The Bhutanese Leading the way.
In a major development it has been learnt that the Adani Group and the Druk Green Power Corporation (DGPC) are close to signing several major agreements over the Wangchu Hydro power project which will be located downstream of the Tala project in Chukha.
The agreements will either by signed this month or latest by next month. The two sides have already agreed DGPC will own 51% and Adani will get 49% of the project for 30 years.
Both sides have also agreed that the loan will be taken on the project which means no sovereign guarantees.
However, it is not yet decided whether the Wangchu will be a 570 mw run of the river project or a much bigger 900 MW reservoir project.
That key decision will come down to the Detailed Project Report and also the market economics for the project. Currently, both options are feasible.
The preference is for a reservoir project as it can store water even in the winter months, but it will depend on if the economics of the peak demand tariff can support a reservoir project.
The loan of 70% will be taken on the project and while the Adani name may help, the loan will have to secured on the viability of the project.
From the remaining 30% equity DGPC will have to come up with 51% and Adani with 49%. DGPC is confident that it can fund its equity portion based on the strength of its operations.
Work is currently going on the final stages of the technical, financial and legal due diligence. The construction will start as soon as the agreements are closed.
A source said that some time has been taken as there are huge responsibilities for the funds and some risks and so both sides have to be confident.
The agreements that will be signed will be of three types.
The first is a Shareholder’s Agreement which will lay out the rights of the shareholders, share transfers, funding, how the company is run and how a deadlock resolution will happen.
The second is a Concession Agreement granting the company the right to build, operate, and transfer a hydropower project to the government after a specified period. It outlines the terms and conditions for this concession, including the rights and obligations of both parties. The agreement typically covers aspects like construction, operation, maintenance, power purchase, and revenue sharing, according to the World Bank.
The third is a Power Purchase Agreement (PPA) which is a contract that outlines the terms of electricity sales from a hydropower plant to an off taker (usually a utility or electricity exchange). It typically includes details about the capacity and energy to be delivered, pricing, and other obligations related to the sale and purchase of power, including the project’s construction, operation, and maintenance.
The project will also explore selling power on the Indian Energy Exchange where power is sold at market rates.
The project is being formed as Special Purpose Vehicle (SPV) which will create the project as its own entity and thus limit the risks for Adani and DGPC.
On 15th June 2024 the Chairman of the Adani Group in India, Gautam Adani, sent out a tweet saying that he has signed an MoU with DGPC for the 570 MW Wangchu Hydro Plant in Chukha.
The MoU was signed with the informal understanding, at least from the Bhutanese side, that the Adani Group would get a significant but minority stake in the project, with the majority shares owned by the DGPC.
Things went awry when a higher stake was asked for soon after the MoU was signed, but this was resolved soon after.
