Adani Group has downplayed the blow it has suffered from Kenya’s decision to cancel a contract to build power transmission lines and substations on its forecast earning, terming the deal that would have earned the Indian conglomerate Sh637.7 billion immaterial.
The firm said the cancellation of the deal did not require it to make any regulatory disclosure under Indian stock exchange rules as it was within its ordinary course of business, underlining the size of the Indian firm.
In Kenya, it was expected to recoup Sh637.7 billion ($4.92 billion) over the 30 years or an estimated Sh21.23 billion a year through a new charge in households’ monthly electricity bills for building the transmission line at Sh95 billion.
The Sh21.23 billion represents 0.004 percent of the Sh4.78 trillion that the Adani Group booked as revenues for the year to March, prompting the Indian conglomerate to term any loss as immaterial and within its ordinary course of business.
It said it was responding to a request for clarification from the Bombay Stock Exchange and the National Stock Exchange after President William Ruto ordered the cancellation of the 30-year public-private partnership (PPP) deal.
Material information is details that would affect a company’s current or future prospects or an investor’s decision to invest in the company.
“Further, the company hereby submits that there is no material impact of the media report on the operations of the company,” Adani Energy Solutions said in a statement.
President Ruto on Thursday also ordered the cancellation of a procurement process that had been expected to award control of Kenya’s main airport to India’s Adani Group.
US authorities on Wednesday indicted Adani Group founder Gautam Adani and seven others, alleging they paid $265 million (Sh34.3 billion) in bribes to Indian officials, prompting the Kenya action. The group denied the allegations, calling them “baseless.”
But this is already hurting the group and the Indian economy.
Adani Group firms lost $39bn in market value after the US indictment, reducing the combined market capitalisation of its 10 companies to $142.6 billion (Sh18.45 trillion).
Adani Green Energy, which is the firm at the centre of the allegations, also said it wouldn’t proceed with a $600m bond offering.
Adani Group has released a report, reassuring its creditors it has sufficient cash flows to service its debt obligations.
This is the first attempt from the Indian conglomerate to manage the fallout from the bribery charges brought forward by US authorities.
It termed the cancellation of the Kenyan deal inconsequential, underlining the wealth of Gautam and the sprawling size of the Adani Group—whose revenues are over 14 times that booked by Safaricom, the richest firm in Eastern Africa with annual sales of Sh335.3 billion.
At Sh18.45 trillion, the market value of Adani Group is larger than Kenya’s estimated gross domestic product (GDP) of Sh13.9 trillion.
The Indian conglomerate was expected to generate outsized profits for 30 years before handing over the power transmission lines to the Kenyan government.
The High Court suspended the contract in October—the same month it was issued.
It was to spend Sh95 billion on capital expenditure, and expects to generate revenues of Sh637.7 billion in the 30 years or Sh21.23 billion annually. This excludes other expenses like debt, salaries and maintenance costs.
Adani was to finance the project using 70 percent debt and 30 percent equity, but Kenya Electricity Transmission Company (Ketraco) wanted the Indian firm to increase the debt component to 75 percent as it would have been cheaper than equity.
Under the PPP deal, Adani was to construct a 206km 400kV Gilgil-Thika-Malaa-Konza power transmission line to boost supply around Nairobi. The line was expected to be completed in 2027.
It was also to build the 70km 132kV Menengai-Ol Kalou-Rumuruti transmission line, providing an alternative evacuation path for the Menengai geothermal complex. The line was slated for completion in 2028.
Adani was also to build two substations-- the 132kV Thurdiburo substation and the 400/220/132kV substation at Rongai—both set for completion by 2028.
Presently, Kenya uses taxes and debt to build the high-voltage power lines through Ketraco.
But with little room for additional borrowing, the State is turning to PPPs to bridge the infrastructure gap.
Kenya Power pays Ketraco a fee known as a wheeling charge for the high-voltage power lines at Sh0.82 per unit of power consumed by homes and businesses.
The utility firm paid Ketraco a wheeling charge of Sh2.72 billion in the year to June 2023.
