MUMBAI – The crisis facing billionaire Gautam Adani has revealed a potential pitfall in India’s ambitious plan to reduce emissions: its reliance on the country’s most affluent and powerful private citizens.
Led by Mr Adani’s US$70 billion (S$92.7 billion) pledged investment in green energy infrastructure, India’s tycoons have so far committed to spend far more than the government on the energy transition. Reliance Industries’ Mr Mukesh Ambani and JSW Group’s Mr Sajjan Jindal, along with energy giants like Tata Group, have rushed to champion the shift to a cleaner future.
But short-seller Hindenburg Research’s allegations about companies linked to Adani Group have raised doubts about the company’s future, including its massive green energy investment. It has also created problems for Adani Green Energy, the group’s renewable-energy arm. The storm engulfing Asia’s now second-richest man also threatens to spread to other conglomerates, as Hindenburg Research has raised questions about the country’s corporate governance.
As Adani Group is a dominant player in India’s clean-energy industries, the pace of investment might slow, said Dr Ashwini Swain, fellow at the New Delhi-based Centre for Policy Research. “We cannot bank on two or three companies to reach our goals. We need a populated sector,” he said. “There are other players and many more will join to take the journey forward.”
India’s national climate blueprint sets 2070 as a goal for net-zero emissions, 10 years after China and two decades behind Europe. India continues to expand its coal power fleet to alleviate energy shortages, prompting the government in January to defend its use of fossil fuels while in the same breath vowing to remain committed to decarbonisation.
To meet its goal, India requires investment of US$160 billion annually until the end of 2030, roughly triple today’s levels, according to the International Energy Agency. Foreign direct investment, while growing, remains a fraction of current commitments. Adani Group’s rapid downfall may undermine investor confidence in India more broadly, threatening to curb capital flows into the nation for green financing.
The gap highlights the government’s dependence on its private sector to hit its green goals. While private capital will be needed to fight climate change all over the world, the sheer size of India’s challenges makes it more reliant on its richest citizens and most sprawling companies.
Executives have so far been happy to oblige, as the prize is a top spot in the lucrative industries of tomorrow. Mr Adani and Mr Ambani are vying to become the single biggest investor in India’s green sector, with the billionaires constantly one-upping each other with fresh announcements of giant manufacturing plants and some of the world’s largest projects.
Mr Adani has often aligned his businesses with Prime Minister Narendra Modi’s development goals and is characterising Hindenburg Research’s charges of fraud as an attack against his home country. At the same time, Minister for Power Raj Kumar Singh said in New Delhi last Thursday that there are more than a dozen large companies that can push India’s agenda forward.
Mr Adani, who made his billions on the back of his coal empire, positioned himself as one of the leading advocates for new and experimental green technology. He is planning enormous solar and wind manufacturing centres across the country, and developing a supply chain for the world’s cheapest green hydrogen aimed at positioning India as an exporter of the clean fuel.
But some environmental advocates point out that Mr Adani and his company were never that green to begin with. Adani Group doubled down on coal production in 2022 as Mr Modi promised to bring reliable electricity to more Indians amid a global fuel supply crunch. The group’s mining operations account for at least 3 per cent of global carbon dioxide emissions from coal, according to SumOfUs, an activist group that runs campaigns intended to apply pressure on powerful corporations.
“India is a lot more than Adani. Its role in India’s energy transition is disputable,” said Mr Assaad Razzouk, chief executive of Gurin Energy, a Singapore-based renewable-energy company. “It is very dangerous to confuse the energy transition in India with one group’s perspective or market power.”
India plans to decrease the share of fossil fuels in the nation’s electricity mix to 50 per cent by 2030, down from more than 57 per cent today. The country still relies heavily on coal for power generation, with demand for the dirtiest fossil fuel expected to inch higher until the end of 2025, and critics say the government needs to do more to limit global warming.
The most immediate near-term consequence of the current Adani rout is that it will be more difficult for the billionaire to raise money to fuel its green expansion.
There is also an open question about the debt at Adani Green Energy. The debt-to-capital ratio for the company soared to 95.3 per cent in the previous fiscal year that ended in March 2022, according to Bloomberg calculations. It has since declined to 88.5 per cent but remains higher than its peers.
Adani Green has the highest funding risk of the group’s companies because of its weak balance sheet, according to Bloomberg Intelligence analysts, adding that the company has US$1.25 billion worth of bonds due in 2024. “Adani Green Energy’s cash as of September cannot cover short-term debt maturities,” said the analysts.
“Will this damage Adani? Categorically it should have already,” said Mr Tim Buckley, director of the Sydney-based Climate Energy Finance think-tank and a long-time observer of the billionaire.
“You’ll find a lot of Western capital will now avoid the Adani group. It is going to put Adani’s ability to access global Western capital, and in particular green capital and ESG (environmental, social and governance) capital” at risk. BLOOMBERG
