The dispute between Adani Power Limited and the Bangladesh Power Development Board (BPDB) has escalated, with Adani Power formally initiating the international arbitration process as negotiations over the Power Purchase Agreement (PPA) have failed.
The financial risk and potential penalty amount relate to the total cost and duration of the 25-year contract, which Bangladesh may be liable for if the contract is unilaterally canceled.
⚡ The Core Dispute and Arbitration
The disagreement centers on the 2017 Power Purchase Agreement (PPA) for electricity supplied from Adani Power’s 1,600 MW coal-fired Godda power plant in Jharkhand, India.2
| Aspect | Detail |
| Disputing Parties | Adani Power Limited (APL) vs. Bangladesh Power Development Board (BPDB) |
| Project | 1,600 MW Godda coal-fired power plant (built exclusively to export power to Bangladesh) |
| Arbitration Center | Singapore International Arbitration Centre (SIAC) (as specified in the PPA) |
| Current Status | Adani Power has nominated its mediator and asked BPDB to do the same, triggering the formal dispute resolution process. BPDB is preparing to face arbitration. |
| Primary Issue | Payment Disputes and Pricing Formula |
Key Points of Contention
- High Power Tariff: BPDB argues that the electricity tariff charged by Adani Power is significantly higher than the rate for power from other domestic and Indian suppliers. The Godda tariff, linked to international coal price indices, was recently estimated at 14.87 Taka per unit, compared to an average of 9.57 Taka from other Indian suppliers.
- Coal Pricing Formula: BPDB is seeking a renegotiation of the PPA’s coal pricing formula, claiming that the current benchmark (linked to Australian and Indonesian coal prices, including long-distance freight charges) makes the power economically untenable for Bangladesh.
- Tax Exemptions: Bangladesh’s interim government has accused Adani Power of breaching the PPA by allegedly withholding the benefit of substantial tax and duty exemptions granted by India after the Godda plant was declared a Special Economic Zone (SEZ).
- Pending Payments: Adani Power is seeking to recover outstanding power dues, which it claims total approximately $496 million (though the exact amount is disputed by BPDB). Adani has also threatened to suspend power supply if the dues remain unpaid.
⚖️ The $5 Billion Fine Risk
The mention of a $5 billion fine risk relates to the potential financial penalty Bangladesh would face if it unilaterally attempts to cancel the 25-year PPA.
- Contractual Liability: International power purchase agreements are legally binding. If Bangladesh were to cancel the contract without proving legal grounds (such as corruption or material breach), it would be liable to pay the full cost of the remaining contract period.
- Total Contract Value: Given the massive power capacity (1,600 MW) and the long 25-year duration of the contract, the cumulative financial liability for BPDB, which includes capacity payments and potential damages, could reach billions of dollars, with $5 billion being the high-end estimate cited by legal experts in Bangladesh.
- Bangladesh’s Review: Following the change in government, a National Review Committee was formed to examine the PPA and other energy deals for potential irregularities or corruption. The interim government has stated it will not hesitate to cancel the deal if corruption or illegalities are definitively proven, which would provide a legal basis for termination under international law.
The arbitration process, set to be conducted under SIAC rules, will begin with a non-binding mediation phase. If that fails, a full-blown arbitration battle will commence, a process that could take several years and whose final verdict would be globally binding under the New York Convention.
