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In a likely reaction to not emerging as the successful bidder for the Mandakini coal block in the recently conducted e-auctions, the stock of Adani Power lost 7 per cent today.
The Mandakini block in Odisha, with an estimated annual production capacity of 7.5 million tonnes, was bagged by Mandakini Exploration and Mining after it outbid other contenders, including Adani Power.
Adani Power has a generation capacity of over 8,500 MW and the company operates three plants at Mundra in Gujarat, Tiroda in Maharashtra and Kawai in Rajasthan.
The Mundra plant, which accounts for over half of the company’s capacity, is fed on imported coal. The plant turned unviable following a change in Indonesian laws that made coal exports from the country expensive.
The other two plants are fed on domestic coal sourced from Coal India. Securing access to coal mines is therefore crucial for Adani Power to ensure raw material security.
But, all is not lost. One, the company has bagged the Jitpur block in Jharkhand. Coal from this block, with an estimated capacity of 2.5 mt per annum, can be used for feeding the company’s Mundra plant.
Second, Adani Power which has been incurring losses for the past few years and is significantly leveraged, might not be able to fund the coal block purchases.
The company had a debt-to-equity ratio of slightly over 3 times at the standalone level as on September 2014. At the consolidated level, the ratio stood at 6 times as on March 2014.
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