Top coal, top ESG?

6 minute read

We review the global top decile ESG ranking of Adani Power, a 99.7% coal-based electricity company as well as recent investor losses in the company's stock after a recent delisting announcement. It is likely that in the near future, Adani Power is likely to delist from the public equity market.

A majority of 90% of shareholder votes is required in order to delist the company. However, there is substantial appetite in the market for private debt, which may be highly relevant to finance this buy-out.

It is our view that involvement or investment in Adani refinancing and bridge debt is not aligned with a credible coal exclusion policy. As background, Adani Group is a conglomerate with activities across the energy spectrum, where Adani Power is one of several horizontally placed subsidiaries.

The Adani Group has globally significant thermal coal mining activities in Adani Enterprises Ltd, a listed sister entity within the conglomerate, making it possible for Adani Power to avoid production based criteria.

It should also be noted that Adani Power is not affected by exclusion criteria from some large, global investors, as the company does not actually produce the coal it burns. Many coal exclusion lists have the requirement that revenues from coal production, as opposed to coal consumption, must not exceed 25% of company revenues. This is one of the fine-print details that ESG minded investors should be aware of when they evaluate asset managers.

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