Adani Power has applied to expand its coal-power plant at Kawai, in the western Indian state of Rajasthan, by a colossal 3200 MW. This is part of a proposed expansion of coal-power capacity of 7720 MW by Adani coal-power plants in India. In addition, the Group is in the process of acquiring three existing coal-power plants from other players. When it comes to burning more and more coal, it’s full-steam ahead for Adani Power.
Basic facts
Adani subsidiary: Adani Power
Location of coal-power plant: Kawai, Rajasthan
Proposal: To add 3200 MW to the plant’s existing capacity of 1320 MW
Cost: US $5.3 billion
Additional coal required: 12.9 million tonnes per annum (above existing consumption)
Status: Environmental approval required
The Adani Group has proposed a three-fold expansion of its coal power plant at Kawai, Rajasthan, in a resurgence of its desire to generate electricity from coal. In an application filed with India’s environment ministry and not yet reported by mainstream media, Adani Power Limited has sought environmental approvals to add 3200 MW of coal power capacity at the Kawai plant by deploying four units of 800 MW each. The plant currently has a capacity of 1320 MW.
If the approvals are granted and the firm receives financing – both of which are likely – it would represent a major boost for Adani’s coal-power ambitions. Not long ago, Adani put up its flagship Mundra power plant on sale for one rupee; debts piling up in the coal-power business threatened the entire Group’s financial viability.
With favourable court orders, regulatory decisions and a fall in international coal prices, the group is looking at adding 7720 MW of new coal-power capacity, a 50% expansion over its current 15,250 MW capacity. This is the highest share among the 10,000 MW of additions promised by Indian coal-power companies to the Modi government. In addition, the Adani Group is in the process of acquiring three existing coal-power plants in India from other players.
Adani Power is said to have earmarked INR 47,000 crore (USD $5.6 billion) over the next few years to carry out the Kawai expansion and other coal-power developments, with the lion’s share allocated to Kawai.
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The expansion at Kawai
The expansion plans at Kawai come as a surprise to many. In a conference call with financial analysts on 25 January 2024, Adani Power officials hinted that the expansion would take place in multiple locations in central India.
Kawai is located in the arid western state of Rajasthan, not far from the Thar desert that straddles India and Pakistan. The plant was opened in 2013 and runs two supercritical units of 660 MW, each imported from China. It was this equipment that was infamously procured by Adani Power through Electrogen Infra FZE, a Dubai company with links to Vinod Adani, which allegedly charged Adani Power significantly more than the price it actually paid the Chinese manufacturer. India’s Directorate of Revenue Intelligence alleged that this was a fraud to siphon money into offshore jurisdictions. It traced the profits from these transactions to another Vinod Adani company in Mauritius. Allegations regarding the huge sums of money concerned have been outlined by the Organised Crime and Corruption Reporting Project (OCCRP) and the Financial Times. Relevant documents were published by AdaniWatch in December 2023.
The DRI subsequently dropped its case, and in March 2023 India’s Supreme Court upheld this decision.
Now, Adani Power plans to add four more units of 800 MW each. The expansion would be carried out on vacant land within the existing Kawai plant premises, the proposal says. The Rajasthan government had allotted this land to Adani – and it is clear now that the Group had sought this land for a future expansion.
This could explain the choice for Kawai, since acquiring land in India is expensive, time-consuming and fraught with the prospect of protests and legal challenges from local people. With the land already in the bag, Adani Power requires only the environmental approval for the expansion to proceed.
The application for the approval states that the additional units would require an additional 12.9 million tonnes of coal per annum (over and above the 5.5 million tonnes pa currently burnt at Kawai), which the company says will be sourced from ‘nearby commercial coal mines’. The expansion will also require 56 million cubic meters of additional water every year in the parched region.
The application was scheduled to appear on 7 May 2024 before the Expert Appraisal Committee of the environment ministry. The panel can either reject the proposal on environmental grounds, return it with questions, or issue ‘terms of reference’ for the company to carry out an environmental impact assessment study. It would have to conduct a public hearing in Kawai, and inputs from the hearing and the study would be presented again to the Committee for its decision on whether to recommend approval for the plant. The environment minister makes the final decision based on this recommendation. This process can take up to a year. As of the publication of this story, the minutes of the 7 May meeting had not been uploaded to the ministry’s website.
The Committee would also have to look into the plant’s existing performance. One analyst has alleged that it has reported ‘ambiguous’ data on air quality and groundwater pollution.
If the expansion proceeds, the total 4520 MW capacity would make the Kawai plant Adani’s second largest coal-power facility, slightly short of its Mundra ‘ultra mega’ power plant which has a capacity of 4620 GW.
Other expansions in the offing
Kawai’s expansion comes after Adani Power recently demonstrated growing optimism in adding coal-power capacity in India. In March 2024, Reuters reported that Adani Power was among other private coal-power producers that collectively promised a 10,000 MW addition to capacity in closed-door discussions with the Modi government.
Of these, Adani Power was reported to have made the highest commitment. In February, it applied for environmental approvals to carry out a 1600-MW expansion in Mahan, beyond the 1600 MW it is already building. Now, it has proposed a 3200-MW addition in capacity at Kawai. But that is not all. In a presentation made by the company in March, Adani Power said it would also add 2300 MW to its capacity through acquisitions, including Coastal Energen Power that runs a 1200 MW facility in southern India and an unnamed 1100-MW acquisition in progress. Afterwards, it also received approval to acquire the bankrupt Lanco Amarkantak Power, which runs a 600 MW plant, and has another 1320 MW under construction. To summarise:
New Adani coal-power capacity (7720 MW):
- 3200 MW at Mahan;
- 3200 MW at Kawai;
- 1320 MW associated with Lanco Amarkantak Power.
Acquisitions of existing coal-power capacity (2900 MW):
- 1200 MW Coastal Energen;
- 1100 MW unnamed;
- 600 MW existing Lanco Amarkantak Power.
If all these plans proceed, Adani Power would add 7720 MW of new coal-power capacity, which represents 50% of the capacity of its existing coal-power stations (15,250 MW), not counting the new acquisitions.
A major reason for Adani Power’s optimism is that several regulatory uncertainties have now been resolved – almost all in the company’s favour. In 2023, the Supreme Court – as well as ending the DRI’s case on over-invoicing of power equipment – also granted the Adani Group monetary compensation for cancellation of a coal block and for a shortfall in coal supply to its plants. (Adani Power has also filed defamation case against journalists Abir Dasgupta and Paranjoy Guha Thakurta in a district court for their reporting on a Supreme Court judge’s favourable order to the Kawai plant). In addition, the Gujarat electricity regulator since 2022 has resumed buying half of the Mundra’s coal power capacity. Adani's Godda power plant went online in 2023, bringing in more revenue.
As a result of its improving debt profile, Adani Power can afford to borrow more money to carry out its expansion. From having five times as much debt as equity in the company at the end of March 2020, the company’s level of indebtedness stands at just 0.61 as much debt as equity at the end of December 2023, according to its financial statements for end December 2023.
Indian credit ratings agency Crisil Ratings, in an opinion issued in January, upgraded the firm’s debt to AA-/stable saying it has a ‘strong business and financial risk profile’ due to regulatory decisions and improved revenues. The ratings opinion revealed INR 30,000 crore ($3.5 billion) of current outstanding debt and bank guarantees, of which 97% are from central government-owned banks and financial institutions, including State Bank of India which has a 30% share in the total outstanding.
India’s and Adani’s last boom in coal power was also backed by ambitious plans, massive investments and loans from government banks.
