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Adani and the grief to income ratio (from my newsletter)

Summary:
Adani (now ludicrously renamed Bravus) is pushing ahead with the Carmichael mine-rail-port project, but the financial and reputational costs keep mounting. Having been forced to finance the mine and rail project out of its own funds, Adani is now finding that its Adani Ports business (of which the Abbot Point coal terminal is only a small part) is becoming equally toxic. PIMCO, once its biggest bondholder announced that it would no longer invest in new bond issues. At the same time, S&P reversed a decision to include Adani Ports in its sustainability index because of investments in Myanmar – without the continuous focus of critics, this investment might have escaped notice.The name changes under which Adani Mining became Bravus and Adani Abbot Point became North Queensland Export

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Adani (now ludicrously renamed Bravus) is pushing ahead with the Carmichael mine-rail-port project, but the financial and reputational costs keep mounting. Having been forced to finance the mine and rail project out of its own funds, Adani is now finding that its Adani Ports business (of which the Abbot Point coal terminal is only a small part) is becoming equally toxic. PIMCO, once its biggest bondholder announced that it would no longer invest in new bond issues. At the same time, S&P reversed a decision to include Adani Ports in its sustainability index because of investments in Myanmar – without the continuous focus of critics, this investment might have escaped notice.

The name changes under which Adani Mining became Bravus and Adani Abbot Point became North Queensland Export Terminal is an indication of the toxicity of these projects.

The continuing struggle against Adani may not stop coal being shipped from the mine, but it will sooner or later make the project a stranded asset, ensuring that most of Adani’s investment is lost.

The bigger picture is that Adani has greatly increased the “grief to income ratio” of investments in any part of the coal production chain. Financiers and suppliers who have agreed, under pressure, to withdraw support from Adani, have realised that they are better off getting out of coal altogether, and are starting to draw the same conclusion about gas.

A recent example is the decision of US insurer Liberty to abandon a proposed mine at Baralaba in Queensland. Liberty had already agreed, under intense pressure, not to insure Adani, and this step was a logical consequence 

This pattern is not unique to Australia. The struggle to stop the proposed Vung Anh 2 coal-fired power station in North Vietnam hasn’t yet succeeded. But companies like Mitsubishi involved in Vung Anh 2 have dumped projects that haven’t yet started and promised to withdraw from coal altogether.  . The Hunutlu coal plant in Turkey, funded by China’s Belt and Road initiative, looks like being the last such venture.

More grief, less income. That’s the future for anyone involved in coal.

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John

John Quiggin
He is an Australian economist, a Professor and an Australian Research Council Laureate Fellow at the University of Queensland, and a former member of the Board of the Climate Change Authority of the Australian Government.

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