Fitch Ratings has downgraded the outlook for Adani Energy Solutions (AESL) to negative on concerns that US investigations could reveal its governance weakness and affect financial stability.
It, however, said the risks associated with the group’s liquidity and funding requirements have moderated. “However, the outlook is negative to reflect our view that the proceedings and outcome of the US investigations could reveal that the group’s corporate governance practices are weaker than we expected and lead to negative rating action in the near to medium term,” Fitch said on Sunday.
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It rated AESL’s long-term foreign and local-currency issuer default ratings (IDRs) at ‘BBB-‘. Fitch said it will monitor the investigations for any evidence of weakness in the entities’ governance practices and internal controls, and the impact on AESL’s financial flexibility.
Fitch Ratings revised Adani Electricity Mumbai ‘s rating outlook to ‘negative’ from ‘rating watch negative’, a positive shift after the rating firm’s revision of the outlook for some of the Adani group entities to ‘rating watch negative.’
US federal prosecutors in November alleged that Gautam Adani, chairman of the Adani Group, and some key executives promised to pay more than $250 million in bribes to 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.
Fitch said that the indictment for alleged securities and wire fraud reflects a corporate governance risk for AESL. “A conviction or any indication of weaknesses in Adani Group entities’ governance practices and internal controls that may come to light as part of the process could put pressure on the ratings,” it said.
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Fitch said it believes the proceedings and the outcome of the US investigations could hamper the group’s funding access. “This could affect AESL’s growth plans significantly, although it has some flexibility in its capex plans,” it said.
AESL has demonstrated adequate funding access since the US indictment, having drawn Rs 5,100 crore from onshore and offshore banking facilities. The group company, AGEL, has also raised onshore funding to refinance its $1.1 billion construction-linked facility,
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