Shares in the firm, controlled by billionaire Gautam Adani, have soared three-fold since the signing of the 8 gigawatt (GW) multi-plant deal.


Adani Green Energy's record $6-billion solar power project announced in June has no guaranteed customer, its deal with India's main solar-adoption agency shows, and may expose the company to higher financial risk. Shares in the firm, controlled by billionaire Gautam Adani, have soared three-fold since the signing of the 8 gigawatt (GW) multi-plant deal, which Adani hailed as the "largest of its type, ever" and a landmark for India.

However, previously unreported details of the agreement between Adani Green and Solar Energy Corp of India (SECI) reveal the agency has no "legal or financial obligation" to support the project if SECI fails to find buyers. This would be the first major SECI project without a state-guaranteed Power Purchase Agreement (PPA), which analysts say has been key to building up India's renewable energy sector.

When SECI floated the tender for the project in June 2019, it had said a PPA would be assured, but it withdrew the clause guaranteeing purchase in the deal signed a year later. "There shall not be any legal or financial implication to SECI in relation to such (unsold) quantum including associated quantum of manufacturing facilities," the agreement, reviewed.

Financing risk

Adani Green has said 2 GW of generation capacity will come onstream by 2022, while the rest will be added in annual 2GW increments through 2025 as a part of the agreement. There are no buyers lined up for the project yet and it is unclear when SECI will be able to find buyers, a process that typically takes months.

Auctions by the SECI usually attract greater participation because of the assurance of power purchase and payments. But the lack of such a guarantee could undermine investor and lender confidence, raising financing costs in a market like India where power demand growth has repeatedly fallen short of expectations amid a broader economic slowdown.

The quality of "federal government-guaranteed contracts with cashflow payment certainty provide investors the confidence to deploy tens of billions of dollars", said Tim Buckley, director at the Institute of Energy Economics and Financial Analysis. Adani Green has said it would receive interim funding for the project from a consortium of foreign banks, and later with money raised from the capital markets.

Since dropping the PPA with Adani, SECI has removed the clause from some other renewable energy tenders too. SECI Managing Director J N Swain told Reuters on Wednesday potential buyers of power were consulted and "due processes" were followed during the auction and before signing the agreement with Adani.