The Adani Group’s solar contracts, which are under investigation over bribery accusations, are priced lower than competitors and could find new buyers if canceled, analysts say. The scandal involves allegations that Adani executives, including founder Gautam Adani, offered a $265 million bribe to secure a deal to supply 8 GW of solar power through Adani Green Energy (AGEL).
The US Department of Justice (DOJ) charged Adani and others in connection with the scheme, but the Adani Group has strongly denied the accusations. Despite the legal challenges, analysts believe that the potential financial impact on the company is limited. According to a recent report by Nomura, even if Adani promoters are found guilty, the potential penalty would be manageable, as it is capped at three times the bribe amount.
Nomura noted that there are approximately 1.8 GW of solar projects in Gujarat set to be commissioned in the coming months under 25-year power purchase agreements (PPAs), with a tariff rate of Rs 2.42 per unit. These projects are operated by five special purpose vehicles (SPVs) of AGEL, which may carry an estimated project debt of around $685 million.
“Compared to ReNew’s solar projects, which have an average tariff of Rs 2.5 per unit, we do not view Adani’s tariffs as unreasonably high,” the brokerage said. “Even if the PPAs for the affected projects are canceled, we believe AGEL can recontract these projects through auctions without significant reductions in tariff rates.”
The US indictment alleges that the bribes, mostly a $228 million payment to a government official were intended to secure a deal with the Andhra Pradesh state utility to purchase electricity from a 7 GW solar project through the Solar Energy Corporation of India (SECI).
Despite the legal troubles, analysts are confident that the Adani Group will continue to have access to financing channels. “The DOJ indictment is an allegation and does not necessarily constitute a breach of anti-corruption agreements,” Nomura explained. “Unless lenders decide to sever ties with the group, it is unlikely that they will call for an event of default. Instead, they may request a waiver or ask AGEL to pay down the affected loan portion.”
The report also pointed out that compared to the turmoil earlier in 2023, when the Adani Group faced a major short-seller attack by Hindenburg Research, the company’s liquidity management has significantly improved. The brokerage expressed no major concerns about the risk of promoter share pledges, even in the face of volatility in Adani’s stock prices.
“While the Adani Group may scale back its growth plans in the short term, we believe it will be able to weather this storm,” Nomura concluded.
(With PTI Inputs)