[Levin]

UPDATED 11 HOURS AGO


......

This crown jewel of his power company, which can light up millions of homes, has more liabilities than assets and has run up US$1.8 billion (S$2.4 billion) of losses.

To paper over the deficit, Mr Adani has deployed more than US$1 billion (S$1.3 billion) of creative debt financing and reassured investors and lenders that profits will come soon.

But Adani Power’s auditor cannot fully make sense of the maths underpinning this claim


Read the full LONG report at: https://www.straitstimes.com/business/ad...-t-go-down

[K88 shu shu]

snake oil seller at work.

[Clyde]

Hyflux also debt more than asset.

[teaserteam]

Dun think this debt is high. Power Plant investment are intensive. Adani's Mundra Power Plant has a total installed capacity of about 4500MW. Assuming the cost is $1000 per kw. The total investment is around $4.5 billion. Lets said the asset has been depreciated by 40%, the asset today maybe 4.5b*0.6 or $2.7 billion. The debt to asset ratio is about 48 % which is reasonably good. In China, power stations would have an debt to asset ratio of about 73%

https://www.sciencedirect.com/science/ar...8722000170

[Levin]

At the core of investors’ skittishness is the debt-fuelled and intertwined nature of how the Adani empire bankrolls its titanic expansions. The Mundra Thermal Power Plant – and its debt, which experts say seems designed to shield Adani Power from extraordinary write-offs, regardless of the unit’s losses – exemplifies this balancing act, where a single asset write-down could have cascading ramifications.

“In the light of the circumstances, impairment probably would have been prudent,” said Dr Alastair Lawrence, an associate professor of accounting at the London Business School.

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Mundra was running – but haemorrhaging money.

After lifetime losses reached US$1.5 billion five years ago, Adani Power’s newly appointed auditor, SRBC & Co, flagged that there was “material uncertainty” around the subsidiary holding the plant that could cast “significant doubt” on its ability to continue as a going concern – a common precursor to an asset write-down.

That could have had far-reaching consequences. All of Mundra, including the land the plant sits on – constituting about one-third of Adani Power’s assets – had been pledged as security for bank loans, filings showed. The Adani family had also committed a quarter of its equity in the company, worth almost US$300 million, as additional collateral.

Even a partial write-down, with its likely impact on Adani Power’s bottom line and share price, could have threatened the whole arrangement.

A curious financial manoeuvre followed.

Inside Adani Power sits a sub-entity resembling an investment company, identified in financial statements as “Standalone”. Through this vehicle, Adani Power lent more than US$600 million to Mundra, delivered through a special kind of unsecured debentures.

Filings showed the securities came with 10 per cent annual interest – but it had to be paid only if Adani Power asked. In addition, they were perpetual, meaning there was no set date when Mundra would have to repay the principal.

The move offered Adani Power a crucial advantage, said Associate Professor Miguel Angel Minutti-Meza, accounting department chair at the University of Miami’s Herbert Business School.

An equity investment might have needed to be written down if the plant kept losing money, he said. A standard loan would have put Mundra on the hook for regular interest payments – or else face a possible write-down. These are fair-value adjustments, made to give investors a reasonable picture of an asset’s prospects.

But the debentures seem custom-made to avoid such consequences, Prof Minutti-Meza said, no matter if Mundra’s losses kept piling up – which is key for Adani Power because “a large impairment may trigger a series of defaults” depending on its loan terms.

“This corporate structure is set up almost to deny responsibility,” he said.

[teaserteam]

We should’ve figures to prove and not using words. Shot it’s like to use all sort of reasons and pull all sort of “words” to scare pple. If we say a company is in trouble, there must b enough statistic to back up unless those statistics r proven to b false.

[Levin]

We should’ve figures to prove and not using  words. Shot it’s like to use all sort of reasons and pull all sort of “words” to scare pple.  If we say a company is in trouble, there must b enough statistic to back up unless those statistics r proven to b false.

?? The article stated that the auditors and all the so-called financial experts have scrutinised the figures and come to the same conclusion that the arrangement is odd. It is not illegal but very odd (a rather mild word given that the arrangement is to shirk off responsibility), that's why the spotlight.

[teaserteam]

Anyone questioned the 1.3billion debt? Just pointing out the debt not high if u r tslking about Seraya or senoko power station, the 1.3 billion will b high

[Levin]

Anyone questioned the 1.3billion debt?  Just pointing out the debt not high  if u r tslking about Seraya or senoko power station,  the 1.3 billion will b high

Nah. Nobody questioned the debt amount. Yes, the debt cannot go down as the plant is not profitable but the main question here is actually the "special debentures", not the debt. Again, this is just a spotlight on it. What is highly unusual is the repeated (not once) reservations of the auditors over several years.

[Clyde]

There was one year sembcorp reported the India power plant utilisation rate was only 40%. When I was there, many villages were still lighting candles and burning cow dung for cooking. They are just too poor to afford electricity