Adani Green Energy

Exploring organic and inorganic routes for growth

The Adani Group has committed $50-$70 billion in investment in the renewables space. The group also aims to become the world’s largest renewables pl­ayer by 2030. In November 2021, Adani Green Energy Limited (AGEL) and Adani Transmission Limited (ATL) declared their Energy Compact Goals as part of COP26, primarily adhering to Sustainable Deve­lo­p­­­ment Goal 7. In particular, AGEL set a tar­get of achieving 45 GW of renewable en­ergy capacity by 2030, with the average tariff below the Average Power Purchase Cost at the national level. For 2025, the co­mpany’s goal is to reach 25 GW of re­newable energy portfolio.

Further, AGEL aims to invest $20 billion in renewable energy development over the next decade and develop a 2 GW per year solar manufacturing capacity by financial year 2022-23. As per the company’s most recent press release dated May 28, 2022, AGEL has an operational capacity of 5.8 GW and a total renewable portfolio of 20.4 GW. Between now and 2025–26, the company expects to add around 3 GW of capacity every year.

Renewable Watch examines the recent de­velopments of AGEL in different renew­ab­le energy segments, financing, and or­g­a­­­nic and inorganic growth opportunities…

Recent financings

AGEL, which is planning massive investments in the renewable energy space, has been depending on a bouquet of fin­a­ncing options for its expansion activities. For ins­ta­nce, in May 2022, Abu Dha­bi-ba­s­ed In­ter­national Holding Company (IHC) invested $2 billion in AGEL, ATL and Ada­ni En­terprises Limited through the preferential allotment route. IHC’s partnership with Adani will generate 9 per cent of India’s non-fossil energy capacity by 2030.

Prior to that, in March 2022, AGEL extended its construction financing framework to $1.64 billion by raising a $288 million facility for its under-construction renewable as­­­­s­et portfolio through definitive agree­me­­nts signed with a group of internatio­nal lenders. The funds will be used to fin­ance the 450 MW hybrid portfolio of solar and wind renewable projects being set up in Ra­jasthan by AGEL. Then, in February 2022, three subsidiaries of AGEL – Adani Green Energy (UP) Limited, Prayatna De­ve­lopers Private Limited and Param­pujya Solar Energy Private Limited – with a cu­mu­lative portfolio of 930 MW of operatio­n­al solar power projects, raised Rs 6.123 billion through their maiden domestic bo­nd issuance, on private placement basis. The non-convertible debentures (NCDs), with a face value of Rs 1,000,000 each, have an average fixed annualised coupon rate of 7.83 per cent per annum and a te­nu­re of up to approximately 12 years. The proceeds from the NCDs will be utilised to part-refinance the existing rupee term loan, bearing a higher interest cost.

Similarly, in September 2021, AGEL pri­c­ed its maiden ListCo senior issuance of $750 million through a three-year issua­n­ce at a fixed coupon rate of 4.375 per cent. The issuance was oversubscribed by 4.7 times. The funds will be utilised to­­­­w­a­rds equity funding of the capex for un­de­rlying renewable projects under constr­uction by AGEL. Under the structure, AGEL can draw up to $1,700 million (in­clu­ding the present issuance) over the co­urse of time, subject to the covenants of the structure.

Inorganic route for growth

AGEL aims to grow quickly in the renewable energy space and amass several GWs of capacity by 2030. However, the development of completely new projects often takes time, as they need to be won in an auction, following which tariffs need to be approved, and land and grid connectivity need to be assured before ac­tual construction begins, which also takes ti-­me. For companies such as AGEL, with deep pockets and the ability to absorb ri­sks, acquiring good quality projects is th­us often a preferable means of expanding their portfolios.

For instance, in October 2021, AGEL successfully completed the acquisition of SB Energy Holdings Limited (SB Energy India) in an all-cash deal. With this deal, SB Energy India is now a 100 per cent subsidiary of AGEL. The transaction pegs SB Energy India at an enterprise valuation of $3.5 billion. The average tariff of the portfolio is Rs 2.75 per unit.

Then, in September 2021, Adani Renew­able Energy (MH) Limited, a wholly-ow­ned subsidiary of AGEL, signed definitive agreements with Essel Green Energy to acquire 100 per cent economic value in a special purpose vehicle that owns a 40 MW operating solar project in Odisha. The project has a long-term power purchase agreement (PPA) with the Solar Energy Corporation of India (SECI) at a tariff of Rs 4.235 per unit, with a remaining PPA life of about 22 years. The acquisition of the project was at an enterprise valuation of Rs 2.19 billion.

