that the company has given no indication of how it will secure funding for this proposal, and Adani Power itself is in no financial position to undertake a major new US$2.1 billion greenfield project. Adani Power has not made the full cash deposit required to secure land for the Godda project, and its loss-making 4.6-gigawatt Mundra plant has recently ceased supplying electricity to the state of Gujarat in breach of its contracted power purchase agreement. Buckley further commented that Adani is obviously keen to try and convince potential Carmichael investors that there are alternative destinations for Carmichael’s coal. The Indian Association of Power Producers has previously stated that, at prices above $70/tons, imported coal is unviable in India, but the current cost for the proposed project is $90 to $100/tons. The IEEFA report concludes that both India and Bangladesh would be better off if Bangladesh were to import power on a technology-agnostic basis from existing Indian power plants in procurement deals based on competitive tenders. Given that renewable energy in India is now cheaper than power from existing coal-fired power plants, such imports come increasingly from renewable sources. In February, 2018, NTPC, the state-owned Indian utility, won a fuel-agnostic competitive tender to export power to Bangladesh that will supply electricity at a far cheaper rate than what Adani’s Godda project could offer.