Adani Group is in talks with Anil Ambani-led Reliance Power to acquire the latter’s subsidiary Vidarbha Industries Power (VIPL), reported The Economic Times, citing people aware of the development.

VIPL, which once supplied electricity to Adani Electricity Mumbai, has not been generating any power for a year after Coal India stopped supplying coal, forcing Adani to buy power from the open market, the report said.

Coal India stopped coal supply to VIPL, which operates two 300 megawatts (MW) units in Maharashtra, over legal issues and matters relating to payments, the report added.

According to a senior executive cited in the report, the acquisition talks, which are at an early stage, may not be fruitful with the current power purchase agreement. “The acquisition cannot happen with the current power purchase agreement because the tariff is very high. Adani Electricity can easily source electricity from the open market at Rs 4 per unit or lower. So then why should it pay Rs 5.50 per unit to VIPL,” the person was quoted as saying in the report.

The report, citing executive, further added that Adani has been procuring power from the market at Rs 3.50-4 per unit while VIPL was charging it Rs 4.38 per unit, which may go further up to Rs 5.50 if allowed to pass on the entire cost of coal procurement. The executive told ET that “any potential acquisition will be guided by Adani Electricity’s internal target of reducing the average cost of power to about Rs 4/unit.”

The two groups have struck two deals in the last two years. While Adani Group acquired the Mumbai electricity distribution business from Reliance Infrastructure in a deal valued at Rs 13,251 crore back in 2017, Adani Transmission bought two transmission projects from Reliance Infrastructure in a deal valued at Rs 1,000 crore before that.

First Published:Jan 14, 2020 11:47 AM IST