Private Sector

Adani Green Energy not having a guaranteed buyer for $6 bn solar project

Adani Green Energy not having a guaranteed buyer

Adani Green Energy not having a guaranteed buyer for $6 bn solar project in India

NEW DELHI|CHENNAI: Adani Green Energy not having a guaranteed buyer for $6 bn solar project in India –┬áIn June has no guaranteed customer, as Adani Green Energy’s announced record $6 billion solar energy project for its affect India’s main solar-adoption agency shows, and should expose the corporate to higher financial risk.

After share soared three-fold since the signing of the 8 gigawatts (GW) multi-plant deal, Shares within the firm, controlled by billionaire Gautam Adani, which Adani hailed because the “largest of its type, ever” and a landmark for India.

However, previously unreported info of the agreement between Adani Green & solar power Corporation of India Ltd (SECI) revealed that the agency has no “legal/financial obligation” to support the project if SECI fails to seek out buyers.

This would be the primary major SECI project without a state-guaranteed Power purchase contract (PPA), which analysts say has been key to putting together up India’s renewable energy sector.

When SECI floated the tender for the project in June 2019, it had said a PPA would be assured, but it withdrew the clause guaranteeing purchase within the deal signed a year later without any implication to SECI in reference to such (unsold) quantum including associated quantum of producing facilities,” the agreement, reviewed by Reuters, says.

Financing risk

Adani Green has said 2 GW of generation capacity will come onstream by 2022, while the remainder is going to be added in annual 2GW increments through 2025 as a neighborhood of the contract.

There are not any buyers in the queue for the Adani Green project yet and it’s unclear when SECI is going to be up to find buyers, a process that typically takes months of time.

Auctions by the SECI generally attract a big amount of participation due to the reassurance of power purchase and payments.

But the shortage of such a guarantee could undermine investor and lender confidence, raising financing costs within a market like India country where power demand growth has continuously fallen in need of expectations amidst a broader economic slowdown in government-guaranteed contracts with cashflow payment certainty provide investors the arrogance to deploy 10’s of billions of dollars”, added Tim Buckley, director at the Institute of Energy Economics and Financial Analysis.

Adani Green has mentioned that it might receive interim funding for the project from a consortium of foreign banks, and later with money raised from the capital markets with investors of its ability to tap markets citing its sovereign grade rating.

It declined to discuss the project on Thursday.

“We have full visibility and that we would be in a position to tell the market shortly,” the group’s chief treasurer, Jugeshinder Singh, said earlier this month.

Enough margin available

Gautam Adani has said the project can make a profit at the facility price of 2.92 rupees ($0.0393) per kW-hr (kwh) agreed within the SECI tender enough margin available plus we even have a time of 3-5 years to implement this project at 2.92 rupees, he said in June for a year with the agency extending deadlines and raising the utmost bidding price to 2.93 rupees/kwh from 2.75 rupees/kwh.

“SECI thought the ultimate price agreed was on the upper side, and that is why there was no purchase assurance,” a politician conversant in the deal said on condition of anonymity thanks to the sensitivity of the matter.

SECI has removed the clause from another renewable energy tenders since dropping the PPA with Adani, also for the potential buyers of power were consulted, and “due processes” were followed during the auction and before signing the agreement with Adani.

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