Adani’s Godda power project bad news for Bangladesh

April 26, 2018
A model of Adani's proposed Godda power plant.

A new report, “Adani Godda Power Project: Too Expensive, Too Late, and Too Risky for Bangladesh”, by Tim Buckley and Simon Nicholas released on April 10 by the Institute for Energy Economics and Financial Analysis (IEEFA) has concluded that the Godda power project, promoted by Adani to justify its struggling Carmichael coal project in Queensland, is financially unviable and a poor strategic fit for Bangladesh.

IEEFA’s Australasia director of energy finance studies, Buckley said: “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.”  

However, he said, Godda would be a policy catastrophe for Bangladesh. The plant is being proposed as a way for India to export power from Jharkhand state into nearby Bangladesh. But both India and Bangladesh would be better off if Bangladesh were to import power on a technology-agnostic basis from existing plants.

“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,” Buckley said. “Importing coal from Australia and then railing it 700 kilometres past the largest coal reserves in India would simply make any electricity produced at Godda too expensive.

Adani Australia Chief Executive Jeyakumar Janakaraj has claimed the Carmichael-supplied Godda project is a way to lift millions of Bangladeshis out of poverty. In fact, the power purchase agreement proposed between India and its much poorer neighbour is geared primarily toward assisting Adani companies at the expense of Bangladesh.

“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,” Buckley said, noting that the estimated Godda tariff would be higher than Indian state-owned utility NTPC’s thermal power tariff.

The report also highlighted the dire financial state of Adani Power: “The company is in clear financial distress with net debt of more than US$7 billion. Its share price has fallen almost 80% to a near 10-year low,” Buckley said.

“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 been able to fund the land purchases 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.

“Adani is obviously keen to try and convince potential Carmichael investors that there are alternative destinations for Carmichael’s coal,” Buckley said. “That’s even though the Indian Association of Power Producers has said that, at prices above US$70/t, imported coal is unviable in India. The current cost is US$90 to US$100/t.”

The report concludes that both India and Bangladesh would be better off if Bangladesh were to import power 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 would likely come from renewable sources.

In February, NTPC won a competitive tender to export power to Bangladesh at a far cheaper rate than Adani’s Godda project could offer, an arrangement that makes much more sense for Bangladesh.

The history of Adani’s promotion of the Godda project bears marked similarities to the course of Carmichael project in Queensland’s Galilee Basin. It has high level political support, fudging starting dates and dodgy financial modelling, which points to a stranded asset with losses to be borne from the public purse or passed on to unsecured partners.

Adani’s original plans were to build a thermal power plant in Jharkhand using domestic coal and sell the electricity within Jharkhand state. Then, in February 2016, Adani changed its plans, proposing to fuel the plant with imported coal and export the electricity to Bangladesh. 

In March last year, the Jharkhand Chief Secretary said Adani would begin work on the Godda project in June and the project would take 18 months to complete. In January, Adani announced that work had started on the project. In its most recent financial results to December 31, Adani Power said the plant would not be operational until May 2022.

The Godda project was reportedly put on hold last May due to environmental concerns, specifically about the proposed plant’s use of water taken from the Chir River. The project also requires land acquisition and has faced significant opposition from those at risk of losing land to Adani.

That the electricity generated by the power plant is to be exported to Bangladesh has made the impacts of water use and land acquisition on local communities even more controversial.

In December, an important 175-acre block was handed over to the company, part of the 1000 acres required for the project. However, further doubts about the project were raised in January when it was reported that Adani had failed to come up with the money to complete the land acquisition.

Adani had also applied to create a new Special Economic Zone for the Godda project which would have secured a 10-year tax holiday and other benefits, but this was rejected by the Commerce Ministry in February.

A former first minister of Jharkhand has questioned whether the plant’s construction is in contravention of India’s pledge to the Paris Climate Agreement, also noting that the cost of solar generation is now lower than the cost of electricity from existing coal fired power plants.

Given the grassroots opposition to the Godda project in both India’s Jharkhand State and Bangladesh it would seem that there are opportunities for mutual international solidarity activities with the movement to Stop Adani in Australia.

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