Exposure to Adani group at $3.1bn, says TotalEnergies

French energy major TotalEnergies has said its exposure to the crisis-ridden Adani group stands at $3.1 billion as of December 31, 2022, which represents 2.4% of the company’s capital employed and only $180 million of net operating income in 2022. France’s largest oil and gas company is one of the largest foreign investors in four of Gautam Adani-controlled energy entities, holding a 50% stake in Adani Total and AGEL23, followed by 37.4% in Adani Total Gas, and 19.75% in Adani Green Energy.

The statement from TotalEnergies came amid allegations against Adani group companies by the U.S.-based Hindenburg Research. The investment firm released a report on January 24, 2023, accusing Adani group firms of fraudulent transactions and share price manipulation at the conglomerate. The group, however, rejected all the allegations.

“TotalEnergies’ investments in Adani’s entities were undertaken in full compliance with applicable – namely Indian – laws, and with TotalEnergies’ own internal governance processes. The due diligence, which were carried out to TotalEnergies’ satisfaction, were consistent with best practices, and all relevant material in the public domain was reviewed, including the detailed disclosures to regulators required under applicable laws,” it said in a release on February 2.

TotalEnergies further said that it welcomes the announcement by Adani to mandate one of the "big four" accounting firms to carry out a general audit.

The release further stated that the entities TotalEnergies has invested in with Adani are managed in accordance with applicable regulations. The day-to-day operations of the entities listed in India, Adani Total Gas Limited (ATGL) and Adani Green Energy Limited (AGEL) are managed by independent teams of professional managers, and their boards are composed of at least 50% independent and non-executive directors (5/9 for ATGL and 5/10 for AGEL). S. R. Batliboi & Co. LLP, a member company of the international financial audit firm EY is AGEL’s statutory auditor, it said.

“These investments being accounted for under the equity method, TotalEnergies has not performed any re-evaluation in its accounts of its stakes in the listed entities ATGL and AGEL in relation to the increase in their stock values,” it added.

In 2018, TotalEnergies and Adani Group entered into an energy partnership with the development of a joint LNG business, Adani Total Private Limited (ATPL). ATPL aims to develop the Dhamra LNG regasification terminal – which is expected to start operations in Q2 2023 – and to market LNG.

In 2019, TotalEnergies announced the acquisition of a 37.4% stake in the listed entity Adani Total Gas Limited, a city gas distribution business. As of end 2022, ATGL operated 33 city gas licenses and some 380 compressed natural gas (CNG) stations. 

In 2020, TotalEnergies and Adani Group extended their relationship, with the acquisition by TotalEnergies of a 20% minority interest in the listed company Adani Green Energy Limited, and a 50% stake in a 2.35 GWac portfolio of operating solar assets owned by AGEL (AGEL23), for a total investment of $2.5 billion. AGEL has around 7 GWac in operation, 10 GWac in construction and 3 GWac in late development.

Meanwhile, shares of Adani Total Energy declined as much as 5% to ₹1,544.7 on the BSE, while Adani Green Energy hit a 5% lower circuit of ₹887.55 in the opening trade.