Godda, in the Indian state of Jharkhand, is surrounded by the country’s most productive coalmines. It will soon also be home to the Adani group’s latest coal-fired power station, a plant built for the sole purpose of sending energy across the border to Bangladesh.
Adani has framed its planned 1,600-megawatt Godda power plant as a humanitarian venture. In a statement to Guardian Australia, the company said it had acted “in the large interests of our neighbours, the people of Bangladesh” by inking the deal.
But market analysts say the supply agreement is anything but benevolent. The tariffs quoted by the Bangladesh Power Development Board are about double the current cost of solar and wind power in India.
Tim Buckley, a former head of equity research at Citigroup and now an analyst with the pro-renewable energy group the Institute for Energy Economics and Financial Analysis (IEEFA), says there is a more obvious reason for Adani to build Godda: to prop up the prospects of the proposed Carmichael megamine in Queensland.
Two deadlines for Adani to finance Carmichael have come and gone. Buckley said potential investors had balked, partly because there were no “bankable” off-take agreements in place. Effectively, Adani has nothing concrete to demonstrate that it can sell, and profit from, the high-ash coal it plans to extract from the Galilee basin.
Adani did not respond directly to a series of questions asking the company to outline specific plans and agreements for Carmichael coal.
It said in a statement that “as a significant coal trader in the region, Adani is well-placed to secure customers for Carmichael coal both from within the Adani group of companies and outside the group”.
“India remains a key market for Carmichael coal,” the statement said. “We are also targeting growth in demand for seaborne thermal coal from Asia. The seaborne thermal coal market has recorded average per annum growth of 4.9% over the last decade and continued growth is forecast, this will create opportunities for the Australian coal industry.”
Initially, Adani had planned to run its own vertically integrated “pit-to-plug” operation, taking coal from the Galilee basin, transporting it to Adani-owned power stations in India, and increasing profits by cutting out middlemen. Up to 16m tonnes a year from the proposed Queensland mine was earmarked for the Mundra power plant in Gujarat.
But Mundra has since fallen into serious financial difficulty, making the “pit-to-plug” vision largely untenable. Adani’s subsidiary Adani Power has a net debt of about US$7bn. Last year it offered to sell majority control in the Mundra power station to a government entity for one rupee.
Mundra and other privately run coastal power stations have to import coal because of Indian rules that give state-owned entities control over the domestic resource. As world coal prices have spiked, those same power stations have struggled to turn a profit. The Indian association of power producers has claimed that coal is unviable in India at prices above US$70 a tonne. The current price is about US$95 a tonne.
Despite Godda’s proximity to India’s coal heartland, Adani would have to import coal to the new plant. The company’s Australian arm has already begun to hint that this will come from Carmichael. At an event in Brisbane last month the chief executive of Adani Australia, Jeyakumar Janakaraj, was reported by News Corp as saying Galilee coal had been “booked”.
Buckley estimates the 700km – and 8km/h – train journey to Godda from the coast would add US$16 a tonne to the cost of coal to fuel the new plant, relative to a coastal power plant.
He says the deal is clearly not in the interests of Bangladesh, which would bear the costs of imported coal and unnecessary transport. Buckley said the country could import power more cheaply by seeking fuel-agnostic competitive tenders from the Indian market.
“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 on to Bangladesh.”
“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.
The deal with Adani has prompted protests in Dhaka on environmental grounds that have had to be broken up by police.
Prof Ijaz Hossain, an analyst in Bangladesh, says the country “is in a precarious situation”.
“The main reason is we used to depend on natural gas, but it’s running out,” Hossain says.
He says even under the best options, the cost of electricity is going to rise fivefold in the country in coming years and the Adani deal would provide electricity in greater quantities than Indian public-sector companies could provide.
“The reality in terms of getting electricity in Bangladesh is: expensive electricity or no electricity. So any electricity coming from any source that is cheaper than the options we have is a good deal.
“We need thousands of megawatts. If the [Indian public sector] could give us 5,000MW I would say, take it. But where will they get it from?
“So if sourcing the coal is done by the Adani group, it’s very favourable for Bangladesh. This is a good project for Bangladesh if it takes off.”
Reports this month suggested the governments of India and Bangladesh were discussing a low-cost 2000MW solar power supply arrangement to Bangladesh.
Adani said in a statement that “the electricity supply agreement and proposed power project have been envisaged after due diligence and prudent planning in the large interest of our neighbours – the people of Bangladesh”.
“The [IEEFA] report is based on certain assumptions and inferences, which are inconsistent with the factual aspects of this initiative between the two nations. Its authors/activists have not consulted us to check the facts”.