Adani Group's solar power contract, which is at the centre of bribery allegations, has tariffs that are lower than competition and can find new buyers in case the pact is cancelled, according to analysts.
US authorities have charged Adani Group Founder-Chairman Gautam Adani and others for being part of a scheme to offer USD 265 million bribe to Indian officials to gain a contract to supply 8 gigawatt of electricity generated from solar energy by Adani Green Energy Ltd (AGEL). The group has denied all charges.
"If Adani promoters are found guilty, we believe the size of potential penalty is manageable given it is up to three times the value of the bribe," Nomura said in a report.
The brokerage said there are about 1.8 GW solar projects commissioned in Gujarat from February-March 2024, with tariff of Rs 2.42 per unit under the 25-year power purchase agreements (PPAs).
These operational projects are running under 5 special purpose vehicles, namely Adani Green Energy Twenty Four A Ltd (AGE24AL), AGE24BL, AGE25AL, AGE25BL, and AGE26BL.
These may have project debt of about USD 685 million, if assuming capex cost of USD 500,00 per megawatt and 75 per cent capex as debt.
"Frankly speaking, we do not view such tariff levels as high, compared with (competitor) ReNew's solar operational projects at average tariff of Rs 2.5 per unit, and we believe even with possible PPA cancellation on these affected projects, AGEL should be able to recontract these projects via auctions with no significant downward revisions in tariff levels," it said.
The US indictment indicated that most of the alleged bribes (USD 228 million) were paid to a government officer to get Andhra Pradesh's discom to agree to purchase electricity at 7 GW capacity through Solar Energy Corporation of India Ltd (SECI).
"We see the average tariff in AGEL's affected projects as comparable to that of ReNew's and we also believe the affected projects can re-contract the PPAs when needed.
It went on to state that the group will continue to have access to financing channels despite the indictment filed by the US Department of Justice in the New York court.
"As per our conversation with Adani management, the DOJ indictment is only an allegation which does not constitute any breach in anti-corruption covenants. In other words, it could indicate a breach at the time of found guilty stage.
"That said, from a business standpoint, unless bank lenders believe that they are no longer maintaining the relationship with Adani group companies in the future, we believe lenders are unlikely triggering the EOD but requesting consent fees for covenant waiver or asking AGEL to paydown the affected loan portion instead," it said.
Compared with the early 2023 when US short-seller Hindenburg brought out a damning report against the ports-to-energy conglomerate, the Adani group's liquidity management awareness has improved meaningfully this time, the brokerage said, adding that it is not worried about the promoter share pledge loan amid the steep volatility of Adani group companies' stock price when such risk has been managed in the past.
"While in the short-term, should Adani group be less ambitious on their growth initiatives, we believe the group should be able to weather this round of rainstorm," it added.
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