Private equity investment engagement and carbon foot-printing: A real-time case study

3 minute read

The biggest US dollar bond funder of potential Carmichael coal lender State Bank of India has a dominant private equity owner, Apollo Management. Here we explore what this means for (climate concerned) end investors in Apollo funds, and/or the private equity manager's engagement opportunity.

A controversy has arisen around State Bank of India potentially giving a significant loan to Adani Enterprises and the Carmichael coal mine build. How could private equity investors inadvertently be exposed to this loan and eventually to the development of “the world most insane energy project”?

SBI has issued around USD3.5bn in hard-currency bonds, of which there is a USD650mn green bond outstanding. There is another 4.3bn of US dollar loans outstanding, for a total of USD8.3bn of funding. US dollar funding is front-loaded: USD4.6bn matures between 2020-22.

The funding operation (the SBI USD670mn loan) comes in the light of several developments. First, Adani Abbot Point, the key infrastructure operator for Carmichael, failed to refinance in February and has not come back to market. Second, Adani Ports issued a USD750mn bond, but this was scaled back from an original planned USD1.25bn due to low demand. We have been informed that investors have since divested due to ADSEZ high exposure to the Carmichael mine.

We believe it is likely that Adani Group would fund Adani Enterprises/Carmichael on its own balance sheet or proxy entities if that was possible without tainting those funding vehicles.

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