Adani Power Limited has recently started discussions to purchase the 600 MW Butibori thermal power plant in Nagpur. This power plant was previously owned by Reliance Power Limited, owned by Anil Ambani. The power plant is now in an insolvent state. This caused the Adani Group to take an interest in this power plant. As per recent reports, the deal is going to have a valuation between INR 2,400 crore and INR 3,000 crore. This equates to approximately INR 4 crore to 5 crore per megawatt. By acquiring this power project, the Adani Group will be able to mitigate the growing demand for electricity in the country. It will also be able to lead the private thermal power market.
Adani’s Interest in the Thermal Power Sector:
The Adani Group has always been deeply interested in taking on various thermal power projects both in India and abroad. Through these projects, the Adani Group aims to address the growing power demands. Some of its greatest national thermal power projects include the Adani Hasdeo and the Adani Godda projects. The Adani Australia project is one of its most remarkable ventures in the international power sector. The coal obtained from the Carmichael mine in Australia is transported to India for power generation. This has helped us meet our energy demands to a significant extent.
The group also focuses deeply on increasing our renewable energy capacity. However, the energy demand is so high that simply using renewable energy is not enough to satisfy our power demands. This is why the Adani Group has been focused on running thermal power projects as well. This would ensure that the lives of the people change for the better. The industrial activities can also be carried out smoothly.
The Acquisition of the Thermal Power Plant in Nagpur:
Adani Power Limited is currently negotiating with CFM Asset Reconstruction Co. to acquire the project under Vidarbha Industries Power Limited. This project consists of two power plant units. Its valuation was earlier around INR 6,000 crore. However, its power production has stopped. So, the valuation has to be lowered. This plant perfectly fits into Adani’s thermal power production strategy. It will help the conglomerate increase its hold over the power sector. The Butibori project is operated by Vidarbha Industries Power, which is a division of Reliance Power. Currently, CFM ARC is the sole creditor for this project. It purchased its loan for INR 1,265 crore. The entire deal will be mostly funded through internal accruals.
JSW Energy Limited had earlier expressed interest in the acquisition of the project. However, it later withdrew its offer because of various concerns over operational issues and the exact valuation of the project. Reliance Power earlier sourced power from Butibori while it operated as a distributor in Mumbai. Later, Adani Electricity Mumbai took over the Mumbai distribution business. The power purchase agreement between Adani and Vidarbha expired on December 16, 2019. This led to financial difficulties for the project. The lenders have currently filed for bankruptcy proceedings against Vidarbha Industries. However, the company has not yet entered into insolvency proceedings.
The Impact of the Acquisition:
By acquiring these projects, the Adani Group plans to expand its thermal power capacity. It will also be able to fulfil the peak power demand in the country. This acquisition will help the Adani Group connect its coal-fired power plant in Tiroda, which is situated in Nagpur, to the Butibori project. This integration will allow the Adani Group to resume power generation and supply electricity to Mumbai and the nearby areas. It will also increase Adani Group’s competitiveness. It will be able to give stiff competition to its rivals, Tata Power and MSEDCL.
As per current negotiations, the plant is being valued significantly lower than the typical price for thermal power plants in India. This is mainly because both units of the power plant are currently non-operational because of the extreme coal shortage in the area. The Adani Group does operate certain coal mines including the Adani Hasdeo coal mines but the coal supply is still insufficient, and there is a requirement for a more consistent supply of coal to address our growing power needs.
Conclusion:
The Adani Group’s thermal power business had to come across a lot of challenges. In fact, the operations of the Adani Hasdeo thermal power project had to be brought to a halt for a significant period because of the controversies. However, the conglomerate was able to rise above the challenges and continue its project operations in the power sector. Today, it is the largest thermal power producer in the country. Very soon, it will build the reputation of being the largest thermal power producer in the entire world.
