By Chandra Jayaratne –

Chandra Jayaratne

Re Adani Wind Power Project in Sri Lanka Offers Fixed Tariff with No Changes over Next 20 years; Appears to Ignore the Critical Principle of Time Value of Money and Transparency

Newspapers report that the Managing Director of Adani Power and Adani Energy Solutions had, at a meeting with Sr Lankan Journalists at the Adani Group’s global corporate headquarters, made a statement that “ the tariff Adani has offered to Sri Lanka is fixed for the entire duration of the contract spanning 20 years” and had also “emphasized the need for transparency in tariffs, pointing out that other power companies initially quoted lower prices but increased rates later, thereby burdening the consumers.” He is further quoted as stating “Transparency is key here. If they charge a certain amount that should be the bill. There should be no hidden elements. Should we offer a fixed tariff with no changes over the next 20 years, or should we present a seemingly lower figure that could potentially double through additional charges in the future? This dilemma demands clarity from Sri Lanka. Discerning individuals already know who can deliver and within what timeframe.” He has in addition described the planned initiatives to add value to the Sri Lankan economy through a local workforce and their skills enhancement. He has gone on to assure that the rich environmental value of the migratory bird flocks will not be negatively impacted due to the use of advanced AI and other proven technologies to be adopted.

Sri Lankan Civil Society respectfully recognizes the above commitments, especially the commitments to Transparency with no hidden elements, Value Addition and Environmental concerns and call upon the Managing Director of Adani Power and Adani Energy Solutions to transparently,

* disclose the original and all amendments to the government-to-government proposals submitted along with their own environmental assessments and provide details of and rationale for all changes in price, conditions/ warranties made during different stages negotiation, until the end contract position

* all related party payments made or committed to be paid at any time throughout the contract period in Sri Lanka or overseas, by or on behalf of any Adani Group Company or on their behalf by any third party, to any of the persons or parties engaged in the contract development or in the negotiations team/process or any other Sri Lankan/Sri Lankan entity or any nominee of such persons

* Declare that up now and into the future throughout the contract period, the project related actions and transactions will not violate any regulations or laws of Sri Lanka or India

* disclose and demonstrate transparently all environmental protection measures in place, especially regarding migratory bird movements and end of project removal/safe disposal of construction material

In addition, it is necessary the Managing Director of Adani Power and Adani Energy Solutions, who is well aware of the accounting concept of “Time Value of Money,” in challenging the benefits of a fixed 20 year pricing by Adani group versus competitive offer prices of other smaller production capacity suppliers, should transparently compute and disclose publicly the respective estimated net present values of the all outgoings from the Sri Lankan state to the Adani Group project and to other competing projects separately. With all projects’ pricing being in US dollars, the exchange rate risk is already mitigated.

The total outflows to Adani Group and other competing projects can transparently be built by accurate estimation. An acceptable discounting rate can be applied in determining the respective net present values. These rates can be based on any additional country risks, local inflation and relevant energy sector related specific risks. Multiple rates of discounting may even be used for different streams of cash flows, with assumptions being transparently disclosed; and apply such discounting rate/s to the estimated streams of cash outflows to Adani and competitor suppliers (provided estimated on acceptable assumptions transparently disclosed). Such computations will impute in the net present values determined risk adjustments for anticipated price variations, especially applicable in respect of other competing offers, if their price offers are subject to permissible future adjustments.

Only by disclosing the above can the Adani Group confirm the position taken at the meeting with the journalists.

Civil Society look forward with much anticipation to the above disclosures and compliance certifications: and sincerely trust that the President, the Minister of Power and Energy, Ministry of Finance, the Auditor General, Governor of the Central Bank, the Opposition Leaders and the Committee on Public Finance will call for and evaluate the requested submissions before final green light for the Mannar Wind Power project.