New Delhi: Adani Group plans to invest over USD 1 billion in setting up projects in Sri Lanka to generate electricity from wind in what would be the island nation’s single largest foreign direct investment and the biggest ever power project, sources said. Group firm Adani Green Energy Ltd (AGEL) will set up two wind farms in Sri Lanka’s Mannar town and Pooneryn village in the northern provide with a total installed capacity of 484 megawatt at an investment of about USD 740 million.
The related infrastructure that would transmit electricity to consumption centres will see further investment of over USD 290 million, two sources with knowledge of the matter said.
The projects will not just be Sri Lanka’s largest renewable energy project but also the nation’s biggest power project to date.
Last month, Sri Lanka had entered into an agreement to buy electricity from Adani’s wind power stations for 20 years.
AGEL will be paid 8.26 cents per kilowatt-hours (kWh) as per the agreement. This is lower than up to 26.99 cents per kWh paid to thermal projects of state-owned CEB and 9.67 to 13.99 cents per kWh for wind projects. It is lower than 8.75 cents per kWh paid for Odamawadi solar project.
Adani Group is also involved in building a USD 700 million terminal project at the island nation’s largest port in Colombo.
Sri Lanka, which suffered from crippling power blackouts and fuel shortages during an economic crisis in 2022, has enacted a new legislation to revamp the country’s power sector and attract investment in renewable energy.
The move, which is in line with the commitments made under a USD 2.9 billion aid from the International Monetary Fund (IMF), seeks to reduce losses in the state-run power company Ceylon Electricity Board (CEB) and make the sector more appealing to investors.
Adani’s project is also strategically important as it would restrict China’s economic influence in the Indian Ocean, particularly Sri Laka’s northern region, which is very close to India’s southern mainland.
Sources said there has been talks at the government-to-government level between the two nations, and many other Indian firms, including state-owned, are also planning to set shop there.
There are also talks of setting up a Sri Lanka-India power transmission line for energy trade between the nations.
Sources said Adani’s project has received Sri Lankan cabinet approval and a power purchase agreement (PPA) is being finalised, post which the Indian giant will begin work and deliver the project in 2 years.
While Sri Lankan government has negotiated an extremely competitive tariff of 8.25 cents per unit, which is much lower than the existing renewable and traditional energy tariffs, an anti-India lobby, which is said to be backed by China and fossil fuel suppliers, has begun a campaign against Adani.
The lobby groups are raising questions about the environment, due process not being followed, and tariffs.
While environmentally, the project was greenlit post a comprehensive EIA (Environment Impact Assessment) study done by an independent third-party expert, Adani has complied with all existing laws in letter and spirit, they said.
Sri Lanka’s Electricity Act allows proposal under G2G mechanism and Adani’s project falls under this.
The project was awarded to Adani following age-old process of government floating an RFP (request for proposal) and developers responding to it.
As per procurement guidelines, any tender needs to go through the same process of technical evaluation by Project Committee of CEB and thereafter tariff negotiation by Cabinet Appointed Negotiation Committee (CANC).
This was followed for Adani’s project, they added.
The project has also been approved by the regulator Public Utilities Commission of Sri Lanka (PUCSL).
Adani’s tariff is lower than government’s own wind power plant and the country’s fossil fuel-based power.
The project will contribute to Sri Lanka’s energy security, generate clean, renewable energy to the tune of 1,500 million units per annum, meeting energy demand of about 0.6 million households. It will generate 1200+ local employment opportunities, displace fossil fuel worth USD 270 million annually and cut CO2 emission by 1.06 million tonne a year.
Sri Lanka is fuel importer and is currently facing economic crisis. Hence the project will not only pump FDI into the nation, also cut fossil fuel import bill, sources said.
