Gautam Adani met Jagan in 2021, promised bribe for solar power contracts, says SEC indictment

Andhra Pradesh: In the indictment by a US court, a high-ranking official from Andhra Pradesh termed as ‘Foreign Official #1’ was paid a massive bribe to get solar contracts from the State.

Adani Group chairman Gautam Adani, India’s second-richest man, and seven others, including his nephew Sagar Adani, have been charged with paying bribes to unidentified officials of the State governments in Andhra Pradesh and Odisha to buy expensive solar power, potentially earning a profit of more than USD 2 billion over 20 years.

What is the solar project about?

The Adani Group in 2021 won a bid to supply 8,000 megawatt (8 GW) of power generated using locally manufactured solar cells and modular plants but could not meet the price expectations of the State governments buying such electricity.

Adani is alleged to have met the then Andhra Pradesh chief minister YS Jagan Mohan Reddy in 2021, following which the State government agreed to buy 7,000 MW of power. Andhra Pradesh officials were paid at the rate of Rs 25 lakh per MW, totalling Rs 1,750 crores (USD 200 million) for the 7,000 MW the State ended up purchasing.

According to the indictment by the US court, prosecutors claim that the Adani Group concealed this transaction from the US banks and investors while raising billions of dollars for its renewable energy projects. The renewable energy company is accused of raising over $3 billion in loans and bonds during this period by making ‘false and misleading statements.’

Who are the two main persons involved?

Gautam Adani (62) is a citizen of India and the founder of both Adani Group and Adani Green. Since 2015, Gautam Adani has served on Adani Green’s Board of Directors and as a member of its four-person management committee. He is also one of Adani Green’s two ‘promoters’, as defined by the Securities Board of India (SEBI).

Sagar Adani (30) is a citizen of India and he is the executive director of Adani Green’s Board of Directors and the chairman of Adani Green’s four-person management committee, in which he has served since October 2018. He is also Gautam Adani’s nephew.

Gautam Adani was referred to as ‘Numero Uno’ and ‘The Big Man’

In 2021, two senior executives of Adani Green Energy Ltd or Adani Green—Gautam Adani and Sagar Adani (collectively named ‘defendants’)—engaged in a bribery scheme involving the equivalent of hundreds of millions of dollars to obtain contracts, as per the indictment.

The indictment alleges that Gautam Adani was referred to in private as ‘Numero Uno’ and ‘The Big Man’, while Sagar Adani reportedly used his cell phone to monitor bribe-related details.

It further outlines that the ‘conspirators’ discussed the scheme extensively through electronic messaging platforms and documented their activities. For example, Sagar Adani tracked bribe specifics on his phone, while Vneet Jaain (MD & CEO of Adani Green Energy Ltd) reportedly photographed a document summarising the bribe amounts. Another conspirator, Rupesh Agarwal, created detailed analyses of bribe payments and methods to conceal them using PowerPoint and Excel.

Is YS Jagan Foreign Official #1?

According to the indictment by a US court, a high-ranking official from Andhra Pradesh is the ‘main one’ named in it. The ‘Foreign Official’ was a citizen of India who resided in India. From approximately May 2019 through June 2024, the ‘Foreign Official #1’ served as a high-ranking government official of Andhra Pradesh, India.

Here comes the twist in the big scam.

As per the indictment, Adani personally met with Foreign Official in Andhra Pradesh to advance the execution of a PSA between SECI and Andhra Pradesh’s state electricity distribution companies, including on or about August 7, 2021, on or about September 12, 2021, and on or about November 20, 2021.

Elaborating the conditions of the meeting by putting a face to the ‘Foreign Official’, in August 2021, Gautam Adani is alleged to have personally met with the then chief minister of Andhra Pradesh YS Jagan Mohan Reddy about the fact that Andhra Pradesh had not entered into a power supply agreement with Solar Energy Corporation of India (SECI) and the ‘incentives’ needed to cause Andhra Pradesh to do so.

During or in connection with the same meeting, Gautam Adani is alleged to have paid or promised a bribe to Andhra Pradesh government officials to cause the Andhra Pradesh government entities to enter into power supply agreements with SECI for the purchase of 7,000 MW of power capacity.

