Adani Power in Talks to Buy OPG Power Ventures' Thermal Plant

Adani Power, India’s largest coal-based private power producer, is in early discussions with OPG Power Ventures to acquire a 414-megawatt coal-fired plant near Chennai. The deal, if finalized, will likely be valued at Rs.1,000-1,200 crore. OPG Power Ventures is a thermal and renewable energy company listed on the London Stock Exchange’s Alternative Investment Market.

Adani’s commitments to make additional investments in the thermal power sector runs against the trend in India’s power sector with other large thermal power companies such as Tata Power and JSW Energy saying they will no longer invest in greenfield thermal power projects. Last month, for instance, JSW Energy terminated its Rs.5,321 crore deal to acquire GMR Kamalanga Energy, a stressed thermal power asset. This also comes amid a strong focus on renewable sources of energy, especially solar.

“For Adani Power, investing further in coal-fired plants makes sense because within the larger Adani group, it has access to coal mines in Indonesia and Australia, shipping and major port and logistics facilities on both Indian coasts,” says a person who is aware of the development. “So they will be able to manage their input costs far better than other private players, allowing them to sell power profitably at lower tariffs,” he adds.

The deal, if finalized, will likely be valued at Rs.1,000-1,200 crore

“If it goes ahead with the OPG acquisition, it will be interesting to see how they manage under a group captive model where the tariff contracts are reset every year, and the pool of customers and demand levels keep changing,” asserts the person. “The power generated here will have to compete with falling cost of off-grid renewable power as well, so the buyer must be confident of managing costs over the long-term”.

The bulk of the power generated from OPG Power’s plant is sold off-grid to industrial customers in Tamil Nadu, mostly automobile, steel and textile firms, at privately-negotiated power purchase agreements. Out of the total, 74MW is contracted with the Tamil Nadu state utility for 15 years until December 2029.

Adani Power has an installed thermal power capacity of 12,450MW. The company also acquired GMR Chhattisgarh Energy Ltd, which operates a 1,370 MW coal power plant in Raipur, for Rs.3,530 crore last year. This June, Adani Power said in a stock exchange filing that it would acquire US-based The AES Corporation’s 49 percent stake in Odisha Power Generation Corporation for $135 million (around Rs.1,019 crore). Adani Power also won approval from the Madhya Pradesh Electricity Regulatory Commission to build a 1,320MW greenfield thermal power plant in the state.