Prior to that, in March 2021, AGEL had signed a share purchase agreement for the acquisition of a 100 per cent stake in two SPVs holding 75 MW of the operating solar projects of Sterling & Wilson Private Limited, a Shapoorji Pallonji Group com­pa­ny. The projects, commissioned in 2017, are located in Telangana and have long-term PPAs with the Southern Power Distribution Company of Telangana. The enterprise valuation of the two target SPVs is Rs 4.46 billion. In the same month, the company also signed a share purchase agreement for acquisition of 100 per cent stake in an SPV holding a 50 MW operating solar project of the Toronto-headquartered SkyPower Global. The project is located in Telangana and was also commissioned in 2017 following a long-term PPA with the Southern Power Distribution Company of Telangana.

Project development activities

In its journey towards becoming a leading global renewable energy player, AGEL has been announcing multiple new proje­c­ts in the renewable energy space and has also been successful in winning a few te­nders recently. Further, the company re­­­a­­lises the importance of large-scale sto­rage facilities in facilitating integration of in­termittent renewables, and is exploring this space actively.

Most recently, in June 2022, the chief minister of Andhra Pradesh approved pump storage projects proposed by AGEL with a total capacity of 3,700 MW and an investment plan of Rs 157.4 billion by the Adani Group in Andhra Pradesh. At the World Economic Forum 2022, the Adani Group had inked a memorandum of understanding with the Government of Andhra Pra­desh for an investment of about Rs 600 billion by AGEL in the state. In Andhra Pra­­de­sh, apart from the pumped hydro project, AGEL also plans to build a 10,000 MW solar energy project. The company has pro­posed pump storage projects in four districts across the state, including two in Parvathipuram, one in YSR Kadapa and one in Satya Sai. In Parvathipuram district, a 1,200 MW plant will be constructed in Kurukutti and a 1,000 MW plant will be co­nstructed in Karrivalasa. Meanwhile, a 500 MW plant in Chitravathi and a 1,000 MW plant in Gandikota will be constructed simultaneously.

In terms of other new projects, in May 2022, AGEL’s subsidiary Adani Hybrid En­ergy Jaisalmer One Limited commissi­on­ed a 390 MW wind-solar hybrid power project in Jaisalmer, Rajasthan. The po­­­w­­er from this project will be delivered at a ta­riff of Rs 2.69 per unit. Prior to this, in De­c­­em­ber 2021, AGEL signed an agreement with SECI to supply 4,667 MW of gr­een power. The agreement is part of a ma­nufacturing-linked solar tender of 8,000 MW awarded to AGEL by SECI in Ju­­ne 2020. Even earlier, in March, 2021, Adani Re­newable Energy Holding Fi­f­t­een Limi­ted, a subsidiary of AGEL, won 300 MW at a tariff of Rs 2.77 per kWh for a period of 25 years at SECI’s Tranche-X tender for se­tting up 1,200 MW of ISTS-connected wind power projects.

The way forward

Other companies in the Adani Group have ambitious renewable energy plans. Going forward, Adani Electricity Mumbai Limited, the distribution arm of Adani Transmission Li­mited, aims to increase its renewable en­­ergy penetration from 3 per cent in fi­­n­ancial year 2020-21 to 60 per cent by fin­ancial year 2026-27.

Meanwhile, Adani Enterprises Limited, through its wholly-owned subsidiary Adani New Industries Limited (ANIL), has undertaken an investment of $50 billion over the next nine years to form a new green hy­drogen vertical. In June 2022, Total­En­ergies announced that it will acquire a 25 per cent stake in ANIL, which will be an exclusive platform for the production and commercialisation of green hydrogen in India. Going forward, ANIL aims to produce 1 million tonnes per annum of green hydrogen per year by 2030, underpinned by around 30 GW of new renewable po­wer generation capacity. ANIL aims to develop a project to produce 1.3 MTPA of urea derived from green hydrogen for the Indian domestic market, to replace current urea imports. Moreover, it aims to invest $5 billion in a 2 GW electrolyser factory fed by renewable power from a 4 GW solar and wind farm.

All in all, the Adani Group, through AGEL and other companies, has ambitious and aggressive plans for India’s renewable en­ergy sector. Interesting times are ahead for the company as it diversifies and ex­pands in the domain of module and electrolyser manufacturing, pumped storage and green hydrogen production.

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