The Bangladesh Power Development Board (BPDB) has reportedly issued a letter of credit (L/C) for the equivalent of US$173 million to partially settle its debts to India's Adani Power.

While this move means that the Indian power producer will continue to supply Bangladesh's state-owned electricity utility with energy, Adani had requested that BPDB either arrange an L/C to secure or otherwise settle outstanding payments amounting to approximately US$846 million.

Payment delays

This substantial sum has accrued due to BPDB's delayed payments for electricity supplied by Adani Power's 1,600 MW Godda plant in Jharkhand, India.

The plant began operations in June 2023, and the unpaid dues have accumulated over several months.

L/C remedy

While the fresh L/C for US$173 million reportedly gives Adani sufficient confidence to keep energy flowing to BPDB, the Indian company had asked for the larger US$846 million L/C to assure it of timely payments for the electricity to be supplied in the future.

This would mitigate the financial risks associated with delayed payments for the Indian power producer while the absence of such a guarantee has led to financial strain on Adani Power.

Dollar crisis

The delayed payments are attributed to Bangladesh's ongoing dollar shortage, which has hindered BPDB's ability to settle its dues promptly.

This financial constraint has affected BPDB's capacity to provide the necessary L/Cs or make timely payments, leading to the current situation.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.