The bribe to Andhra Pradesh for this power supply agreement—which was significantly larger than the Odisha power supply agreement—was greater than that paid to the Odisha government officials by orders of magnitude. Later, statements by Adani Green executives to executives of Azure Infra indicated that the Andhra Pradesh bribe payment was approximately $200 million. This information was consistent with Adani Green’s internal records.

Andhra Pradesh agreed to buy power from SECI after Adani meeting

Shortly after Gautam Adani’s alleged meeting with Jagan, and the payment or promise to pay bribes, communications internal to Adani Green and Azure reflected that Andhra Pradesh had agreed to buy power from SECI.

Around the same time, Andhra Pradesh agreed in principle to execute a power supply agreement with SECI that would directly benefit Adani Green and Azure. And, within weeks, the Andhra Pradesh government was publicly quoted as saying, “In the Cabinet meeting held last month, it was decided to accept SECI’s offer. After deliberation, the State decided to tap 7,000 MW in the first phase.”

Gautam Adani, with Sagar Adani’s assistance, ultimately paid or promised bribes to government officials in numerous Indian states worth hundreds of millions of dollars to cause those State governments and their officials to enter into power supply agreements with SECI.

‘Adani paid a massive bribe to Indian officials’

According to the report, when SECI attempted to form a contract with the State governments to sell energy obtained via that capacity at prices consistent with the amounts to be paid to Adani Green and Azure, the governments refused.

The problem was economics. The price for energy capacity that SECI had tentatively agreed to pay under the Letters of Award turned out to be too high. So, when SECI attempted to contract with the Indian state governments and DISCOMs to offload power at prices consistent with the Letters of Award, the Indian states refused.

That refusal was only overcome when Gautam Adani, assisted by Sagar Adani, personally intervened and, in the aggregate, paid or promised to pay hundreds of millions of dollars of bribes.

Gautam Adani, Sagar R Adani, Vneet Jaain and others had offered and promised to Indian government officials approximately Rs 2,029 crore (approximately $265 million) in bribes in exchange for Indian government officials causing the State electricity distribution companies to execute PSAs under the Manufacturing Linked Project, which would benefit the Indian Energy Company’s subsidiaries and the US Issuer.

Approximately Rs 1,750 crores (approximately $228 million) of the corrupt payments were offered to the ‘Foreign Official’ in exchange for the Foreign Official contracting Andhra Pradesh’s State electricity.

How does power distribution work in the State?

Within each State, electricity is typically procured and distributed by one or more state-owned power distribution companies or DISCOMs. The chief minister of a State generally appoints one or more directors to oversee the DISCOM. As the head executive of a state, a chief minister can influence the decisions of publicly owned DISCOMs.

After SECI issued Letters of Award to Adani Green and Azure for the Manufacturing Linked Projects and accepted their proposed tariffs as amounts at which SECI would buy solar power generating capacity from them for the next 25 years, SECI attempted to enter into Power Supply Agreements (or PSAs) to sell solar electricity to the State governments and DISCOMs at prices consistent with the Letters of Award.

The Indian states and DISCOMs, however, initially refused to contract with SECI, because aspects of the Indian renewable energy market had shifted and caused downward pressure on solar energy prices. They were unwilling to buy solar energy from SECI at prices consistent with those set forth in the Letters of Award, which were above then-market rates. This unwillingness of the states and DISCOMs to enter into Power Supply Agreements prevented SECI from entering into Power Purchase Agreements with Adani Green and Azure. Without those Power Purchase Agreements, Adani Green and Azure could not develop and operate the Manufacturing Linked Projects and earn the billions of dollars of revenue associated with them.

Adani Green maintained records of bribes

Adani Green executives are said to have kept track of the bribes, creating and maintaining multiple internal records of bribes that had been paid or promised to numerous states and state officials to induce them to cause the states to buy renewable energy from SECI. By way of example, according to Adani Green’s internal records, a payment equal to hundreds of thousands of dollars was paid or promised to government officials in the Indian state of Odisha to cause Odisha to enter into a Power Supply Agreement with SECI for the purchase of 500 MW of power.

Consistent with Adani Green’s internal records, SECI announced its first Power Supply Agreement related to the Manufacturing Linked Projects in July 2021, pursuant to which the Grid Corporation of Odisha agreed to buy 500 MW of power capacity from SECI.

