Adani Power Strengthens Energy Links with Bhutan in Historic Hydropower Drive

Adani Group has inked a Memorandum of Understanding (MoU) with state-owned Bhutanese Druk Green Power Corporation (DGPC) to collaborate on developing 5,000 MW of new hydropower and pumped storage projects, doubling the size of their current joint venture.

Government Support and Existing Collaboration Extended:

The pact enjoys complete support from the Bhutanese and Indian governments, affirming a common endeavor towards clean energy development and regional integration.

The new initiative is based on the existing Wangchhu Hydropower Project, at 570/900 MW, in which DGPC has a 51% holding and Adani 49%. Shareholders' Agreement of the project has also been signed.

MoU Details and Strategic Significance

The MoU provides a framework for the identification, evaluation, and implementation of a succession of projects in phases. It was linked in Bhutan in the presence of high government authorities.

The cooperation is designed to increase the hydropower generation capacity of Bhutan while allowing power export and integration into India's electricity markets. Secured offtake and market access are the foundation of the collaboration.

Energy Roadmap Alignment:

The project fits into Bhutan's Renewable Energy Roadmap 2040, which aims at 20,000 MW of total installed capacity by tapping hydropower, solar, and geothermal resources with the support of strategic partnerships and private investment.

DGPC, Bhutan's premier hydropower developer, will lead implementation and take advantage of its proven experience. The collaborative effort should enhance national energy security and sustainable economic growth.

Outlook and Market reaction 

Although the announcement strengthens Adani's focus on increasing its renewable energy business, short-term effects on the company's stock performance have been negligible. This conservative market reaction could be due to the nascent stage of the agreement, since the MoU is a preliminary intent without agreed-upon terms. Moreover, past negotiations between DGPC and Adani have run into roadblocks, specifically in regards to ownership stakes and concession periods. For example, previous discussions showed Adani's ambition for a 70% majority share and a long concession period of more than 90 years, which was against Bhutan's policy of keeping majority shares in its hydropower projects .

Investors can also be waiting for further clarity on project structuring, financing terms, and regulatory approvals before they make adjustments to their positions. Hence, although the MoU is a strategic shift for Adani in the renewable energy space, the market seems to be taking a 'wait-and-see' attitude awaiting more tangible developments. 

As of 13:20 PM, the company’s stock is trading at a decline of 2.20% at ₹508.75.

Disclaimer: This news is solely for educational purposes. The securities/investments quoted here are not recommendatory.

To read the RA disclaimer, please click here