B Mirror Report : The Bangladesh Power Development Board (BPDB) has been charged by Adani Power Limited of neglecting to renew the Letter of Credit (LC). Simultaneously, the corporation has brought up the problem of nonpayment in an official and forceful manner. This has raised concerns regarding future power supply continuity.

Under Clause 13.2(1) of the Power Purchase Agreement (PPA) signed on 5 November 2017 between Adani Power Limited (then APJL) and BPDB, BPDB is required to maintain and renew a valid LC of an adequate amount at specified intervals. This LC serves as security for payment of electricity bills. However, despite clear violations of the PPA, questions are now being raised within power sector policymaking circles as to why BPDB is not taking effective action. Sector insiders warn that such a situation could negatively affect foreign investment in Bangladesh’s power sector in the future. In this context, the possibility of contract suspension or legal disputes cannot be ruled out.

In its letter to BPDB, Adani Power stated that despite repeated reminders and formal notices, BPDB has still failed to renew the LC, which constitutes a clear breach of contract and an ongoing “Event of Default.” Failure to renew the LC is not only a contractual violation but is also undermining the confidence of its financial lenders and creating serious risks to the implementation of the PPA and the Implementation Agreement.

According to sources within BPDB, under the PPA BPDB was obligated to continuously maintain a valid LC of sufficient value. This is not an optional facility but the minimum financial security for payment of electricity bills.

However, Adani Power claims that despite sending seven letters over a five-month period from 18 July to 5 December no resolution was achieved. Under Clause 13.2(1) of the contract, failure to renew the LC directly constitutes an “Event of Default” as per Clause 4.3(c). Legally, this means BPDB is already in breach of contract. On 13 November this year, Adani Power issued a formal notice of default to BPDB. The matter was not limited to BPDB alone; in accordance with Clause 4.6 of the agreement, the Government of Bangladesh was also formally notified in writing.

A senior official of the power division, speaking to Media on condition of anonymity, said that failure to renew the LC effectively means the government is taking a risk. This is not a minor administrative lapse. The LC complication indicates deep financial stress at BPDB. Rising capacity charges, dollar shortages, and reliance on subsidies have collectively weakened BPDB’s financial stability.

In its letter, Adani Power said that both its international and domestic lenders have expressed serious concern over the issue. In large-scale investments in the power sector, an LC is the most basic security mechanism. If that becomes uncertain, the project’s financial sustainability comes into question.

Analysts believe that if the LC issue persists, several options could be open to Adani Power. These include seeking remedies under the contract, limiting or suspending power supply, or pursuing international arbitration each of which would be economically and diplomatically sensitive for Bangladesh.

According to Adani Power, the urgency of the matter was also highlighted in recent meetings with BPDB officials. However, even after those meetings, no written assurance or timeline was provided. Adani Power has clearly stated that if the LC is not renewed immediately and confirmed in writing, the situation could become more complicated.

Energy expert Ijaz Hossain told Media that, first of all, BPDB is unlikely to go as far as deliberately breaching the contract, as the consequences would not be positive. However, it is also true that BPDB does not currently have full capacity to make payments.

He said the BPDB–Adani situation has now taken on the nature of a “dispute.” Just as people behave during a dispute, BPDB is behaving similarly with Adani. This is because the disagreement between BPDB and Adani over reducing electricity prices is ongoing. At the same time, Adani also understands that BPDB lacks sufficient financial capacity. Essentially, both sides now need to engage in dialogue and reach a compromise on the LC issue, and it is hoped that BPDB will resolve the matter through mutual understanding.