Adani not ready to budge on original tariff rate for Mannar wind project

By Kelum Bandara  

India’s Adani Group is not ready to compromise on the  initially agreed tariff rate and other parameters of the 484 MW wind  and transmission project in Mannar, despite its agreement to execute  the project if  Sri Lanka requests, Daily Mirror learns.  

Adani Green Energy SL Ltd informed Sri Lanka’s Energy  Ministry its position in this regard after the Sri Lankan authorities  including President Anura Kumara Dissanayake said that the price of US  $0.0826/kWh (8.26 US cents) quoted and agreed upon earlier is too high.    

Subsequently, the company withdrew from the proposed wind  project earlier. However, Adani Group reaffirms that it would always  be available to undertake any development opportunity if the Sri Lankan  government ever considers it to participate.  

According to an informed source, due process had been  followed and Adani was selected to implement the wind and transmission  projects. The Cabinet Appointed Managing Committee on Investment  (CAMCI) had approved the project under ‘Fast tracking of Investments’ at  that time. After Cabinet approval was given during the time of the  last government, the MoUs were entered into between five government  entities and Adani Green Energy SL Ltd.  

The project also forms part of Sri Lanka’s Long-Term  Generation Expansion Plan 2023-2042 approved by the Public Utilities  Commission of Sri Lanka.  

The tariff quoted has been determined by multiple factors  such as the capital cost, cost of raising funds, tenure of the power  purchase agreement (PPA), and operational and maintenance costs.  The PPA tenure in Sri Lanka is 20 years, whereas in India it is 25  years, allowing for longer asset ownership and operation.  

Sri Lanka’s credit rating by Moody’s is “Caa1” and S&P  is “SD”. These credit ratings denote a very high risk associated with  any lending or investment in a country. The equity risk premium for Sri  Lanka is 22.15 per cent, but Adani is seeking only a 5 per cent risk  premium.  

According to industry experts, the cost of 8.26 US cents  per kWh, Adani’s wind energy, if realised, will significantly undercut  the country’s current oil and coal-based generation, which averages over  14 cents. The pricing differential will enable Sri Lanka to reduce its  annual power generation costs by approximately US $ 80 million.  

Sri Lanka spends around US $ 300 million annually on  imported oil and coal for electricity. Incorporating Adani’s wind  project will save over $200 million in annual foreign exchange outflows,  greatly enhancing energy security and economic stability.