Recent assessments by Indian credit ratings agencies have raised concerns about Adani Power’s ‘aggressive’ expansion of coal power, flagging the risk of an investment of nearly US $13 billion on the Adani Group’s financial stability. This is one of the world’s largest private investments in new coal power at a time when the Earth’s climate is already reeling from a record concentration of CO2. Adani’s plans to raise its debt by 70% to pay for a massive expansion in its coal-power generation has sparked concerns by credit-rating agencies. Adani Power already has a debt of US $3 billion and plans to borrow US $2.1 billion more.
Adani Power has embarked on plans to nearly double its coal-power capacity, which stands at 17,550 MW, already the highest among private coal-power companies in India. Adani Power aims to reach 30,000 MW by 2031, announcing 11,200 MW of expansions, according to the credit assessments. Rather than building new plants, Adani Power plans largely to expand its existing plants and acquire bankrupt producers of coal power. The Group is funding these expansions through its reserves of cash as well as by raising debt, including a proposed loan of Rs 18,000 crore (US $2.1 billion) that will raise its total debt by at least 70%.
As well as the serious impacts of the consequent growth in global carbon emissions and local pollution, the plan comes at a time when the Adani Group is mired in investigations and/or prosecutions over allegations of fraud and bribery in the United States and Switzerland, while undergoing regulatory scrutiny in India. (On 10 February, however, US President Trump issued an executive order that could delay or even halt proceedings against Adani and other parties in the USA)
The credit-assessment reports – two of which were issued in January 2025 by Care Ratings and India Ratings and one in October 2024 by Crisil – separately said that the expansion plans pose a risk to the Group’s credit profile in case of delays or cost increases in the projects in the future – both likely scenarios given India’s history with implementing large polluting projects. The agencies also flagged the pending investigation against parts of the Group by the US Department of Justice as potentially adding to the company’s credit risks. Their overall assessment, however, is that Adani Power will likely pull through because of its 'strong capability to execute' projects, citing the completion of the Godda coal power project in 'record time'.
Expansions
The ongoing power expansion is a remarkable turnaround for Adani Power, which faced near bankruptcy in 2017 after Indian regulators refused to compensate it for a spike in international coal prices. Adani had even put up a majority stake in its flagship Mundra power plant for sale for one rupee.
The company’s fortunes changed after it managed to negotiate a settlement with power utilities, including in Adani’s home state Gujarat. Favourable orders from the Supreme Court in 2023 regarding a dispute with Coal India, India’s state-owned and largest coal miner, were also beneficial to the Adani Group’s coal-burning businesses. Meanwhile, the Supreme Court in 2023 upheld the Modi government’s decision to drop its investigations into alleged over-invoicing of imported power equipment by an Adani Group company.
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The Group has since benefited from a rise in power demand in India. According to the Indian government, power demand increased by 20% in the two years to 2024, partly due to increased heat and humidity caused by global warming, and partly due to a bounce-back from the economic impacts of Covid. The government wants to commission more coal-power plants to cater for the increased demand. Adani has benefited from the demand surge. Its plant load-factor (or the utilisation rate of its power plants) increased from 48% in the 2023 fiscal to 65% in the 2024 fiscal, and was 72% in the first half of the current fiscal, as per Care Ratings.
Given the optimism about coal power, in early 2024, Adani Power, JSW group and Essar Power told the Modi government in meetings that they together planned to add 10,000 MW of coal-power capacity over a decade. Adani’s plans at the time to add 4800 MW were the highest among the companies.
Its expansions will have severe impacts on the environment and human health. For example, for a massive three-fold expansion at its power plant in Kawai in Rajasthan state, it has asked the local government to move a school and government clinic that fall within a kilometre of the power units. Others are coming up in tiger corridors and in areas already suffering from pollution of the air and water from the company’s coal-burning plants.
Problems arising from these factors would also impact the group’s financial health.
