President Anura Kumara Dissanayake, who had promised a review of the Adani wind power project during his election campaign, is expected to move forward with alternative energy strategies.

Adani Green Energy, a subsidiary of the Adani Group, has announced its decision to withdraw from its proposed $1 billion wind energy project in Sri Lanka. The decision was communicated to Sri Lanka’s Board of Investment (BOI) and comes despite the company having secured most of the necessary approvals.

The withdrawal is attributed to prolonged delays, including unresolved environmental clearances and an ongoing Supreme Court case that has complicated the project’s progress. The company had planned to establish wind farms with a combined capacity of 484 MW in Mannar and Pooneryn, alongside significant expansions in the country’s transmission network. However, despite having spent $5 million on pre-development activities, Adani Green Energy has chosen to step away from the project.

There has been a raging debate in Sri Lanka on the deal, citing it as an expensive deal. The earlier government had agreed to purchase power from Adani’s 484-megawatt wind power project at a rate of 8.26 US cents per unit under a 20-year power purchase agreement. This agreement, announced in May 2023, triggered widespread criticism due to the high price and lack of competitive tendering. Media minister Nalinda Jayatissa had earlier reiterated the government’s stance, saying, “We are not agreeable to the prices put forward, so that agreement was revoked, and the committee was appointed to reassess the project pricing.”

Delays and Renegotiations

The company’s decision to exit the project follows an announcement from Sri Lanka’s newly elected government, led by President Anura Kumara Dissanayake, that it intends to renegotiate the terms of the agreement. The government had expressed its desire to lower the power purchase price from the previously agreed rate of 8.26 US cents per kilowatt-hour to below 6 US cents.

With a new Cabinet Appointed Negotiations Committee (CANC) and Project Committee (PC) set to reassess the project, Adani Green Energy’s board decided to withdraw. In a statement, the company said, “While we fully respect the sovereign rights of Sri Lanka and its choices, we have decided to respectfully withdraw from the said project.”

Environmental Concerns and Legal Challenges

Apart from pricing renegotiations, the project faced resistance due to environmental concerns. In particular, the environmental approvals for the Mannar wind farm had not been resolved, and activists had raised objections over the potential ecological impact. The matter had also been brought before Sri Lanka’s Supreme Court, further stalling the project’s implementation.

Murtaza Jafferjee, Chairman of the Colombo-based think tank Advocata Institute, had earlier criticised the lack of transparency in awarding the project to India’s Adani Group without a competitive bidding process. He highlighted that the deal contradicts the International Monetary Fund’s (IMF) recommendations to curb corruption through competitive tendering.

“Why are we paying 8.3 cents for an untendered project?” Jafferjee had questioned. “The IMF Governance Diagnostic Report emphasises the need for competitive procurement processes. Unfortunately, Sri Lanka lacks a proper procurement law and instead operates with guidelines that are often bypassed.”

The wind power project has faced stiff opposition from various quarters, including Sri Lankan environmentalists and local communities. Environmental groups, such as the Wildlife and Nature Protection Society and the Environmental Foundation, have raised concerns over the project’s potential ecological impact. They argue that the lack of an adequate Environmental Impact Assessment (EIA) could threaten local biodiversity, particularly migratory bird populations.

Investment and Development Efforts

Adani Green Energy had already undertaken significant pre-development efforts, including obtaining most of the necessary clearances and working on land acquisitions for both the wind farms and the associated transmission network. The company had engaged in over 14 rounds of discussions with the Ceylon Electricity Board (CEB) and other Sri Lankan authorities to finalize the agreement.

Despite these efforts, the lack of a final resolution on environmental approvals and the ongoing court case proved to be major roadblocks.

Future Prospects in Sri Lanka

While withdrawing from this investment, Adani Green Energy reaffirmed its willingness to explore future opportunities in Sri Lanka should the government invite the company for new projects. The company’s statement highlighted its long-term interest in Sri Lanka’s renewable energy sector, emphasizing that it remains open to collaborating if conditions are conducive.

“Our executives recently had discussions with CEB officials as well as the Ministry of Power and Energy in Colombo,” the company noted. “However, with uncertainties remaining over the project’s future, we believe it is best to step back at this point. Should the Sri Lankan government consider Adani Group for future projects, we will be happy to explore those opportunities.”

Following the announcement of its withdrawal, Adani Green Energy’s stock snapped a five-day losing streak, rising by 2.1 per cent on the National Stock Exchange (NSE) in India, trading at ₹936 per share. Investors seemed to react positively to the company’s decision to step away from a project fraught with uncertainty.

Political and Economic Implications

President Anura Kumara Dissanayake, who had promised a review of the Adani wind power project during his election campaign, is expected to move forward with alternative energy strategies. The government’s stance on reducing the power purchase price indicates its focus on making energy more affordable for Sri Lanka’s citizens while also addressing public concerns over foreign investment in strategic infrastructure.

The withdrawal of Adani Green Energy from the project is a significant development in Sri Lanka’s energy sector. While it reflects challenges in executing large-scale foreign investments, it also presents an opportunity for Sri Lanka to reevaluate its renewable energy strategy.

Adani Green Energy’s decision to withdraw from the $1 billion wind power project in Sri Lanka marks the end of what could have been a major renewable energy initiative in the country.

While factors such as pricing disputes, environmental concerns, and legal challenges contributed to the company’s exit, the development underscores the complexities of executing large-scale infrastructure projects in emerging markets. The Sri Lankan government now faces the task of reassessing its energy needs and finding viable alternatives to meet its growing demand for sustainable power.