TAQA looks to bet big on Adani's power business

Mumbai: Abu Dhabi National Energy Co. PJSC (TAQA) is looking to double down on India and is evaluating a large exposure in the expansive power businesses of Gautam Adani that span thermal generation to transmission, clean energy and green hydrogen, said people aware of the matter.

TAQA, among the largest integrated utilities in Europe, West Asia and Africa and also the second largest stock on Abu Dhabi Securities Exchange (ADX), is keen to deploy $1.5-2.5 billion in Adani Group firms or in a single entity, said the sources mentioned above. However, both sides believe there is maximum synergy between TAQA and Adani Energy Solutions, formerly Adani Transmission, to forge a strategic alliance and work together on projects in North Africa and West Asia.

TAQA is keen to pick up a stake of as much as 19.9% through a combination of primary infusion into the company and the secondary purchase of shares from promoter family entities. The current value of Adani Energy Solutions is ₹91,660 crore with promoters owning a 68.28% stake. At current prices, a near 20% stake would be valued at ₹18,240 crore ($2.19 billion). The stock ended flat on Thursday at ₹821.70.

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Mails sent to Adani Group and TAQA did not elicit a response till the time of going to press on Thursday.

GQG Partners and its affiliates already own around 5.5% in Adani Energy Solutions as per June disclosures.

Established in 2005, TAQA, which means energy in Arabic, has investments in power generation, transmission and distribution assets, as well as upstream and midstream oil and gas operations. Its assets are spread across the UAE, Saudi Arabia, Canada, Ghana, India, Iraq, Morocco, Oman, the Netherlands, the UK and the US.

In India, TAQA owns and operates a 250 MW lignite-based thermal power plant in Neyveli in Tamil Nadu. It generates and sells power to the Tamil Nadu Generation and Distribution Corp. (Tangedco), the state's power generation and distribution company. It has a presence in Himachal Pradesh, owning a majority stake in NCC Ltd's power plant in the state.

For years, it has been planning to expand its India portfolio and even signed an agreement to buy two hydro projects from the Jaypee Group in 2014 for Rs 9,689 crore but the acquisition did not fructify with TAQA exiting the deal following a shift in global strategy. TAQA had been meeting with several Indian private utilities before zeroing in on Adani. Senior management meetings and technical due diligence are said to have taken place. However, the final financial diligence is expected over the next two-three months to zero in on the exact quantum and deal structure, said one of the executives in the know.

Adani Energy Solutions is India's only pure-play, private-sector listed entity in the transmission and distribution sector and has already cornered 22% market share in tariff-based competitive bidding (TBCB) projects. The group diversified into transmission in 2015. The company has applied for second licences in three locations - Saurashtra, Navi Mumbai and Bulandshahr. It's also entered the smart metering segment with an order book of Rs 5,800 crore. The company has also added cooling solutions as a business segment.

Its crown jewel is the Mumbai transmission and distribution business acquired from the Anil Ambani group in 2018 for Rs 18,800 crore, giving it access to 3.17 million of 4.2 million users in India's commercial capital. The next year, Qatar's sovereign fund QIA bought a quarter of the Mumbai distribution company for Rs 3,200 crore, the Adani Group's first ever investor from the Gulf. In May, the company announced an Rs 8,500 crore qualified institutional placement. MD and CEO Anil Sardana had told ET on August 1 that the company was in touch with several investors.

"The group has been able to mobilise upwards of $8 billion in the last few months for meeting various requirements. And I guess the same investors are showing a lot of interest. So we are still talking to them," Sardana had said.

Adani Energy Solutions has its footprint across 13 states with over 31 transmission projects and a network of 18,795 circuit km as of FY22. On the distribution side, company has integrated utilities catering to 720 circuit km in Mumbai and the Mundra SEZ. With the acquisition of distribution in Mundra, the company's management expects strong growth opportunities and improvements in last-mile connectivity.

"Distribution is the key area where the company's presence will multiply and aid growth. ATL (now Adani Energy Solutions) should see an 8% revenue CAGR in FY22-25E, driven by locked-in growth in both transmission and distribution business," said Lavina Quadros and Bhaskar Chakraborty, analysts at Jefferies.

The company plans to leverage the data collected through its smart meter business, Sardana had told ET on August 3.

Going forward, the company is also planning to connect renewable energy parks to consumption areas and add high voltage direct current (HVDC) connections to cities.

On August 6, AESL achieved financial closure for its $1 billion Green HVDC link project, which will enable further greening of the Mumbai grid by supplying more renewable power to the city. HVDC transmission technology is superior to conventional methods as it stabilises power distribution networks in the event of sudden loads or blackouts in one part of the network that could lead to synchronisation problems and cascading failures.