The Bhutanese | Tenzing Lamsang | August 24, 2024
In the wee hours of Sunday on 15th June 2024, Gautam Adani, the Chairman of the Adani Group in India sent out a tweet saying that he has signed an MoU with the Druk Green Power Corporation (DGPC) for the 570 MW Wangchu Hydro Plant in Chukha.
This was during the visit of Mr Adani to Bhutan to explore business opportunities.
It has now emerged that when the MoU was signed the informal understanding, at least from the Bhutanese side, was that Adani would get a significant but minority stake in the project with the majority shares owned by the Druk Green Power Corporation (DGPC).
This is not just for Adani but for all such hydro projects in Bhutan inviting foreign joint venture investments in hydro projects.
However, after spending some time in Bhutan, the understanding, at least from Mr Adani’s side seems to have been a different one or later changed.
This is because in a later informal meeting with Bhutanese officials Gautam Adani verbally indicated that his group would be interested in a majority stake in the Wangchu project.
This stance left Bhutanese officials surprised as Bhutan has never given majority stakes to foreign companies in its hydro projects.
One outcome of the Adani request was that the discussions with Tata Power on the 600 MW Khorlochhu project (formerly called Kholongchu project) assumed more urgency and importance as this was supposed to be a template Joint Venture (JV) hydro project for future JV projects.
In the deal with Tata Power over the 600 MW Khorlochhu project it was announced in the first week of August that Tata Power would get a 40% stake and DGPC would hold 60%.
This 40% stake of the Tata group would revert back to Bhutan after the concession period of 30 years.
A source, on the condition of anonymity, said that Bhutan cannot give a majority stake to any foreign JV partner and in fact the Khorlochhu project deal with Tata Power would serve as a template for future JV projects.
This is more so after Bhutan’s past attempts to do JV projects with Indian Public Sector Undertaking (PSU) companies could not happen after a 50:50 project shareholding in the Kholongchu project between DGPC and Satluj Jal Vidyut Nigam (SJVN).
There were issues with management control, raising of financing, contract awarding and more leading to the tie up with SJVN getting dissolved.
It is clear that DGPC wants management control in JV projects but will also offer a good stake to foreign investors.
However, according to the source nothing is finalized and the Adani verbal offer is likely more a negotiation tactic by a private businessman than any final stand.
The government will await a formal offer proposal by the Adani group which will essentially be a financial offer and then formal negotiations will start.
The stake issue is all the more important as the 570 MW run-of-the-river Wangchu project in all likelihood many be converted into a 900 MW reservoir project which will significantly increase its size, importance and revenue as Bhutan currently does not have any storage projects.
As per the 2024-25 budget documents the Wangchu projects aims to start on April 2027 and be completed by April 2034. The DPR is to be reviewed with preference for a 900 MW reservoir option.
Sources had earlier told this paper that while the MoU has been signed formal discussions have not started and so the MoU is a form of expression to start discussions.
The letter of acceptance given by the DGPC to Adani as part of the MoU is one of the many attempts by Bhutan to attract foreign investment into Bhutan’s hydropower sector and in Bhutan in general. However, this is also within the purview of the Bhutanese system.
At the same time Bhutan also wants to get major business houses to invest in other sectors of Bhutan’s economy and so this will also be an important factor to take into account.
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