Adani Green Energy puts Rs 10,000-crore capex plan under review

Company to reduce capex in near term; execs say large part of it can be discretionary

India’s largest green energy company, Adani Green Energy (AGEL), has decided to review its capital expenditure (capex) plan of Rs 10,000 crore for financial year 2023-24 (FY24). In a post-third quarter results call with its bond holders, AGEL’s management said this was a tentative target and was still under review.

This marks a change in AGEL’s stated plans on its capex. Last week, addressing the earnings call, the AGEL management had said it has planned a capex of “broadly” Rs 10,000 crore for FY24 and a similar amount for FY25.

“Short-term capex (12-18 months) is being reviewed. In the near term, there will be a slow down in our target. We will revisit our discretionary capex and reduce our capex in the near term,” the management said in the call with fixed-income investors on February 16. Business Standard has reviewed the audio of the meeting.

This is the second such move by an Adani Group company since US-based short-seller Hindenburg Research released a report accusing the company of stock manipulation and accounting fraud, charges that the group has denied.

Last week, Adani Power called off the acquisition of DB Power close to a year after winning the bid. Adani Road Transport has also put investment commitments in new road projects on hold.

On the February 16 call, AGEL executives told bond holders that the capex for FY24 was a combination of committed and discretionary spends. “The capex number that is being talked about is still under review. A larger part of this capacity can be in the form of discretionary capex,” said the company. Phuntsok Wangyal, chief financial officer, and Viral Raval, investor relations (listed equity and bonds) at AGEL, addressed the bond holders.

The development comes close on the heels of rating agency Moody’s changing its outlook to negative because of the company’s “large capital spending program and dependence on sponsor support potentially in the form of subordinated debt or shareholder loans,” which it said is likely to be less certain in the current environment.

AGEL owns 50 per cent stake in the two restricted groups (RG1 and RG2), which comprise its under construction projects.

“AGEL will have $2.7 billion of refinancing due in fiscal year ending March 2025 (fiscal 2025), including $750 million and $500 million of AGEL RG-1 notes maturing in September 2024 and December 2024, respectively. This is the key driver for the negative outlook on the ratings,” Moody’s said. The document was reviewed by Business Standard.

The company’s management said AGEL would have underwritten cash back commitment to pay out the entire holding company (holdco) facility within a year of legal maturity of the holdco bond. “Holdco maturity is by September 2024 and we are in the process of putting in place securities. By the time annual results are declared, we will disclose,” said the management.

It added that there was no need for near-term financing as construction facility (loan) for RG1 was in place and fully utilised. “For taking out the construction facility, we will continue to issue 20-year bonds, which will be fully amortised with no refinancing risk. When we come out with a firm plan for RG1, the construction facility that comes through 2025-26 will be refinanced similarly,” the company said.

The company said a large part of its planned capex would be discretionary because of the risks attached with the off-takers of the projects. “Under our contractual documents, there are obligations on both the parties so my requirement to fulfil my obligation within a certain time frame is dependent on the off-taker fulfilling their obligation. If the last mile transmission to delivery point is delayed by off taker, we defer the capex,” said the company.

The AGEL management said the state utilities were delaying the last-mile transmission. “We can spend the capex, commission the project, connect it to the nearest substation and sell in infirm market. Till December 2022, we had an infirm revenue of Rs 1,645 crore,” said the executives. Infirm power is feeding the electricity generated from a project directly to the grid before the commissioning of the project.

AGEL is poised to end FY23 with 8.1 gigawatt (Gw) capacity. Adding the projects it acquired from SB Energy, its total portfolio rises to 20 Gw. It aims to have a capacity of 45 Gw by 2030.

CHANGE IN STANCE
 

Second such retracting move by an Adani Group company since the Hindenburg controversy
 

Last week, Adani Power called off the acquisition of DB Power, after close to a year of winning the bid
 

The development comes close on the heels of rating downgrade by Moody’s