French-based energy company TotalEnergy CEO Patrick Pouyenne has previously managed to navigate complex situations in emerging markets. Even after the murder of journalist Jamal Khashoggi in Saudi Arabia, in 2018, he joined the country's 'Future Investment Initiative'. He also took a long time to withdraw from the company's operations in Russia during Russia's military campaign against Ukraine.
TotalEnergy has close ties with Indian billionaire Gautam Adani. Adani is now indicted in the US in a bribery scandal. A new challenge has appeared in front of TotalEnergy.
Adani Group's relationship with TotalEnergy started in 2018. During this time they jointly developed the liquefied natural gas (LNG) business. Currently, Puyanne holds 37 percent stake in Adani Total Gas and 20 percent stake in Adani Green Energy.
Adani Green Energy currently has 11 GW of solar and wind power generation capacity. Adani is now the leader in the renewable energy sector in India. In September 2023, TotalEnergy further strengthened the relationship with Adani Green through a separate solar joint venture.
Adani Green Energy is now the prime accused in a US court case over a bribery scandal. US prosecutors alleged that Gautam Adani and others paid $26.5 million in bribes to Indian government officials between 2020 and 2024. Adani paid these bribes to the officials to secure the agreement to buy solar power at a price higher than the market price.
According to the complaint, Adani Green raised $17.5 million from US investors in 2021.
Total's investors, however, are quite relaxed about the situation for now. Because they think it is not like the experience of Iran in 2018. Total was then forced to withdraw from a major gas project in Iran due to US sanctions. But in the present case, Total did not directly face any charges. However, the Adani scandal poses a risk to Total's India investment plans.
Bernstein analysts warned that Total's due diligence could be questioned before entering into a partnership with Adani. Although only 3 percent of Total's total capital is invested in India, about 25 percent of the company's renewable energy projects, or 6 GW of generating capacity, are located in the country. Adani Green's target of achieving 50 GW of renewable power generation capacity by 2030 is in line with Total's target of 100 GW capacity.
During the new partnership with Adani Green in 2023, Total warned that the profit potential could be hampered if the partnership is not properly managed or selected inappropriately. Currently, renewable projects receive a total Return on Capital Employed (ROCE) of around 10 percent. However, the current situation may reduce the profit figures of the company.
But a major revision like the one in Iran is unlikely. Pouyanne will try to put the crisis behind him, as he did last year during the Adani short-seller incident. However, US legal pressure could create a volatile environment for Total's Indian operations in the long term.
