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The
world’s third-richest man sells a green dream
built on coal - September 12, 2022
Profiles
Mining
Business
Environment
Media
By
Chris Kay and P R Sanjai
Early
one evening in April, Asia’s newly minted richest
person strode onto the stage of the National Centre
for the Performing Arts, in Mumbai. Stocky and mustachioed,
Gautam Adani was there to deliver a speech at the
India Economic Conclave, a gathering of the country’s
financial elite.
Historically
media shy, Adani’s become more prominent in recent
months, and not just because of the meteoric surge
in his wealth. A rapid diversification spree has pushed
his vast, largely fossil-fuel driven conglomerate
into a raft of new sectors in and outside of India,
and Adani is seeking to reinvent himself for the global
stage.
His
public appearances now have renewed purpose: to persuade
the world – especially the gatekeepers of global
capital markets needed to fund his grand ambitions
– that a coal tycoon is now a champion of green
energy.
Though
Adani isn’t the only coal baron attempting such
a pivot, he’s by far the richest and one of the
most influential, with close ties to Prime Minister
Narendra Modi, India’s most powerful leader in
decades. Surging energy prices and a breathtaking
jump in the shares of his listed companies have pushed
Adani’s fortune to an estimated $US143 billion
($209 billion) – only Elon Musk and Jeff Bezos
are wealthier. But it’s his alignment with Modi,
who like Adani hails from the prosperous coastal state
of Gujarat, that has been the foundation of the tycoon’s
empire. It’s also what could become Adani’s
Achilles heel, as he seeks to move into a world that
increasingly values environmental considerations over
Modi’s mantra of economic development.
Adani’s
speech to the India Economic Conclave, then, was careful
to pay homage to both camps.
“India
is on the cusp of decades of growth that the world
will want to tap into. Therefore, there can be no
better defence of our interests at this time than
atmanirbhar,” Adani said in the Mumbai address,
using the Hindi term for self-reliance — the
same nationalist theme that Modi often emphasises
in his speeches. Rising global demand for green energy,
he went on, will be a “game changer” for
the country. “For India, the combination of solar
and wind power coupled with green hydrogen opens up
unprecedented possibilities.”
Seen
as closer to the prime minister than any other billionaire,
Adani’s central business strategy over the past
decade has been to bolster Modi’s efforts to
develop India’s $US3.2 trillion economy. He has
synchronised his corporate ambitions with government
priorities, most significantly by doubling down on
coal as Modi promised to bring reliable electricity
to more Indians. The alignment extends to foreign
affairs. In 2021, Adani began construction on a major
port facility in Sri Lanka; according to officials
from both countries, the plan was encouraged by the
Modi government, which wants to curb Chinese influence
on the nearby island. Whether building expressways
or upgrading data centres, Adani can be counted on
to provide money, infrastructure, or expertise, whatever
the policy priority.
While
Adani, 60, has said he doesn’t receive or expect
special treatment from the government, that alignment
has served him well. Shares of his seven listed firms
have seen hefty gains this year, lifting their combined
market value to some $US255 billion, about 7 per cent
of the overall Indian market. Among the top 10 billionaires
tracked by Bloomberg globally, Adani is one of only
two whose fortune hasn’t declined in 2022 –
and the only one that’s primarily been fuelled
by coal.
Adani’s
now using those financial resources to supercharge
his ambitions, the centrepiece of which is a commitment
to invest $US70 billion by 2030 in green energy infrastructure.
Last month, his group also unveiled $US7.2 billion
of investment in alumina and iron-ore projects and
recently acquired the Indian operations of cement-maker
Holcim for $US10.5 billion. Other forays include moves
into media and digital services, airports, data centres
and telecommunications.
As
long as Modi remains in charge, and Adani’s companies
keep generating enough cash to offset the significant
debt he’s accumulated to fund expansion, his
position appears robust – at least within India,
according to Tim Buckley, the director of the Sydney-based
Climate Energy Finance think tank and a long-time
observer of the billionaire. “His political power,
his ability to understand the lay of the land in India,
is second to none,” Buckley said. “The organisation
works very, very effectively, unlike a lot of Indian
competitors, and they get things done.”
Beyond
India, however, Adani’s power is less assured.
And that’s where his grandiose bet on renewables
comes in. The $US70 billion pledge is the blueprint
that Adani hopes will make his empire the world’s
largest producer of clean power by the end of the
decade. Yet his green investments so far still pale
in comparison to his fossil-fuel exposure, a dichotomy
that risks undermining Adani’s quest to be taken
seriously on the world stage.
According
to SumOfUs — an activist organisation that runs
digital campaigns intended to apply pressure on powerful
corporations — Adani’s mining operations
account for at least 3 per cent of global carbon-dioxide
emissions from coal. The Adani Group declined to comment
on this figure, and for this story more broadly. “It’s
hard not to see Adani’s green investments as
anything but cover for his company’s coal expansion,”
said Nick Haines, a SumOfUs campaign manager in Melbourne,
“or at best having his cake and eating it too”.
