Zero new coal mine financing? EQT infrastructure investors and Carmichael

3 minute read

Many investors have zero tolerance for funding new coal mine projects. End investors in EQT’s infrastructure funds should be aware that EQT’s recent joint venture (AdaniConneX) with Adani Enterprises likely is in breach of absolute, zero-based exclusionary rules.

We think that AdaniConneX will to a fraction be driven by electricity generated from Carmichael coal and we base this on the following three assumptions. Firstly, AdaniConneX will be powered using non-renewable sources. The AdaniConneX JV statement clearly states that some of the power for the data centres will come from non-renewable sources. Secondly, the non-renewable electricity will be supplied by Adani Power. The JV signing ceremony focused around Adani Power’s CEO. Adani Power’s generation capacity is 99.7% coal based. Thirdly, Adani Power will use Carmichael coal to generate electricity.

Adani Enterprises’ Carmichael mine has been described by Adani Group’s COO as a “support function for Adani Power” clearly indicating that Adani Power will produce electricity based on Carmichael coal. From a balance sheet perspective, AdaniConneX provides a secured forward revenue stream for Adani Enterprises on a company level and for Carmichael on a project level. Providing balance sheet relief is, in our credit experience, effectively the same as lending cash.