Industry leaders have conveyed that the bribery charges levied by a US court against the Adani Group are not expected to hinder India’s ambitions in clean energy substantially.
Delhi has committed to obtaining 50% of its energy requirements, equating to 500 gigawatts (GW) of electricity, from renewable sources by 2032. This initiative is crucial in the global fight against climate change.
The Adani Group is expected to account for one-tenth of that capacity.
Analysts suggest that while the legal issues in the US may momentarily hinder the group’s expansion efforts, they will support the government’s overarching objectives.
India has significantly progressed in developing clean energy infrastructure in the past decade.
According to the International Energy Agency, the nation is expanding its renewable energy capacity at the fastest pace among major economies.
The installed clean energy capacity has experienced a remarkable five-fold increase, with approximately 45% of the nation’s power-generation capacity, totaling nearly 200GW, now derived from non-fossil fuel sources.
A former CEO of a competing firm, who requested anonymity, described the charges against the Adani Group—integral to India’s clean energy goals—as “like a passing dark cloud,” asserting that they will not significantly hinder the ongoing momentum in this sector.
Gautam Adani has committed to investing $100 billion (£78.3 billion) in India’s energy sector transition. The green energy division is the largest renewable energy company in the nation, generating nearly 11GW of clean energy through various wind and solar initiatives.
Adani aims to expand its capacity to 50GW by 2030, accounting for nearly 10% of the nation’s total installed capacity.
More than half of the total, specifically 30GW, is set to be generated at Khavda, located in the western Indian state of Gujarat. The world’s largest clean energy plant is being hailed as five times the size of Paris, serving as the centerpiece of Adani’s renewable energy portfolio.
Khavda and Adani’s renewable energy facilities have become focal points in the allegations brought forth by US prosecutors. The charges suggest that the company secured contracts to provide power to state distribution companies through bribery of Indian officials. The group has refuted these claims.
The repercussions at the corporate level are becoming increasingly apparent.
Following the public release of the indictment, Adani Green Energy swiftly called off a $600 million bond offering in the United States .
France‘s TotalEnergies, a significant stakeholder with a 20% ownership in Adani Green Energy and a partner in various renewable projects, announced its decision to cease new capital investments.
Prominent credit ratings agencies, including Moody’s, Fitch, and S&P, have revised their outlook on companies within the Adani group, notably Adani Green Energy, to a negative stance. The company’s ability to secure funding is set to be affected, resulting in higher costs associated with capital-raising efforts.
Analysts have voiced concerns regarding Adani Green Energy’s capacity to refinance its debt, particularly as international lenders become increasingly cautious about extending their exposure to the group.
Global lenders such as Jeffries and Barclays are reassessing their relationships with Adani. This is because the group’s dependence on international banks and both international and local bond markets for long-term financing has surged from just 14% in the financial year 2016 to nearly 60% currently, as indicated by a note from Bernstein.
Japanese broking Nomura has indicated that while new financing may be scarce in the immediate future, it is expected to “gradually resume in the long term.” Japanese banks, including MUFG, SMBC, and Mizuho, are expected to maintain their partnership with the group.
An unnamed CEO stated that the “reputational and sentimental impact” will diminish within a few months, emphasizing that Adani is focused on developing “solid, strategic assets and creating long-term value.”
A representative from the Adani Group informed the BBC of the company’s dedication to its 2030 objectives, expressing confidence in achieving a renewable energy capacity of 50 GW.
Adani stocks have experienced a significant rebound following the lows reached after the US court indictment.
Analysts have indicated to the BBC that a potential reduction in funding for Adani may ultimately advantage its competitors.
Adani’s financial clout has facilitated swift expansion within the sector. Yet, competitors like Tata Power, Goldman Sachs-backed ReNew Power, Greenko, and state-owned NTPC Ltd are also making substantial strides in enhancing their manufacturing and generation capabilities.
Adani’s status as a green energy champion could be better. “It is a significant entity that has navigated both sides of the industry, holding the title of the largest private developer of coal plants globally,” stated Tim Buckley, director at Climate Energy Finance.
He stated that a significant organization, viewed as potentially corrupt, may be hindering its growth, which could result in increased financial resources being directed towards other green energy firms.
Vibhuti Garg, the South Asia director at the Institute for Energy Economics and Financial Analysis (IEEFA), has noted that market fundamentals are robust, with demand for renewable energy in India surpassing supply. This trend is expected to sustain a strong appetite for significant investments in the sector.
The pace of India’s clean energy ambitions may need to be improved by its bureaucracy.
Companies under our observation are exhibiting a notably positive outlook. For them, finance poses no issues. “If anything, state-level regulations serve as a deterrent,” states Ms. Garg.
Many state-run power distribution companies are grappling with financial challenges, leading them to favor less expensive fossil fuels while delaying the signing of purchase agreements.
Adani has secured a contentious tender in a significant development, marking the inaugural major contract awarded by the state-run Solar Energy Corp of India (SECI) that lacks a guaranteed purchase agreement from distributors, as reported by Reuters.
The chairman of SECI informed Reuters that 30GW of operational green energy projects are currently available in the market, but they need more buyers.
According to experts, the 8GW solar contract central to Adani’s indictment in the United States highlights significant issues within the tendering process. This process mandated that solar power generation companies also produce their modules, thereby restricting the pool of potential bidders and increasing power costs.
According to Ms. Garg, the court indictment is expected to result in a “tightening of bidding and tendering rules.”
Mr. Buckley emphasizes the significance of a more transparent tendering process that mitigates future risks for both developers and investors.