Adani’s
wide-ranging group was built on a bedrock of coal,
and it continues to be central to his business. The
main Adani units that rely on the fuel account for
62 per cent of his conglomerate’s revenue. Coal
is a domestic resource, one critical to Modi’s
ambitions for self-reliance, and Adani is India’s
largest private developer of coal mines. In a 2019
interview with Bloomberg News, Adani insisted that
India’s economic goals would be impossible to
achieve without coal power, which must “play
a big role” in expanding electricity generation
capacity. The country is the world’s third-largest
carbon emitter, after China and the US, and while
Modi has signed on to targeting net-zero emissions,
his 2070 timeline lags China’s by 10 years, and
the US and UK by two decades.
As
global asset managers move to decarbonise their portfolios,
speeches extolling the ambition of Adani’s green-energy
plans may not be enough to keep the money flowing.
While
Adani says boosting India’s energy security is
behind his new green play, the billionaire’s
experience in Australia may at least partially explain
the shift. Adani is developing a large mine in Queensland
to augment Indian supplies, and the pushback he’s
seen there shows the challenge he’ll likely face
expanding his influence beyond India’s borders.
Lawsuits, protests, and government inquiries repeatedly
delayed Carmichael, as the project is known, since
it was proposed more than a decade ago; in 2020, Adani’s
Australian mining unit pleaded guilty to misleading
environmental authorities over land-clearing at the
site, drawing a fine of $US20,000 ($29,000). Banks
such as Goldman Sachs Group ruled out providing loans
for the project, forcing Adani to finance the mine
himself.
Carmichael
involves a major port expansion in environmentally
sensitive waters, and activists believe it poses an
unacceptable risk to wildlife as well as the Great
Barrier Reef. They’re also concerned about what
a major investment in Australian coal production will
mean for India’s power mix. Carmichael began
exporting coal earlier this year, feeding soaring
demand for the fuel in India as temperatures soared
this summer.
Yet
during the 32-minute speech at the India Economic
Conclave, Adani hardly mentioned coal. Part of his
motivation for ramping up public appearances, people
familiar with the billionaire’s strategy say,
is to change the perception of his business, better
aligning himself with asset managers — and lenders
— who are making green energy and ESG a priority.
The Adani Group says it has a pipeline of 20.4 gigawatts
of clean-power projects, equivalent to about 20 per
cent of current US solar capacity. But just over a
quarter of that is operational, primarily in the form
of solar and wind farms in Indian states including
Karnataka in the south and Uttar Pradesh in the north.
At
the same time, the company is almost doubling its
coal-fired power capacity to 26 gigawatts, according
to environmental non-profit group Market Forces, and
is still pursuing natural gas projects.
For
the immediate future, at least, that’s where
the money is. Energy-supply constraints caused by
the war in Ukraine have pushed coal prices to multi-year
highs, and the International Energy Agency expects
global demand to set annual records through 2024.
European countries including Germany and the Netherlands
are reopening coal plants to make up for tighter stocks
of natural gas.
In
late May, after attending the World Economic Forum
in Davos, Switzerland, Adani couldn’t resist
something of an I-told-you-so. “Developed nations
that were setting targets and giving stern lectures
about climate change to the rest of the world now
appear to be less censorious as their own energy security
is threatened,” he posted on LinkedIn.
Building
this empire has required borrowing on a scale rarely
seen in India. The Adani Group has about $US8 billion
of foreign-currency bonds outstanding, the most of
any Indian business, according to data compiled by
Bloomberg. The group’s combined net debt was
1.6 trillion rupees ($29 billion) as of end-March,
according to company data. The Adani Group, however,
says it’s deleveraged consistently over the past
few years and its metrics are healthy.
This
enormous scale has raised some questions about the
group’s activities in India — and its relationship
to power. Without any experience in aviation, Adani
won bids to operate a raft of airport facilities through
a federal government tender about three years ago.
More
recently, lawmakers sought an investigation into whether
a series of Mauritius-based funds, which were some
of the largest investors in Adani companies, were
being used to stoke the astonishing share surges that
have propelled them to among the highest multiples
in India. The Indian department overseeing import
and export regulations is probing the matter, and
the capital markets regulator is examining compliance
with securities rules, India’s junior finance
minister told parliament last year. Representatives
of Adani have said the group complies with all regulatory
requirements and has made required disclosures.
Outside
India, Adani faces a different experience, as the
situation in Australia showed. Though he has made
other forays overseas, and partnered with French oil
giant TotalEnergies SE – which pledged to invest
$US7.3 billion in Adani businesses, including his
renewable energy and green hydrogen units – expansion
will expose Adani to a level of scrutiny he’s
never seen before.
As
global asset managers move to decarbonise their portfolios,
speeches extolling the ambition of Adani’s green-energy
plans may not be enough to keep the money flowing.
Right
now, shares in Adani companies are able to command
a premium “because they are the only green energy
and infrastructure-focused group in India that offers
global investors access to these businesses through
their listed companies,” said Deven Choksey,
managing director at Mumbai-based brokerage KRChoksey
Holdings Pvt
“Yet
as global investors become more sensitive to what
makes a viable green investment, they’re more
likely to ask hard questions. Like why Adani is already
expanding production at Carmichael, aiming to raise
its annual output by 50 per cent more than originally
approved by its board in 2019. ??The tycoon may have
to commit to exiting coal in order to realise his
empire-building ambitions, says Buckley at the Climate
Energy Finance think tank. “He’s no mug,
he will totally roll with the punch,” he said.
“ESG 2.0 is coming and that doesn’t mean
greenwash, it means you’ve actually got to walk
the walk.”
(Bloomberg)
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