The financial outlook of several Adani Group companies linked to key projects in Sri Lanka has been downgraded to negative by S&P Global Ratings following corruption and fraud charges filed in the United States. The developments raise concerns about the future of major infrastructure and renewable energy projects spearheaded by the group in Sri Lanka.
In a press release issued on Friday (22) S&P Global Ratings said the credit rating downgrade includes Adani Ports and Special Economic Zone Ltd. This is a company involved in a terminal project at the Colombo Port. Its BBB- rating has now been assigned a negative outlook, reflecting potential challenges in funding and governance for the company.
Adani Green Energy Ltd. (AGEL), a promoter of the controversial wind power project in Mannar, is not directly rated by S&P. However, the financing arm of the project, AGEL Restricted Group 2, saw its outlook cut to negative, signaling potential risks to the project’s long-term viability.
The downgrade comes as US prosecutors filed charges against the Adani Group and senior executives, alleging bribery of Indian officials to secure solar power contracts. While the group has denied the allegations, asserting that they are baseless, S&P expressed concerns over governance practices and potential damage to investor confidence.
S&P’s report highlights the interconnected nature of Adani Group companies, where governance and financial concerns in one entity can impact others due to shared leadership and management structures. This has implications for the Sri Lankan projects, as the group may face increased borrowing costs or difficulty accessing funds.
“The allegations could renew questions over the group’s governance practices and damage its reputation,” S&P noted. “We will watch for any signs of weaker funding access or concerns from existing lenders, which could be demonstrated by lowering of funding limits, nonrenewal of facilities, or significantly higher credit spreads.”
S&P’s caution is further underscored by the cancellation of a $600 million bond sale by the Adani Group following the indictment, as well as a sharp decline in equity and bond prices across its companies.
The Mannar wind power project, already controversial due to environmental concerns, faces additional uncertainty as S&P warns that the ongoing investigation into the parent company could affect the company’s ability to renew critical contracts, even though its debt is fully secured.
While S&P acknowledged the strong fundamentals of some Adani entities, such as established infrastructure assets and regulated returns, it cautioned that unresolved allegations could impair the group’s funding access and reputation.
S & P said: “The allegations could renew questions over the group’s governance practices and damage its reputation,
“We will watch for any signs of weaker funding access or concerns from existing lenders–which could be demonstrated by the lowering of funding limits, nonrenewal of facilities, or significantly higher credit spreads.
A US indictment of three board representatives of an unrated Adani group entity could affect investor confidence in other Adani group entities (because the founder is on the board of multiple entities within the group), thereby potentially impairing their funding access and increasing their funding costs.”
