Stockholm (NordSIP) – Following a less than fortuitous 2023 that saw a rout on Adani stock after it was publicly shorted by Hindenburg Partners, the Indian infrastructure and energy conglomerate is back in the news as it appears that its green energy subsidiary is testing the waters for a return to the green bond market.
According to a filing with the Securities Exchange Board of India (SEBI) first reported by Reuters, Adani Green Energy is looking to issue US$409 million in bonds with 12.7 years weighted average life. The same filing discloses that Barclays, DBS Bank, Deutsche Bank, Emirates NBD Bank, First Abu Dhabi Bank, ING Bank, Intesa Sanpaolo, MUFG Securities Asia, SMBC Nikko Securities, Societe Generale and Standard Chartered Bank were hired as joint bookrunners to arrange fixed income investor meetings around the world at the end of February. The new bond is set to refinance US$500 million worth of green bonds issued in 2019 that are set to mature at the start of December 2024.
Ringfencing Concerns
The announced return of Adani to sustainable markets triggered a number of reaction from green bond specialists. While commending Adani for the projects, the Anthropocene Fixed Income Institute (AFII) warned investors against “the fact that the proposed new bond issue refinances an existing solar operation (rather than supporting a new development) indicates reduced additionality”. Moreover, while there is nothing intrinsically wrong with the proposed use of special-purpose vehicles (SPVs) for this bond, SPVs can reduce transparency.
“At the same time, we believe investors considering the new issue should look closely at Adani Green’s interconnectedness with the broader Group and globally significant coal-developing activities to ensure they are comfortable with their investment,” David Lewis, Research Director at the AFII added in his article.
Toxic Bonds, a global network that calls on bondholders and underwriters to deny new debt to companies expanding coal, oil and gas, highlighted the same concern. In a LinkedIn post it warned that “Banks are misleading investors and failing to perform their due diligence by continuing to vouch for Adani Green’s bonds. The evidence of the lack of ring-fencing is clear”.
Both organisations cited a number of examples showing how Adani Green Energy was associated with the fossil fuel projects of the rest of the Adani Group, including a “Adani used shares from Adani Green Energy and other companies as collateral in a $300 million credit facility for the Carmichael coal mine in Australia, via Adani Enterprises,” Toxic Bonds explained. “This activity has been associated with Adani Green being removed from the UN-backed Science Based Targets Initiative (SBTi),” AFII’s Lewis added.
Market Reactions
On January 24th, 2023, Hindenburg Research, an investment research firm, announced it has “taken a short position in Adani Group Companies through U.S.-traded bonds and non-Indian-traded derivative instruments”, based on a 2-year research project. Data from the Frankfurt Stock Exchange showed Adani Green Energy’s bonds maturing in December 2024 being quoted at a 84.86 discount on February 2nd, 2023. Adani Green Energy has another US$750 million in green bonds outstanding issued in 2021 that are due to mature in October 2024. On February 2nd, 2023, these securities were quoted at a 63.05 discount on the Frankfurt Stock Exchange.
Since then, the price of both bonds has steadily recovered. At the close of business on February 29th, 2024, the securities were trading at a 99.44 and at a 98.53 discount, respectively.