Growing risks
Adani Power had outstanding borrowings worth at least Rs 28,855 crore (US $3.3 billion) as of September 2024, according to its latest financials. According to India Ratings, which issued the most recent report on 22 January 2025, Adani Power has outstanding debt of Rs 26,270 (US $3.0 billion) crore. The company plans to borrow another Rs 18,587 crore (US $2.1 billion) – a 70% increase over its existing debt. Of this, it plans to raise Rs 11,000 (US $1.3 billion) crore through non-convertible debentures – bonds issued to retail and institutional investors – and the rest through bank loans. To fund the rest of the expansion, the company will use ‘internal accruals’ – its cash reserves.
All three credit-rating companies flagged that this outlay exposes the company to financial risks.
‘Ratings are constrained on account of [the] company’s aggressive capital expenditure plans,’ Care Ratings said in its assessment issued on 7 January. ‘Successful commissioning of plants without major delays/cost overruns and healthy operational performance shall be a key monitorable,’ it added.
‘Given the significant organic expansion projects, the company remains exposed to time and cost overrun risks,’ India Ratings said in its report, issued on 22 January. ‘Any increase in the project cost and/or debt would remain a key monitorable.’
The agencies are likely concerned by India’s history of delays in implementing large infrastructure projects such as coal-power plants. Such projects require environmental approvals before they can be commissioned. In addition, they may also be relying on the government’s powers to compulsorily acquire land on behalf of the company. In the past, protests and court petitions by affected communities have delayed or permanently stalled such acquisitions – especially for projects as obviously polluting as those burning large quantities of coal.
Besides these risks, the shifting economics of coal power – such as rising coal prices and falling electricity tariffs – affect the viability of these units. The last such boom in coal power in India in the 2000s, which was based on overly optimistic power demand projects, ended in a string of defaults by private power developers that precipitated a banking crisis in the country. And that was before the global push to phase out coal and the resultant availability of cheap renewable energy.
The ratings agencies pointed out that Adani Power has benefited from high electricity prices in India in the last few years, saying that this ‘will be a monitorable’. The agencies flagged that 17% of Adani Power’s capacity does not have long-term buyers and is sold on the open market. Any drop in power prices would affect earnings from this quarter. In addition, Adani is exposed to delayed payments from its power-utility clients, most of which are financially stressed. Already, Bangladesh is in arrears of up to US $800 million for power from Adani’s notorious Godda plant. As well, any reduction in utilisation of its power capacity has been cited as a risk. In summary, the ratings agencies seem to consider any deterioration in the company’s financial position as a risk given its expensive and ambitious expansion plans.
In addition, the agencies also raised concerns over the ongoing investigations into and prosecutions against the company. India Ratings said it will ‘continue to monitor the impact of the ongoing cases against the group including the indictment and civil complaint by the US Department of Justice and the US Securities and Exchange Commission against APL’s chairman in November 2024’, adding that the agency would ‘continue to monitor the corporate governance practices of the group and the disclosures to the agency on an ongoing basis.’
However, all agencies concluded with an optimistic view of the company, assigning the company stable or positive credit ratings. They qualified their discussion on risks by citing the company’s long experience and ‘ability’ to execute projects, such as the Godda coal-power plant. ‘Execution risk is mitigated to some extent by the availability of land and Adani Power’s vast experience in the sector,’ Crisil’s assessment said. ‘The fact that APL executed the greenfield Godda plant on time despite the pandemic and [it also] recently achieved financial closure for [the] Mahan Phase II provides comfort.’ India Ratings said it ‘draws comfort from the APL’s strong execution capability as demonstrated in timely commissioning of [a] similar project of Godda plant in three and a half years.’
What they seem to have missed are the protests, arrests and court cases that dogged the Godda project for many years before it was commissioned, and the continuous efforts by the Modi government to ensure its financial viability, including a tax-free status and a deal with the Bangladesh government to buy all the power. Ironically, Godda has become a thorn in Adani’s side as Bangladesh’s new regime has delayed paying its power bills and has been reviewing the power contract. However, the agencies do not see this as a risk, saying the dues are backed by letters of credit and a sovereign guarantee from the country’s government.
Adani Power’s coal-power expansion is arguably one of the Group’s biggest investments and is based on an optimistic view that coal power will continue to be viable, that their projects will receive the necessary approvals, that power buyers will pay their dues on time, and that all other financial parameters will be in the company’s favour, or at least neutral. In their cautious assessments, have the credit agencies predicted a future crisis?
