Adani's Rs 65,000-cr solar power dream

Plans JV with Rajasthan govt to set up 10,000 Mw facility

Billionaire Gautam Adani can not think small. Adani Enterprises is planning to set up a solar power facility of 10,000 megawatt (Mw) in a joint venture with state-run Rajasthan Renewable Energy Corporation.

To put it in perspective, this would be bigger than another group firm Adani Power’s existing capacity. The company that claims to be the largest private-sector thermal power producer has 9,280 Mw of capacity, including 40 Mw of solar generation.

“This is certainly the largest renewable project, but its success would depend on financing,” says an analyst with a domestic brokerage who does not wish to be identified. As a thumb rule, the cost of setting up small solar power facilities is about Rs 7 crore a Mw. However, it is expected to be a little less at Rs 6.5 crore per Mw for a large project such as this, which would cost about Rs 65,000 crore ($10.5 billion). “While the prospects of solar energy in the desert state is huge, with ample availability of land, the state's financial position is not in a good health,” he says.

Adani Enterprises’ finances are also not in a favourable position. At the end of 2013-14, the company had a total debt of Rs 71,979 crore, with a debt-equity ratio of 2.92. Such projects usually have a debt component of 70 per cent. The details of the venture with the government are not available yet. Hence, the debt Adani Enterprises will require for the project cannot be assessed.

In January, Adani Enterprises also signed a pact with US-headquartered SunEdison to jointly invest $4 billion in setting up India’s biggest solar panel factory. This would be now helpful to manage supply for the new project in Rajasthan. “India has embarked on an ambitious programme of becoming a world leader in renewable power generation, with a special focus on solar,” Gautam Adani, chairman, Adani Group, said. “Solar power costs twice more than thermal power. So it would be interesting to see if state electricity boards are ready to buy power at that cost,” says another analyst with a foreign brokerage.

The park will include generation projects and a manufacturing unit for solar modules, parts and equipment.

This will be Adani’s second-most ambitious project after the plan to develop Carmichael coal mine in Australia, which requires an investment of $10 billion.