Adani Group’s meteoric rise in the Indian power sector continued unabated in 2011, with the financing of its second 4GW capacity coal-fired plant, and it stepped up its efforts to take control of the infrastructure required to make its projects as profitable as possible, and at the same time try replicate its successful Indian model in Australia.

The company founded by Gautam Adani only began producing power in India in 2009, but now envisages operating plants with an installed capacity of 20,000MW by 2020. Further progress towards this goal came in the form of a project sponsored by Adani and Millennium Developers & Promoters to expand a 3,300MW power plant located at Gondia in Maharashtra by 1,320MW. The plant is scheduled to begin operations in July 2013 and will have the same 4,620MW capacity as Adani’s coal-fired plant at Mundra in Gujarat.

Construction of the third phase of Mundra was completed in March and resulted in the plant having the largest generating capacity in the world for a single-location coal-fired unit in the private sector. The only coal-fired plants larger than the Mundra plant are state-owned units in Taiwan, China and Poland.

The arranger of the Gondia project’s Rs50.32 billion ($1.13 billion) in debt was SBI Capital and the debt featured two tranches with 14- and 15-year tenors – a vote of confidence in the sponsor given that Indian banks do not typically like lending at tenors extending beyond 10 years. Debt constituted 80% of the total financing – notably higher than for most power projects in India.

One of the hallmarks of Adani’s operations in India has been its ability to build infrastructure around its generation plans. The company won the Project Finance Indian Transmission Deal of the Year in 2010 after closing Rs22 billion ($489 million) in debt for a $611 million project to connect the Mundra power station with the north of the country by way of a 986km long high voltage DC transmission line – the first such private sector HVDC line in the country. The 2,500MW capacity line passed through no fewer than three states and had transmission losses of 1% compared to 5-8% losses for legacy lines.

That ability to buttress its generation operations with ambitious infrastructure developments was once again in evidence in 2011, with the acquisition of a 99-year lease of Queensland’s Abbot Point coal terminal. Adani won with a bid of A$1.829 billion ($1.953 billion) and its success came in the wake of the company’s purchase of Linc Energy’s coal mines, also in Queensland. Adani managed to win despite a higher, eleventh-hour bid from International Port & Logistics (IPL).

Adani’s bid also overcame competition from Brookfield Infrastructure Partners, as well as a combined bid from Macquarie, Cheung Kong Infrastructure and RREEF Infrastructure, through its willingness to take on development risk. Both Adani and IPL were able to bid more than the $1.5 billion offered by the other losing consortiums, whose bids were limited by their acceptance of a planned increase in the terminal’s facility from 21 million tonnes per year (tpy) to 50 million tpy. Adani’s bid won out because it submitted plans to expand the terminal’s capacity to 80 million tpy and the IPL bid was deemed to contain too many sources of uncertainty.

The $2 billion one-year bridge loan that Adani closed with Standard Chartered and State Bank of India in May 2011 was due to be refinanced as Project Finance went to press, with the new loan reportedly in the order of A$1.4 billion ($1.51 billion) and coming from a largely Australian bank consortium.

Despite the string of successes outlined above, Adani will need to bring all of its deal-making prowess – and its increasing economies of scale – to bear, as competition for coal deposits intensifies. Like its competitors, Adani faces a potential squeeze on profits from delayed domestic coal-mining projects, high international coal prices and lower-than-expected rises in domestic power demand, which will narrow the country’s power deficit as more supply comes online (roughly a fifth of its production is sold on a merchant basis).

The company has signed six long-term power purchase agreements with state utilities in Gujarat, Haryana, Maharashtra and Rajasthan, but has since argued that the PPAs – which vary between Rs2.34 and Rs2.94 per unit – require renegotiation in the wake of the Indonesian government’s decision in August to sell its coal in accordance with a different international benchmark. Indonesian coal prices rose by 30% – a sharp external shock given that Indonesian-sourced coal-fired generation accounts for 30% of India’s overall power output. The sudden jump in prices pushed Adani into the red in the third quarter of last year. If there was one silver lining for the company, it is that competitors such as Tata were hit even harder by the decision than Adani, because Adani at least controls of mines, ports and transport facilities – testimony once again to the company’s core strategy.