Will bribery charges hinder India’s renewable energy goals?

Bribery charges brought by a US court against the Adani Group are unlikely to significantly alter India’s clean energy goals, industry leaders told the BBC.

Delhi has committed to supplying half of its energy needs or 500 gigawatts (GW) of electricity from renewable sources by 2032, key to global efforts to combat climate change.

The Adani Group is planned to contribute one-tenth of that capacity.

He legal problems in the USA It could temporarily delay the group’s expansion plans, but will not affect the government’s overall goals, analysts say.

India has made impressive progress in building clean energy infrastructure over the past decade.

The country is growing at the “fastest pace among major economies” in adding renewable energy capacity, according to the International Energy Agency.

Installed clean energy capacity has quintupled, and around 45% of the country’s power generation capacity (almost 200 GW) comes from non-fossil fuel sources.

The charges against the Adani Group, crucial to India’s clean energy ambitions, are “like a passing dark cloud” and will not significantly affect this momentum, said a former CEO of a rival company, who wished to remain anonymous.

Gautam Adani has pledged to invest $100bn (£78.3bn) in India’s energy transition. Its green energy division is the largest renewable energy company in the country, producing nearly 11 GW of clean energy through a diverse portfolio of wind and solar projects.

Adani aims to expand that figure to 50 GW BY 2030, which will represent almost 10% of the country’s installed capacity.

More than half of that amount, or 30 GW, will be produced in Khavda, in the western Indian state of Gujarat. It is the world’s largest clean energy plant, said to be five times the size of Paris, and the centerpiece of Adani’s renewable energy crown.

But Khavda and Adani’s other renewable energy facilities are now at the center of charges brought by US prosecutors: they allege that the company obtained contracts to supply power to state distribution companies from these facilities, in exchange for bribes to Indian officials. . The group has denied it.

But the consequences at the business level are already visible.

When the allegation became public, Adani Green Energy immediately canceled a $600 million bond offering in the United States.

France’s TotalEnergies, which owns 20% of Adani Green Energy and has a joint venture to develop several renewable energy projects with the conglomerate, said it will halt new capital injection into the company.

Major credit rating agencies (Moody’s, Fitch and S&P) have since changed their outlook on Adani group companies, including Adani Green Energy, to negative. This will affect the company’s ability to access funds and make it more expensive to raise capital.

Analysts have also raised concerns about Adani Green Energy’s ability to refinance its debt, as international lenders tire of adding exposure to the group.

Global lenders such as Jeffries and Barclays are said to be reviewing their ties with Adani, even as the group’s reliance on global banks and local and international bond issues for long-term debt has grown from just 14% in the year. 2016 financial year to almost 60% as it progressed. dated, according to a note from Bernstein.

Japanese brokerage Nomura says new funding could dry up in the short term but should “gradually resume in the long term.” Meanwhile, Japanese banks such as MUFG, SMBC and Mizuho are likely to continue their relationship with the group.

The “sentimental and reputational impact” will fade in a few months, as Adani is building “strong, strategic assets and creating long-term value,” the unnamed CEO said.

A spokesperson for the Adani Group told the BBC it was “committed to its 2030 targets and confident of delivering 50GW of renewable energy capacity”.

Adani’s stock has rebounded sharply from the lows it hit after the US indictment.

Some analysts told the BBC that a possible slowdown in Adani’s funding could end up benefiting its competitors.

While Adani’s financial clout has allowed it to expand rapidly in the sector, its competitors such as Tata Power, Goldman Sachs-backed ReNew Power, Greenko and state-owned NTPC Ltd are also significantly increasing manufacturing and generation capacity.

“It’s not that Adani is a champion of green energy. He is a big player who has walked both sides of the street, being the largest private developer of coal plants in the world,” said Tim Buckley, director of Climate Energy Finance.

A large entity, “perceived as corrupt,” possibly slowing its expansion, could mean that “more money will start flowing to other green energy companies,” he said.

According to Vibhuti Garg, South Asia director at the Institute of Energy Economics and Financial Analysis (IEEFA), market fundamentals also remain strong and demand for renewable energy exceeds supply in India, which is likely to keep the appetite for large investments intact. .

In fact, what could slow the pace of India’s clean energy ambitions is its own bureaucracy.

“The companies we follow are very optimistic. Financing is not a problem for them. If anything, it is the regulations at the state level that act as a kind of deterrent,” says Ms Garg.

Most state-owned power distribution companies continue to face financial constraints, opting for cheaper fossil fuels and delaying signing purchase agreements.

According ReutersThe controversial tender won by Adani was the first major contract issued by state-owned Solar Energy Corp of India (SECI) without a guaranteed purchase agreement from distributors.

The SECI president told Reuters there are 30 GW of operational green energy projects on the market with no buyers.

Experts say the 8GW solar contract at the center of Adani’s US indictment also sheds light on the complicated bidding process, which required solar power generation companies to also manufacture modules, limiting the number of bidders and generated higher energy costs.

The indictment will undoubtedly lead to a “tightening of bidding and bidding rules,” says Garg.

A cleaner tender process that reduces risks for both developers and investors will be important in the future, agrees Mr Buckley.

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