Bribery charges against the Adani Group in a U.S. court are unlikely to significantly derail India’s clean energy ambitions, according to industry leaders speaking to the BBC.
India has committed to sourcing half of its energy needs, or 500 gigawatts (GW) of electricity, from renewable sources by 2032—an essential part of global efforts to combat climate change. The Adani Group is expected to contribute a tenth of that capacity.
While the legal issues in the U.S. may temporarily delay Adani’s expansion plans, analysts believe they will not hinder the government’s overall renewable energy targets.
India has made substantial progress in building clean energy infrastructure over the past decade. The country is expanding its renewable capacity at the “fastest rate among major economies,” according to the International Energy Agency. Clean energy capacity has grown fivefold, with nearly 45% of India’s power-generation capacity—around 200GW—coming from non-fossil fuel sources.
Despite the charges, a former CEO of a competing firm, who wished to remain anonymous, described the situation as a “passing dark cloud” that would not significantly affect the momentum of India’s clean energy drive. Gautam Adani has pledged to invest $100 billion (£78.3 billion) in India’s energy transition. Adani Green Energy, the group’s green energy arm, is the country’s largest renewable energy company, generating nearly 11GW of clean energy through a diverse mix of wind and solar projects.
Adani aims to expand its green energy capacity to 50GW by 2030, which would account for nearly 10% of India’s total installed capacity. Over half of that—30GW—will be produced at Khavda, located in Gujarat, India. This site is touted to become the world’s largest clean energy plant, five times the size of Paris, and is central to Adani’s renewable energy portfolio.
However, Khavda and other Adani renewable facilities are now at the heart of the bribery charges filed by U.S. prosecutors, who allege that the company secured contracts to supply power to state distribution companies in exchange for bribes to Indian officials. Adani has denied these allegations.
The legal troubles have already affected the company. Following the indictment, Adani Green Energy canceled a $600 million bond offering in the U.S. France’s TotalEnergies, which owns a 20% stake in Adani Green Energy and collaborates with the conglomerate on several renewable projects, announced it would halt new investments in the company.
Credit rating agencies like Moody’s, Fitch, and S&P have since downgraded their outlook on Adani Group companies, including Adani Green Energy, to negative. This could affect the company’s ability to access funding and raise capital at affordable rates.
Concerns have also been raised about Adani Green Energy’s ability to refinance its debt, as international lenders are increasingly wary of the group’s exposure. Global lenders such as Jeffries and Barclays are reportedly reassessing their ties with Adani, as the group’s reliance on international and local banks for long-term debt has risen from just 14% in 2016 to nearly 60% today, according to Bernstein.
Japanese brokerage Nomura predicts that new financing might be scarce in the short term, but should gradually resume over the long term. Japanese banks such as MUFG, SMBC, and Mizuho are likely to maintain their relationships with the group.
Despite the reputational impact, the unnamed CEO believes that the negative effects will subside in a few months, as Adani continues to build “solid, strategic assets and create long-term value.”
A spokesperson for the Adani Group told the BBC that the company remains “committed to its 2030 targets” and is confident it will achieve its goal of delivering 50 GW of renewable energy capacity.
Adani’s stock has rebounded significantly from the lows following the U.S. court indictment.
Some analysts suggested to the BBC that a potential slowdown in Adani’s funding could actually benefit its competitors. While Adani’s financial power has allowed it to quickly expand in the sector, companies such as Tata Power, Goldman Sachs-backed ReNew Power, Greenko, and state-owned NTPC Ltd are also significantly increasing their manufacturing and generation capacity.
“It’s not that Adani is a green energy leader. It is a major player that has been involved in both renewable and coal energy development, being the world’s largest private developer of coal plants,” said Tim Buckley, director at Climate Energy Finance.
He added that if a large entity, “perceived as corrupt,” experiences a slowdown in expansion, it could result in “more money flowing into other green energy companies.”
Vibhuti Garg, South Asia director at the Institute for Energy Economics and Financial Analysis (IEEFA), pointed out that market fundamentals remain strong, with demand for renewable energy in India outpacing supply, which should sustain investment interest.
However, what could hinder the pace of India’s clean energy goals is its own bureaucracy.
“Companies we track are very optimistic. Finance isn’t a problem for them. The real challenge is state-level regulations,” said Ms. Garg. Many state-run power distribution companies face financial difficulties, opting for cheaper fossil fuels and delaying the signing of power purchase agreements.
According to Reuters, the controversial tender won by Adani was the first major contract issued by state-run Solar Energy Corp of India (SECI) without a guaranteed purchase agreement from distributors.
SECI’s chairman told Reuters that there are 30GW of operational green energy projects on the market without buyers.
Experts note that the 8GW solar contract at the heart of Adani’s U.S. indictment also highlights the problematic tendering process, which required solar power generation companies to also manufacture modules, limiting the number of bidders and leading to higher costs.
The court case will likely lead to “stricter bidding and tendering rules,” says Ms. Garg.
A more transparent and secure tendering process that reduces risks for developers and investors will be essential moving forward, agrees Mr. Buckley.
