TOTAL recently announced that it invested US$ 490 million in a joint venture with Adani Green Energy. The joint venture will host 2.1 gigawatts of operational solar power projects previously fully owned by Adani Green Energy and its subsidiaries. The two companies now hold 50% each in the new joint venture.
Adani Green Energy is one of the leading private renewable energy companies in India. It also operates the largest single-developer solar power project in the country.
The company has been able to scale up its portfolio rapidly over the last few years, unlocking significant value during the process. Adani Green Energy was earlier a non-listed subsidiary of Adani Enterprises, a large conglomerate.
In 2018, Adani Green Energy (NSE: ADANIGREEN) was listed at Indian stock markets as a separate entity and has seen a massive jump in value. The shares were listed at around ₹32 (US$0.42) a piece and touched a high of ₹243 (US$3.2).
At present, Adani Green Energy has transferred only operational projects to the joint venture. It is unclear if more assets will be placed under the joint venture as they are commissioned. The highlight of the 2.1 gigawatt portfolio is that most of the projects pre-date the highly competitive phase in India’s solar power auctions. Tariff bids had declined to record-low of ₹2.43 (US¢3.20) per kilowatt-hour during this phase. Several developers now stay away from these competitive auctions, leading to a resurgence in tariff bids.
The deal is beneficial to both TOTAL and Adani. Given that all of the projects are operational, TOTAL will have access to a steady stream of revenue from these projects. Many of these projects have PPAs signed at much higher rates compared to tariff bids seen in the recent past. Adani will receive much needed funding for further expansion of its portfolio. The company has been aggressively participating in solar, wind, solar-wind hybrid, and storage tenders over the last few months.
The deal also shines light on India’s renewable energy sector which has seen several challenges emerging over the last few years.
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