State distribution companies in India

The Chhattisgarh State Power Distribution Company Limited, Tamil Nadu Generation and Distribution Corporation Limited, GRIDCO Limited, Jammu Kashmir Power Corporation Limited, Andhra Pradesh Central Power Distribution Corporation Limited, Andhra Pradesh Eastern Power Distribution Company Limited and Andhra Pradesh Southern Power Distribution Company Limited (collectively, the state distribution companies) were electricity distribution companies in India that were State-owned and State-controlled and performed functions that the State governments in India treated as their own.

The State Distribution Companies were ‘instrumentalities’ of the Indian government, and their officers and employees were ‘foreign officials,’ as those terms are used in the FCPA, Title 15, United States Code, Sections 78dd-1(0)(1)(A) and 78dd-3(f)(2)(A).

$750 million of Adani Green corporate bonds

In September 2021, the defendants leveraged that narrative in the offering to sell $750 million of Adani Green corporate bonds (Notes), including more than $175 million in Notes to investors in the United States. In connection with the offering, Adani Green told purchasers of the Notes that none of Adani Green’s directors or officers, including the defendants themselves, had paid or promised to pay bribes to government officials or attempted to unduly influence those officials.

According to the complaint copy, Adani Green and the defendants also emphasised to underwriters and potential investors that Adani Green had implemented robust anti-bribery and anti-corruption processes and that Adani Green was a leader in India in good corporate governance.

However, none of those measures were said to be true.

In the months and weeks before making these representations in connection with the Offering, defendants were personally involved in paying or promising the equivalent of hundreds of millions of dollars in bribes to state government officials to induce governments to enter into contracts necessary for Adani Green to develop India’s largest solar power plant project, from which Adani Green stood to earn billions of dollars.

Adani Green wanted to be world’s largest solar power producer

According to the US Securities and Exchange Commission, Adani Green has also touted its plan to become the world’s largest private producer of solar power by 2025 and of renewable power by 2030.

This effort relies significantly on programs and economic incentives implemented by SECI (or the Solar Energy Company of India), an arm of the Central government responsible for renewable energy development. It also depends on Adani Green’s successful implementation of the so-called Manufacturing Linked Projects, which comprise a substantial part of Adani Green’s intended power generation capacity.

Azure paid some of its share of the bribes

In 2022, after SECI and many state governments publicly announced they had entered into Power Supply Agreements related to the Manufacturing Linked Projects—benefiting both Adani Green and Azure, which were to develop two-thirds and one-third of those projects, respectively—Gautam Adani and Sagar Adani sought to collect from Azure one-third of the bribes that had been paid or promised to Indian state government officials to secure those Power Supply Agreements.

Specifically, between April and June 2022, Gautam Adani and Sagar Adani, together with Vneet Jaain, met in person in India multiple times with multiple senior Azure personnel to discuss how—consistent with a prior agreement with Azure—Gautam Adani, with Sagar Adani’s assistance, had paid or promised bribes to State government officials to procure contracts between the states and SECI necessary for the Manufacturing Linked Projects to move forward.

Among other things, Gautam Adani suggested that Azure could pay some of its share of the bribes by the Azure senior personnel causing Azure to cede Azure’s rights to its most valuable aspect of the Manufacturing Linked Projects—Azure’s right to sell 2.3 GW of power capacity to SECI related to Andhra Pradesh—to Adani Green.

Following each of the meetings with Gautam Adani, Sagar Adani, and Vneet Jaain, Azure senior executives met frequently and strategised about various transaction structures to pay Azure’s one-third share of the bribes that Gautam Adani, with Sagar Adani’s assistance, had paid or promised to Indian state government officials.

In December 2023, Adani Green publicly announced that it had signed a Power Purchase Agreement with SECI for the majority of the 2.3 GW portion of the Azure award that Azure had returned to SECI.

YSRCP denied allegations

The YSRC Party denied the allegations against the then Government led by YS Jagan Mohan Reddy.

According to the statement issued, the power procurement of 7,000 MW was approved by APERC vide its order dated 11-Nov-2021. After the APERC approval was obtained, the Power Sale Agreement (PSA) was signed on 1-Dec-2021 between SECI and AP Discoms. This was after the CERC approval as well. It is necessary to mention that SECI is a Government of India enterprise.

"There is no direct agreement between AP DISCOMs and any other entities including those belonging to the Adani group. Therefore, the allegations made on the State Government, in the light of the indictment are incorrect," said in a statement issued by YSRC Party.