Adani Energy Solutions ratings affirmed at BBB- with stable outlook

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Adani Energy rating stable

Highlights

Fitch affirmed Adani Energy Solutions' BBB- ratings with a Stable Outlook on both issuer and U.S. dollar notes totaling approximately $987.5 million due 2036 and 2041.
Fitch forecasts AESL's consolidated EBITDA will double by March 2028 from FY26 levels after five years of roughly 10% CAGR, with stable cash flows supported by regulatory frameworks.
AESL is expected to generate negative free cash flow through FY30 due to INR815 billion capex, but de-risking from falling net leverage and improved funding access after recent regulatory clearances.

Fitch cites regulation, operations and growth outlook

As reported by Fitch Ratings, Adani Energy Solutions Limited's Long-Term Foreign- and Local-Currency Issuer Default Ratings remain at BBB- with a Stable Outlook, while the AESL-guaranteed 4.25% U.S. dollar 500 million senior secured notes due 2036 and 6.117% U.S. dollar 487.5 million senior secured notes due 2041 are also affirmed at BBB-. The notes were issued by subsidiaries Adani Transmission Step-One Limited and ATSOL Global IFSC Limited, respectively.

Fitch says the ratings are supported by the established regulatory framework for AESL's transmission and distribution assets and by a strong operating record that supports stable cash flow. It also says some assets benefit from a cost-plus tariff structure, which provides long-term cash flow visibility, while revenue from core assets depends on system availability rather than volume, limiting demand risk.

The agency expects AESL's consolidated EBITDA to double by the financial year ending March 2028 from FY26 levels, following compound annual growth of about 10% over the previous five years. Fitch adds that the Stable Outlook reflects its view that the company's credit metrics remain consistent with the current rating over the medium term.

Capex pressure and funding access remain in focus

Fitch expects AESL to generate significantly negative free cash flow over FY27 to FY30 as it undertakes aggregate capital expenditure of INR815 billion. Even so, the agency says strong earnings growth should help AESL's EBITDA net leverage fall to 5.0x in FY27, supporting what it describes as an adequate financial profile.

Fitch also says contagion risk has eased after recent developments, including the U.S. Department of Justice dropping criminal charges against certain Adani Green Energy Limited board members. In its view, that reduces spillover risk for AESL and further strengthens the company's access to funding as it executes its investment pipeline in India's power networks sector.

In our earlier coverage of Fitch’s rating of Hainan Rubber’s proposed subordinated perpetual securities, we explained that the BBB- assessment reflected the notes’ lower ranking in the capital structure and the issuer’s option to defer coupons. We also highlighted Fitch’s view on the group’s high leverage and liquidity position, alongside the role of state-linked support in underpinning funding access as the company refinances offshore debt.

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