Power Packed AGM: The Ambani Way
Reliance walking on territories abandoned by others. Will it succeed?
Hope. That’s what the AGM of India’s largest company was all about. Here’s a quick brief for you to catch up.
Reliance will finally be getting into a strategic partnership with Saudi Aramco, the world’s largest daily oil-producing company.
Why finally?
Because two years back, Reliance had announced a 20% stake sale in its chemical and refining business to Saudi Aramco. Things went cold after that. And everyone has since been waiting for this development to happen. So pretty exciting, huh!
Talking about partnerships-
Reliance and Google have together developed ‘Jio Phone Next’ that will be available at “ultra-affordable” prices. The two giants are also working together on 5G tech.
Jio Mart, launched in collaboration with Facebook-owned Whatsapp, will be scaled up pretty soon.
And it’s also working on data solutions for SMEs with Microsoft.
Yes. Reliance is working with pretty much all the global giants out there (except, ahem, Amazon).
Things could not get more promising. Can they?
Well, it did! Reliance is getting into solar power, heating up the green energy space all the more.
Just a month ago, SoftBank had announced its exit from solar power in India. Its 80% stake in SB Energy (and the balance 20% stake held by Bharti Global Ltd.) was lapped up by Adani Green Energy Ltd (AGEL). In fact, SoftBank looked so desperate to get out of the deal that it was ready to sell its stake for $625 million vs the $800 million investment it made in the last 5 years.
It’s almost tragic because just about 2.5 years ago, SoftBank’s chief executive, Masayoshi Son, promised free electricity after 25 years to all the countries that are part of the International Solar Alliance. SoftBank also had lofty plans to invest $1 trillion in India’s renewable energy capacity by 2030.
Guess he went too far into the future and it all came crashing down! But why?
Because the on-ground reality did not match the plans made on paper.
Solar power generation requires vast empty lands. But land evacuation in India is not easy.
India merely generates solar energy. But the process of solar power generation is itself highly dependent on imported solar cells and modules (read: dependence on China).
The electricity distribution companies (discoms), who are the final customers of the solar power generating companies, have weak financial positions and cannot always make timely payments for the power that is supplied to them.
Regulations are very hazy around solar power auctions.
Wait, auctions?
Yaa. You can’t go about producing solar power just like that. The states run auctions, and the developer with the most promising bid gets the contract.
Now, there have been several instances where states canceled or renegotiated the contracts after the bidding process had been concluded. If you can’t find customers, then this puts the developers in a tough spot, no?
Aren’t you wondering why Adani picked up these stocks then? And, why is Reliance embracing the live wire that SoftBank won’t even touch with a pole?!
Well, Adani Green Energy Limited, the world’s largest solar energy developer, is facing its fair share of troubles. It has promising capacities, but sadly 80% of its capacities haven’t found customers yet. Its biggest project (30% of its capacity) is trapped in the crossfire of uncertainty. So it’s better to not go into the depths of AGEL, or to discuss its future.
But, Reliance can be different. Reliance can make a difference.
Because Reliance isn’t just looking at solar energy development. It is looking to build the entire ecosystem in India. It plans to open four giga factories—solar photovoltaic module factory, energy storage battery factory, electrolyser factory, and fuel cell factory—for its gigantic plans.
And considering the vast experience that this group has, maybe it can get above all the hurdles that the others are struggling with?
Reliance has been quick to adjust its sails with changing tides. In 2016, it diversified from oil to tech to stay relevant in recent times. And as the environmental crisis has started ringing the bells of calamity, it is again adjusting its sails to green energy.
P.S: Team ReadOn attended the AGM live. If you missed the intriguing, fun, and romanchak session, watch it here (at 1.5x speed, preferably!)