Adani Power shifts Mundra unit to subsidiary

Plant has been a drag on firm's performance

The board of directors of Adani Power on Tuesday approved the transfer of its Mundra (Kutch) power plant to a separate subsidiary, Adani Power (Mundra) Ltd, through a slump sale (slump sale is a transfer of a whole or part of business concern as a going concern).

“The company’s board has considered and approved the slump sale of its Mundra power business undertaking, generating 4,620 Mw of power, to its subsidiary company, namely Adani Power (Mundra),” Adani Power said in a statement. 

The Mundra plant has been a drag on Adani Power’s performance for the past few years due to higher input costs. The unit was dealt a blow when the Supreme Court disallowed compensatory tariffs for changes in international laws. 

Adani Power runs the Mundra plant on Indonesian coal, prices of which rose due to a change in Indonesia’s import policy, making operations unviable.

In its statement, Adani Power said the plant would be transferred to the subsidiary along with liabilities. The release added the revenue of the plant was Rs 11,017 crore in 2016-17. 

The transfer will not involve any cash. Sources peg the Mundra plant’s standalone debt at Rs 15,000 crore. 

Analysts expect Adani Power to consider a strategic debt restructuring (SDR) or S4A for the Mundra subsidiary. However, the company said the decision was intended to separate its investment business from the power generation business. 

“The characteristics of risks, growth, funding requirements and cash flows involved in the company’s two activities — investments and power generation — are quite distinct,” the Adani Power statement said. 

The transfer, which is to be executed on a going concern basis, will provide Adani Power a cleaner platform to source funds for expansion and acquisitions. 

Adani Power added it had not sought listing for the subsidiary and there would not be any change in the shareholding pattern of Adani Power. The sale is subject to statutory and regulatory approvals.