Adani Power

Vertical integration is the next big step

An increasing number of conventional power generation companies are foraying into the renewable energy space. With the government’s focus on renewable energy development and better access to financing, there is now greater ease of entering the sector.

Adani Power is one such company that has carved a niche for itself in the renewable energy space. A subsidiary of the Adani Group, it has an extensive portfolio comprising thermal power plants (TPPs), solar and wind projects, and power transmission networks distributed across the country. A leading player in the solar energy segment, it has the distinction of developing the world’s largest solar power plant (648 MW) at a single location. Adani Power is aiming to develop 10 GW of solar power capacity by 2022.

To this end, it has entered into a joint venture (JV) with Rajasthan Renewable Energy Corporation Limited (RRECL) to develop one of India’s largest solar parks. Both the companies hold equal equity share in the JV, Adani Renewable Energy Park Rajasthan Limited. The park will entail an investment of Rs 600 billion and include a manufacturing unit for solar modules and other equipment. About half of the 10 GW capacity of the solar park is expected to be developed by Adani Power. As part of the first phase, which is likely to be completed by December 2019, Adani is currently developing 500 MW of solar capacity at Bhadla, Jodhpur, and 1,500 MW at Fatehgarh, Jaisalmer. The second phase of the park is expected to be completed by 2022.

In a bid to declutter the group’s operations, the Adani Group undertook a restructuring exercise last year. Adani Ports and Special Economic Zone Limited, and Adani Power were demerged into free-standing listed companies. Post this, Adani Power, which was earlier a subsidiary of Adani Enterprises, became a directly owned subsidiary of the Adani Group. The restructuring facilitated the company’s shift to solar module manufacturing, generation and project development.

Renewable Watch explores the growth of Adani Power’s power portfolio, the capacity under execution and its future outlook…

Current portfolio

Since Adani Power’s inception in 2007, its portfolio has grown significantly in the thermal, solar and wind power segments. It has a coal-based power footprint of 10,440 MW from four plants. These are the 4,620 MW Mundra TPP, which is the largest private single-location coal-based power project in the country and the first to receive carbon credits from the United Nations Framework Convention on Climate Change; the 3,300 MW TPP in Tiroda, Maharashtra; the 1,320 MW TPP in Kawai, Rajasthan; and 1,200 MW TPP in Udupi, Karnataka. Another 3,200 MW of coal-based power plants are currently under construction.

The company also has assets in the power transmission segment, with about 5,448 ckt. km of transmission lines currently under operation, and another 1,927 ckt. km under construction. The largest of these is the Mundra-Mohindergarh transmission line spanning 1,980 ckt. km, followed by the Tiroda-Koradi-Akola-Aurangabad line spanning 1,215 ckt. km.

Solar

It has been only five years since Adani Power ventured into the renewable energy sector, but it already has one of the country’s largest solar portfolios. According to a Renewable Watch Research analysis, of the capacity developed as of September 2016, Adani Power accounts for the second largest market share at 6.04 per cent, closely following ACME with 6.92 per cent.

Adani Power’s cumulative existing solar power capacity stands at 788 MW and includes a 100 MW completely tracker-based power plant in Punjab and a 40 MW plant at Bitta, Gujarat. These are followed by the world’s largest solar power plant with 648 MW of installed capacity. Located at Kamuthi near Madurai, the project was built at an investment of Rs 45.5 billion. While civil works were carried out by the Adani Group, the modules were procured from China-based Hanhwa Q Cells Private Limited. The balance of system was installed by ABB India Limted. The plant was set up in a record time of eight months, translating into about 11 MW per day, with the help of 8,500 personnel.

Currently, Adani Power has 1,330 MW of capacity at various stages of development. These are 100 MW each in Uttar Pradesh, Chhattisgarh, Telangana and Andhra Pradesh, 790 MW in Karnataka and 70 MW in Maharashtra. The company is also in the process of developing ultra mega solar power plants and solar parks, including 13 GW in Gujarat and 10 GW in Rajasthan.

Wind

Adani Power has also ventured into the wind energy business in India. It has commissioned a 12 MW wind power plant in Madhya Pradesh. Also, 90 MW is under construction in Gujarat and another 50 MW in Andhra Pradesh.

Manufacturing

Working in tandem with the government’s Make in India initiative, Adani Solar, a wholly owned subsidiary of Adani Enterprises Limited, is currently in the process of setting up a 1.2 GW solar cell and module manufacturing facility at Mundra, Gujarat. Adani Solar is a vertically integrated company of the Adani Group that, once commissioned, will help the company deliver complete solar solutions from manufacturing to generation. The company will provide multi crystalline, mono crystalline and dual glass bifacial solar modules along with pre- and post-sales support. The facility is being built at an investment of Rs 4 billion over a period of four years.

Financial health

Adani Power’s total income in the quarter ended December 2016 was Rs 58.13 billion, 6.5 per cent less than the total income during the same quarter in 2015-16. The company suffered a net loss of Rs 3.23 billion in the same period against a profit of Rs 1.09 billion in the same quarter of the previous year.

The company was struggling with a consolidated debt of Rs 49.13 billion at the end of 2015-16. However, with the recent growth in the number of projects, upcoming solar and thermal capacity, and commissioned projects, the company is expected to recover in the near future.

Outlook

With a large solar capacity under development, Adani Power is expected to generate significant revenues in the coming years. Once its solar manufacturing facility comes online, it would achieve vertical integration, serving the complete solar power value chain. This will help reduce the country’s dependence on imported modules, leading to a further decline in equipment prices and an increase in profit margins for developers. The company plans to increase its conventional power generation capacity to 30,800 MW, transmission capacity to 20,000 ckt. km and solar manufacturing capacity to 1.8 GW by 2021-22.

However, with grid integration increasingly becoming an impediment to the growth of renewable energy, Adani Power’s ultra mega solar power parks would need to borrow synergies from the group’s transmission business to enable better evacuation of the power generated. Challenges such as land evacuation and clearances continue to exist in utility-grade solar projects. To counter this, the company may want to draw up strategies and venture into the rooftop solar segment and leverage the opportunities arising from the government’s 40 GW by 2022 target.

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