Explained: The SECI solar bid at the centre of Gautam Adani’s US indictment

Awarded to Adani Green and Azure Power, the manufacturing-linked solar tender consisted of 12,000 MW of generation capacity and 3,000 MW of module manufacturing capacity — among the first of its kind at the time that combined generation of electricity and manufacturing of modules (solar power panels) at the same time.

According to US prosecutors, “the co-conspirators undertook extensive efforts to corruptly persuade government officials to cause state electricity distribution companies to execute PSAs”. The US prosecutors have also alleged that Gautam Adani personally met with an unnamed government official in Andhra Pradesh to advance the execution of a PSA between SECI and Andhra Pradesh’s state electricity DISCOMs, for which roughly Rs 1,750 crore was offered to the unnamed official.

DISCOMS not interested at first 

After the tender was awarded, SECI had to sign PSAs with state DISCOMs, without which it could not sign power purchase agreements (PPAs) with Adani Green and Azure. SECI is a public sector enterprise under the Union Ministry of New and Renewable Energy . US prosecutors have alleged that “SECI’s inability to find purchasers jeopardized the lucrative LOAs (letter of awards), and corresponding revenue” that was anticipated by the two companies.

“As a result, in or about 2020, the defendants Gautam S Adani, Sagar R. Adani, Vneet S Jaain,… among others, devised a scheme to offer, authorize, make and promise to make bribe payments to Indian government officials in exchange for the government officials causing state electricity distribution companies to enter into PSAs with SECI,” the US district court in New York has alleged. Vneet Jaain is MD and CEO of Adani Green.

The proceedings in the US started after the Securities and Exchange Commission (SEC) — the American markets regulator — filed a complaint with prosecutors alleging that Gautam Adani and his nephew “engaged in a bribery scheme involving the equivalent of hundreds of millions of dollars to obtain contracts that benefitted Adani Green, while, at the same time, falsely touting the company’s compliance with anti-bribery principles and laws in connection with a $750 million bond offering” in the US markets.

‘Adani personally met Andhra CM’, SEC told court

According to SEC’s complaint, the PPAs with Adani Green and Azure was supposed to be signed within 90 days of issuing the LOAs, but it took more than 18 months and the PPAs were executed by SECI “only after Adani Green’s senior executives, Gautam Adani and Sagar Adani, undertook a massive bribery scheme to incentivize Indian state government officials to enter into contracts with SECI to buy energy at above market rates”.

SEC also alleged that Adani Green was set to make billions of dollars from the execution of PPAs from different states including Andhra Pradesh and Odisha. “According to industry analysts, Adani Green was projected to earn billions of dollars of revenue and more than a billion dollars in profit by selling power capacity to SECI related to its Letter of Award and Manufacturing Linked Projects. To that point in its corporate history, Adani Green had earned only approximately $50 million in revenue and had not recorded a profit,” it said.

SEC noted that Gautam Adani personally met with the Chief Minister of Andhra Pradesh in August 2021, and “at or in connection with that meeting, Gautam Adani paid or promised a bribe to Andhra Pradesh government officials to cause the relevant Andhra Pradesh government entities to enter into Power Supply Agreements with SECI for the purchase of 7,000 MW of power capacity”.

Electronic documentation

The indictment alleged that the defendants and co-conspirators kept extensive electronic documentation of their bribery efforts, and typically communication through electronic messaging. Adani’s nephew Sagar, for instance, allegedly used his cell phone to track specific details of the bribes offered and promised to Indian government officials, according to the documents.

Rupesh Agarwal, former chief strategy and commercial officer of Azure Power Global, also prepared multiple analyses using PowerPoint and Excel to determine which payment option was best. One summarised the options suggested by Gautam Adani, and described the direct payment to the Indian Energy Company as a “Development Fee.”

The defendants often referred to each other by code names. Gautam Adani was called “Mr A,” “numero uno” and “the big man.” Jaain was called “V,” “snake” and “numero uno minus one.”

The indictment also alleged that some of the named defendants destroyed and concealed evidence, including a PowerPoint analysis and electronic communications, which impaired the availability of records for use in investigations.

Earlier, manufacturing-linked solar tenders were criticised by some industry players for trying to force solar developers to get into the manufacturing of modules. “Manufacturing requires high equity and low lending, while on the other hand project generation focuses on low equity and high lending, therefore asking a single entity to handle them together successfully is asking a lot,” a leading module maker had noted in 2019.

Problem with solar bids

The problem with solar bids is also that newer bids tend to see a drop in prices, leading to DISCOMs often reneging on earlier contracts. For instance, if one PPA is signed at an agreed tariff of Rs 2.5 per unit based on a discovered price by SECI and the discovered price in the next bid is Rs 2 per unit, then the buyer is reluctant to fork out the tariff agreed to earlier.

A consistent fall in solar power tariffs due to the falling price of solar panels has led to DISCOMs waiting for a further fall in tariffs rather than contracting PPAs at current prices, according to experts.

SECI often faces difficulty in finding buyers at discovered prices because DISCOMs expect the tariffs will continue to fall even further and many of them have already met renewable purchase obligations that their respective states are supposed to achieve.