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IEEFA update: The Adani juggernaut is expanding on all fronts, Australian coal needs not be one of them

October 29, 2019
Tim Buckley

The Adani Group is today one of the most powerful business conglomerates in India, spanning six listed entities across a growing multitude of activities.

The Adani group is building powerful allies.

The group is unusual in that it is entirely, sensibly, almost entirely focused on one country, India. Internationally, this conglomerate operates only two businesses of any note – one thermal coal mine in Indonesia and a massively leveraged and likewise under-performing coal export terminal in Australia – the latter of which has suffered due to regulatory glitches.

It is likewise unusual in that at a time when India Inc and the Reserve Bank of India are slowly but successfully working to reduce excessive corporate financial leverage and non-performing assets across India, Adani is continuing to add more financial leverage by expanding in all directions concurrently.

WITHIN INDIA THE STRATEGY HAS PAID ENORMOUS DIVIDENDS TO DATE, given this financial leverage is applied primarily to infrastructure where the value is tied to the success of the Indian economy, which has grown at over 6% annually for the last decade. And the Adani group is building powerful allies.

Tata Power has said that they will never build another coal-fired power plant again

The crown jewel is without doubt Adani Ports & SEZ, built up into the largest port owner operating in the nation from humble beginnings leveraging 16,000 acres of land gifted to Adani more than a decade ago. The group also holds majority stakes in Adani Power Ltd (India’s largest private coal-fired power generation firm), Adani Transmissions Ltd (successfully built up mostly in the last five years to become India’s largest private grid transmission line owner/operator), Adani Green Energy Ltd (successfully built up in just five years to be one of the top three renewable energy developers/owners in India), Adani Gas Ltd and Adani Enterprises Ltd.

In 2019, most investors and banks have been understandably in full retreat from the Indian thermal power generation sector which is highlighted by financial distress, promotor collapses (GVKLanco et al), the debt-funded governance debacle of IL&FS, and the continuing run of expanding non-performing assets continually eroding the capital base of most public banks. Indeed, Tata Power has said they will never build another coal-fired power plant again, instead pivoting to become one of India’s premier renewable energy leaders. But not Adani Power.

International expansions for the Adani Group have been costly and difficult to implement.

Over the last couple of years, Adani Power acquired the 1,320 megawatt (MW) subcritical coal power plant at Udupi, the 600MW subcritical coal power plant at Raigarh, the 1,370MW Raipur supercritical coal-fired power plant, and the 600MW Korba West subcritical coal power plant. Adani Power is also pushing ahead with the controversially expensive 1,600MW Godda imported coal-fired power plant proposal for re-export to Bangladesh, supported by a controversial government award of an Adani dedicated special economic zone (SEZ) and a $1.5 billion subsidised loan from the Indian government’s Power Finance Corp (PFC).


More recently, Adani Enterprises announced completely new business developments in areas as unrelated as developing data storage servicesdefence contracting and metro rail operation. In February 2019, having never run a public airport of size, Adani won not one but six airport contracts from the Indian government. Just last week Adani announced it had signed a memorandum of understanding (MoU) with Abu Dhabi National Oil Company (ADNOC), BASF and Borealis for a joint feasibility study to build a $4 billion chemical plant at Mundra in Gujarat.

Adani Enterprises’ Australian HALE thermal coal export proposal is looking entirely unbankable and unviable

In contrast to this general track record of domestic success, international expansions for the Adani Group have been costly and difficult to implement.


In 2009 Adani Enterprises commissioned one of the world’s lowest energy content (3,000kcal) thermal coal export mines in Indonesia. While 12-13 million tonnes per annum (Mtpa) was targeted back in 2009, production has generally run around 4Mtpa.

APCT operates at only 55-60% of capacity and barely breaks even after debt funding

The second offshore foray was to acquire a huge coal deposit long stranded in the remote Galilee Basin, Queensland Australia in 2010. Almost a decade and $1 billion later, this purchase remains remote and undeveloped, having generated enormous controversy and ongoing community backlash. Half of a nearby tenement of similar size was reportedly sold for just $0.4 million last year, while another tenement development plan held by Chinese interests was shelved in March 2019. Adani Enterprises’ Australian HALE thermal coal export proposal is looking entirely unbankable and unviable absent massive government subsidies from both Australia and India.

In 2011, the Adani Group acquired the Abbot Point Coal Terminal (APCT) for US$2bn (financed almost entirely by debt). Nine years later, APCT operates at only 55-60% of capacity and barely breaks even after debt funding.

Finally, a target to build 1,500MW of solar across Australia in 2017 has seen just 65MW built three years later, and management exits suggest this stalling of activity is likely to be ongoing.

International recognition

The Adani group has been exceptionally busy tapping international debt markets in 2019, with multiple US$ denominated bond raisings across Adani Ports, Adani Green Energy and Adani Transmission successfully raising US$2-3 billion of new debt.

Earlier this month the Adani Group announced a major milestone, selling a 37.4% stake in its recently listed Adani Gas Ltd to Total for Rs 6,155 crore (US$850m).

India is taking an international leadership role on decarbonisation, renewable energy infrastructure and electric vehicles.

The Indian government has long targeted a doubling of gas’ share of the Indian energy mix to 15%, but most (including IEEFA) have been sceptical of this target in light of the heavily regulated and well-below international market parity pricing of gas in India. However, Adani’s announcement is a major international capital market endorsement of its recent aggressive expansion into liquefied natural gas (LNG) import terminal construction and gas distribution network development across a growing number of cities across India.

IEEFA has long endorsed the global importance of India’s audacious 450 gigawatts of renewables by 2030 aspiration, not just in terms of delivering an ever lower cost, more sustainable energy new alternative for India, but also in terms of delivering on Prime Minister Narendra Modi’s commitments under the Paris Agreement. India is well ahead of its 2015 Nationally Determined Contribution (NDC) and is taking an international leadership role on decarbonisation, renewable energy infrastructure and electric vehicles.

WITH GROWING INTERNATIONAL FOCUS ON INDIA’S INCREASINGLY IMPORTANT ROLE ON THE CENTRE-STAGE GLOBALLY, the concurrent rise of the Adani group is of real note. It would a pivotal moment if the Adani Group were to show global leadership and walk away from its long stalled Carmichael mine proposal in Australia.

The International Energy Agency (IEA) has long argued the world must rapidly move away from its over-reliance on coal if it is to deliver on the Paris Agreement, starting with developed countries like Australia.

Opening up for development the world’s largest new thermal coal basin – a truly enormous carbon bomb of up to 300Mtpa of low-quality thermal coal for export for many decades – has proven unbankable and unviable for a clear reason: the world cannot afford it.

It would be far better for Adani to acquire an existing export thermal coal mine to secure immediate import supply to India and immediate cashflows for as long as it is needed. There are an increasing number of existing, large scale, higher quality thermal coal export mines available at increasingly bargain prices – BHP’s Mt Arthur mine is the latest for sale from an increasingly keen seller.

This could prove a real win-win-win for the Adani Group, BHP and the planet.

Tim Buckley is Director, Energy Finance Studies South Asia, IEEFA.

This article first appeared in The Wire.

Tim Buckley

Tim Buckley, Director, Climate Energy Finance (CEF) has 30 years of financial market experience covering the Australian, Asian and global equity markets from both a buy and sell side perspective.

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