Adani Power's Ambitious Growth: Expansion Plans Set to Transform India's Energy Landscape

Adani Power Ltd aims to boost its thermal power generation capacity to 30.7 GW by 2030, a 1.7x increase from current levels. The company plans a 2.2x EBITDA growth, supported by Rs 1.6 trillion capital investment. Jefferies rates Adani Power a 'Buy', predicting a 30% stock upside.

Adani Power Ltd (APL), India's prominent thermal power generator, is poised for significant capacity growth. The company has announced a plan to elevate its power generation capability from 17.6 GW to an impressive 30.7 GW by the year 2030, marking a robust 1.7-fold increase.

A report by Jefferies highlights the roadmap for this ambitious expansion, noting that APL possesses the necessary land and financial backing to achieve it. Collaborating with BHEL for equipment supply and utilizing its in-house EPC team, APL ensures the project's progress remains on schedule. This initiative comes amidst a positive backdrop where India's peak power deficit and APL's presence in the merchant power market provide favorable conditions.

The report anticipates a 10% compound annual growth rate (CAGR) in EBITDA from FY24 to FY27, rising further to 19% CAGR between FY27 and FY30 as new capacity comes online. Overall, APL aims for a 2.2x increase in EBITDA between FY24 and FY30, necessitating Rs 1.6 trillion in additional capital spending to reach 13 GW of added capacity. This investment is expected to be funded largely through operational cash flows estimated at Rs 1.4 trillion during FY25 to FY30.

Financial forecasts indicate that APL's debt-to-equity ratio will peak at 1.4x in the period of FY26-FY27, but it's projected to decline as new plants commence operations, generating revenue. APL has secured coal supplies, ensuring reliable operation of its plants. Long-term power purchase agreements offer stability, with provisions like fuel supply agreements or mechanisms for cost pass-through of imported coal, while merchant plants maintain coal access domestically and internationally.

Jefferies has initiated coverage on Adani Power with a 'Buy' rating, projecting a 30% potential increase in share value. This endorsement underscores confidence in APL's growth strategy and positions the company as an enticing investment within the power sector.

(With inputs from agencies.)