TotalEnergies pauses investments in Adani Group after bribery charges

Coal-to-airports conglomerate Adani group started the week navigating conflicting signals from its global investors. While French energy giant TotalEnergies on Monday announced a pause on new investments citing corruption allegations by the US Securities and Exchange Commission (SEC), Florida-based GQG Partners expressed its confidence in the group, emphasising the sound fundamentals of its investments.

The developments follow bribery charges filed last week in a New York district court against the group’s founder and chairman, Gautam Adani, and seven others in connection with projects under Adani Green Energy Limited (AGEL). The fallout has already unsettled the conglomerate’s international ventures, including critical projects in Sri Lanka, Bangladesh, and Kenya.

“Until such time when the accusations against the Adani group individuals and their consequences have been clarified, TotalEnergies will not make any new financial contribution as part of its investments in the Adani group of companies,” said the French company.

It claimed that it learnt about Adani group executives’ link to the alleged corruption related to AGEL through a public announcement made by the US court last week.

TotalEnergies further said it will look at taking relevant actions to protect its interest in AGEL; it holds a 19.75 per cent stake in the green energy company and also 50 per cent interests in three joint projects with the group. As of September 2024, these investment commitments totalled to $3.2 billion.

TotalEnergies’ statement, which came in late trading hours of the Indian equity markets, triggered a sharp decline in shares of select Adani group companies, thwarting an intraday rally. The stock of AGEL closed 8.1 per cent down after having climbed as much as 6.4 per cent; similarly, shares of Adani Energy Solutions and Adani Total Gas witnessed sharp reversals.

Also, the prices of certain Adani dollar bonds fell to almost one-year lows on Monday as investors cut their exposure to the Indian conglomerate in the wake of bribery and fraud allegations.

The group's billionaire chairman, Gautam Adani, and seven other people were last week charged with agreeing to pay around $265 million in bribes to Indian government officials.

The charges related to alleged payments to obtain contracts that could yield $2 billion of profit over 20 years as well as to develop India's largest solar power project.

This isn’t TotalEnergies’ first pause on Adani investments. In February 2023, it halted plans for a 25 per cent stake in Adani New Industries Limited (ANIL) pending the outcome of investigations into the allegations by American short-seller Hindenburg Research allegations.

Though the French company has not gone ahead with its investment in ANIL so far, it has made two new investments in AGEL joint ventures -- in 2023 and 2024.

TotalEnergies’ press note also asserted that the company “was not made aware of the existence of an investigation into the alleged corruption scheme.”

An email query to TotalEnergies seeking details of the possible actions to protect its minority interest in AGEL remained unanswered until the time of going to press.

Legal experts noted that the accusations, if substantiated, could trigger indemnity provisions, though enforcement challenges may arise if business ties persist. Humera Niyazi of White and Brief's Sidebar observed that “While TotalEnergies could collaborate with other institutional investors to push for governance reforms, mitigate risks, and explore legal remedies, it is crucial to recognise the potential gravity of the situation.”

Vivek Bajoria, partner & head of Bengaluru, Khaitan Legal Associates added that any breach of contractual warranties could result in indemnity or damage claims, depending on the law governing the contract. “Any shareholders’ agreement would typically consist of provisions that constitute default and what remedies are available to the non-defaulting (party) in such cases. These are generally contractual in nature,” he explained.

On the other hand, GQG Partners -- the Adani group’s white knight since allegations by Hindenburg Research surfaced in early 2023 -- struck a contrasting tone. In a statement on Monday, it said that any coercive action by Indian regulators is unlikely and that the Indian government will maintain its support to Adani as he is the “most important infrastructure developer” in the country

“…It is unlikely that Indian regulators will take action in this matter given the thorough review of the Adani group following the Hindenburg allegations. However, we will be monitoring any developments closely,” said GQG.

The asset manager said its exposure to the ports-to-power conglomerate stood at $8.1 billion, only 5.2 per cent of its total assets of nearly $157 billion, as on November 21. “We believe this level of exposure is manageable, even given the volatility in Adani group stocks,” it said, noting that it had positive returns on its investments in the group.

Meanwhile, neighbouring Bangladesh is planning to review seven power supply agreements, including a contract with Adani Power for 1,600 megawatts of electricity. Sri Lanka, too, appears to be reassessing its commitments. Bloomberg reported that a US development agency is reevaluating its due diligence on a $500 million Adani-backed port project in the island nation. In Kenya, the government last week cancelled two Adani projects worth $2.6 billion, citing corruption concerns.