Adani Power’s MEL Issues Equity Stake to RIL Under PPA Agreement

On July 9, 2024, Adani Power Limited (APL) announced a significant development regarding its subsidiary, Mahan Energen Limited (MEL), in a stock exchange filing. This update follows their earlier disclosure from March 27, 2024, wherein MEL had entered into a 20-year long-term Power Purchase Agreement (PPA) for 500 MW with Reliance Industries Limited (RIL) under the Captive User policy defined by the Electricity Rules, 2005.

As part of this agreement, one unit of MEL’s Mahan thermal power plant, with a capacity of 600 MW out of its total planned and operating capacity of 2800 MW, was designated as the Captive Unit. To comply with the policy’s requirements, RIL was required to hold a 26% ownership stake in this Captive Unit relative to the power plant’s total capacity.

In fulfilment of these conditions, and following the completion of all necessary prerequisites outlined in the Investment Agreement dated March 27, 2024, RIL has subscribed to 5,00,00,000 “Class B” equity shares issued by MEL. These shares, with a face value of ₹10 each, collectively represent a 26% ownership stake in the Captive Unit.

This strategic equity allotment allows RIL to secure a reliable power supply exclusively from the Captive Unit under the established agreement between the two corporate entities. It underscores the mutual benefits of this arrangement, enhancing MEL’s long-term revenue visibility while ensuring stable power sourcing for RIL’s operational needs.

As a result of this equity issuance, MEL has transitioned from being a wholly owned subsidiary of APL to having RIL as a strategic minority shareholder. This shift marks a significant corporate restructuring aimed at optimising operational synergies and leveraging strategic partnerships in the energy sector.

About Adani Power Limited

Adani Power is part of the diversified Adani Group and is India’s largest private thermal power producer. The company and its subsidiaries sell power generated from these projects under a combination of short-term Power Purchase Agreements (PPAs), long-term PPAs, and merchant agreements.

On July 10, 2024, the share price of Adani Power Ltd opened at ₹734.05, touching the day’s high at ₹737.45, as of 9:34 AM on the NSE.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.