Wangchu deal with Adani dead on arrival over majority stake differences

A credible source in the government has said that the Wangchu deal with the Adani Group is as good as dead due to the conditions of the Adani Group.

This is after the Adani Group indicated that it wanted a 70% majority stake in the project and not just a 30-year concession period, but a concession period going to 90 years plus.

This was clearly not acceptable to Bhutan, which wants a majority stake in the hydro projects and so this informal offer was not accepted.

The source said that once this was made clear, the Adani Group did not send its written proposal which should have come by now.

This is being interpreted in Bhutan as the Group having pulled out given the wide differences between the two sides.

The offer was not only a major mismatch of what Bhutan was expecting, but it was seen as being too bold for local consumption.

However, this will not be the end of this project as a source said that there are major Indian companies lined up to invest in this project and others more amenable to Bhutan’s requirements.

Meawhile, the Adani Group  Head of Communications wrote to the paper on Saturday saying the Adani Group has not withdrawn from the Wangchu Project.

The email said, “In fact, the terms of the project are now under negotations and discussions are moving satisfactorily.”

The Group said on 16 June  Adani Group signed an MoU with DGPC to develop the 570 MW..project in Chukha.”

It said this energy infrastructure project embodies the spirit of cooperation and the deep friendship between India and Bhutan, reflecting both nation’s commitment to sustainability and clean energy.

The paper asked whether the Adani Group is willing to accept a minority stake and the 30-year concession period to make the deal happen.

However, there was no response on this.

The Bhutanese government source said there are no ‘negotitations or discussions’ going on. 

A source from the Adani Group said that the reason they are asking for the majority stake is to make it easier to raise financing as it is incumbent on the majority partner to do so. Otherwise raising financing will be very diffcult.

However, this argument is unlikely to be accepted by the Bhutanese side.

Bhutan considers hydropower to be a national resource and asset to be owned mainly by the Bhutanese people for inter-generational equity and so it cannot consider giving majority stake to private companies and that too not following the concession period.

This is the only reason Bhutan is roping in private companies and giving them a stake which it did not do in the past except for the 126 MW Dagachu where Tata Power got a 26% stake as a strategic investor.

The Wangchu project has a lot of value as the project in all likelihood many be converted into a 900 MW reservoir project which will significantly increase its size, importance and revenue as Bhutan currently does not have any storage projects.

As per the 2024-25 budget documents the Wangchu projects aims to start on April 2027 and be completed by April 2034. The DPR is to be reviewed with preference for a 900 MW reservoir option.

Background

On 15th June 2024, Gautam Adani, the Chairman of the Adani Group in India sent out a tweet saying that he has signed an MoU with the DGPC for the 570 MW Wangchu Hydro Plant in Chukha. 

This was during the visit of Mr Adani to Bhutan to explore business opportunities.

The MoU was signed the informal understanding, at least from the Bhutanese side, was that Adani would get a significant but minority stake in the project with the majority shares owned by the Druk Green Power Corporation (DGPC).

This is not just for Adani but for all such hydro projects in Bhutan inviting foreign joint venture investments in hydro projects.

However, after spending some time in Bhutan, the understanding, at least from Mr Adani’s side seems to have been a different one or later changed.

This is because in a later informal meeting with Bhutanese officials Gautam Adani verbally indicated that his group would be interested in a majority stake in the Wangchu project.

The Bhutanese side could not accept this as and such a demand placed more urgency on the 600 MW Kholongchu project deal with Tata Power.  Both sides agreed in August 2024 that DGPC will get 60% and Tata Power 40% with a concession period of 30 years and extendable by 5 years making it a template agreement of sorts.

Far from a majority stake, even the past attempted 50:50 stake with Indian PSU SJVN over Kholongchu did not work out over management control, financing and contract awarding.

Editor’s Note: This article has been edited online to reflect the position of the Adani Group which came a day after the original print version of the article was published.