Credit rating agency Fitch Ratings cut the outlook on Adani Energy Solutions Ltd to negative - close to junk - on concerns that US investigations could reveal that the group’s corporate governance practices are weaker than its expectation.
The US indictment may lead to “negative rating action in the near to medium term” for Adani Energy, according to a statement by Fitch dated March 9.
Quoting analysts, a Bloomberg report says, separately, the assessor removed Adani Electricity Mumbai Ltd from negative watch, but said the probe could put pressure on its rating. Fitch affirmed ratings for both the firms at BBB-, just a notch above "junk" rating. “Fitch will monitor the investigations for any evidence of weakness in the Adani entities’ governance practices and internal controls as well as the impact on the financial flexibility,” of Adani Electricity and Adani Energy, analysts said.
The rating agency’s comments underscore challenges facing the Adani Group as it grapples with fallout among foreign investors in the wake of a probe by the US Department of Justice. A spokesperson for the Adani Group didn’t immediately reply to an email seeking comment on Monday.
US federal prosecutors in November alleged that Gautam Adani, one of the world’s richest people, and his associates promised to pay more than $250 million in bribes to Indian government officials to win solar energy contracts, and concealed the plan as they sought to raise money from US investors. The Adani Group has denied the allegations as baseless and said it would seek legal recourse.
To be sure, Fitch said risks associated with the group’s liquidity and funding requirements have moderated. The dollar bond of an Adani Energy unit due in 2036 fell to the lowest level in a week, while Adani Electricity’s 2030 note was steady after declining for three weeks in a row.
However, Adani Green Energy Ltd (AGEL), India's largest renewable energy company, has stated that it had refinanced its first construction facility, which had an outstanding debt of $1.06 billion with long-term financing.
In its regulatory filing on March 3, the company stated that it has successfully refinanced its maiden Construction Facility with an outstanding of $1.06 billion taken in 2021 to develop India’s largest solar-wind hybrid renewable cluster in Rajasthan. The long-term financing raised to refinance its Construction Facility has a door-to-door tenor of 19 years with fully amortized debt structure emulating the underlying asset life. With this breakthrough, AGEL has successfully completed its capital management programme for the underlying asset portfolio, which involves securing long-term facilities that are perfectly aligned with the cash flow lifecycle of that portfolio.
The statement goes on to say the framework of this programme provides significant benefits through deep access to diverse pools of capital, securing large sums with long duration. This approach not only enhances financial stability but also ensures AGEL’s ability to continue its growth trajectory and deliver sustainable value creation to its stakeholders. The refinancing facility has received a rating of AA+ Stable from three domestic rating agencies - ICRA, India Ratings, and CareEdge Ratings.