Adani Power subsidiary signs PPA with Reliance Industries, shares up 3%

Shares of Adani Power gained more than 3% on Thursday, March 28, after the company announced its subsidiary entering into a power purchase agreement (PPA) with Reliance Industries Ltd.

In a stock exchange filing, Adani Power said that its wholly-owned subsidiary Mahan Energen Limited (MEL) has signed a 20-year long-term Power Purchase Agreement (PPA) for 500 MW with Reliance Industries Ltd.

Reacting to the news, Adani Power shares surged up to 3.34% to an intraday peak of ₹533.7 apiece on the NSE . On the other hand, RIL shares rose to the day's high of ₹3,011.9 apiece on the NSE.

As per the agreement, Reliance Industries will acquire 5 crore equity shares of MEL, aggregating to ₹50 crore. One unit of 600 MW capacity of MEL's Mahan thermal power plant, out of its aggregate operating and upcoming capacity of 2800 MW will be designated as a captive unit for this purpose.

"To avail the benefit of this policy, RIL has to hold a 26% ownership stake in the captive unit in proportion to the total capacity of the power plant... RIL will invest in 5,00,00,000 equity shares of MEL, aggregating to ₹50 crore for the proportionate ownership stake," the company said in a filing to the stock exchanges.

Adani Power, MEL, and RIL have signed an investment agreement on 27 March 2024 at 7 pm. Closing of the transaction is subject to customary closing conditions, including receipt of requisite approvals, the stock exchange filing mentioned.

Incorporated in 2005, Mahan Energen is a company engaged in the generation and supply of power. The turnover of MEL, as per its audited standalone financial statement, for FY 2022-23, 2021-22, and 2020-21 were ₹2,730.68 crore, ₹1,393.59 crore, and ₹692.03 crore, respectively.

The investment is subject to customary conditions precedent including receipt of requisite approvals by MEL and is expected to be completed within two weeks of receipt of completion of conditions precedent and receipt of such approvals by MEL, it added.

Adani Power shares were trading 3.07% higher at ₹532.4 apiece on the NSE while Reliance Industries shares were trading 0.8% lower at ₹2,960.8 apiece on the NSE at 3:15 pm.