Coal finance drying up, one country at a time

In the wake of last Saturday’s defeat, it’s important to remember that Australian politics is just one of many fronts in the struggle to stabilize the global climate and, in particular, to decarbonize electricity supply as rapidly as possible.

An important step in this process has been the push for financial institutions of all kinds: banks (public and private), pension funds, insurers and insurance brokers, corporate financial advisors and so on, to break with fossil fuels, starting with coal-fired electricity and thermal coal.

For a long while, victories in this effort were primarily symbolic. Ethical investors dumped coal, but there were plenty of others to take their place. A year or two ago, the process started to bite. The inability of Adani to find any outside finance for the Carmichael mine was an indication of things to come. By 2019, most global banks, export-import finance agencies and development banks had imposed restrictions on coal finance that were becoming increasingly stringent.

The great exception to this process was Asia where China, Japan, Korea and Singapore were all expanding their lending to coal projects in the developing world, even as they shifted towards renewable energy at home.

That’s changed quite suddenly. Beginning late last year, major Japanese banks have been adopting policies restricting lending to coal. The most recent instance is Mitsubishi UFG . Then, in the space of a month, all three of Singapore’s biggest banks followed suit. Now the focus of attention has shifted to Korea. Banks there are resisting pressure to divest, but it’s hard to imagine they can do so much longer.

That leaves China. Obviously there is not a lot of room for pressure from external groups or from civil society domestically. On the other hand, a situation where China is the sole source of funding for coal creates risks on both sides. For the banks, the implied overweighting of coal violates standard principles of financial risk management. For the borrowers, there is nowhere to turn for refinancing if China pulls the plug.

In these circumstances, it’s reasonable to expect that quite a few of the global coal projects currently being pushed by Chinese interests will not proceed. And sooner or later, this last source of money for coal will dry up.

54 thoughts on “Coal finance drying up, one country at a time

  1. Harry Clarke

    Commercial compensation claims are rarely paid out on the basis of actual damages, let alone law. The (alleged) victim sues and the (alleged) perpetrator makes a strategic call on whether to fight the case or pay the (alleged) victim to go away.

  2. Is that the same resources minister who was desperate to gift Adani $1B (!) to assist kick-starting the project (knocked back by the QLD state qov)… or was that irony I missed?

  3. Harry capital markets are clued in which is why Adani could not get loans from anywhere.

    go to Bank Undergound and examine various articles on coal to understand why this occurring.

  4. Troy Prideaux

    It was sarcasm.

    (I know all the tricks, dramatic irony, metaphor, pathos, puns, parody, litotes and… satire.)

  5. Then nottrampis no problem right? It will not proceed.

    The claim above was that keeping the project going dsguises an underlying financial problem. I find that difficult to believe.

  6. Harry Adani claims to be self financing I think . I did say we would see public subsidises and we know all banks have told them no for good reason given it is thermal coal.

  7. Modi and Adani are mates. Modi has boosted Adani’s fortunes a number of times in the past. What does Modi’s re-election for five years with a huge majority now mean for Adani’s financial prospects, and for his ability to directly finance or raise loans for the Carmichael mine?

  8. Markets cheer in anticipation of second term for Modi,
    Adani stocks up 20%. May 20, 2019
    thenewsminute.com/article/markets-cheer-anticipation-second-term-modi-adani-stocks-20-102073

    Adani Group Stocks Jump 7-14% as Narendra Modi Set to Return to Power. May 23, 2019,
    news18.com/news/business/adani-group-stocks-jump-7-14-as-narendra-modi-set-to-return-to-power-2156457.html

    These India Stocks Rise and Fall With Modi’s Fate. ‎22‎ ‎May‎ ‎2019‎
    bloomberg.com/news/articles/2019-05-22/modi-tracker-stocks-fell-during-india-vote-rose-with-exit-polls

    Report Raises Questions About Adani Group’s Rapid Growth in Modi Years. May 21, 2019
    https://www.newsclick.in/report-raises-questions-about-adani-groups-rapid-growth-modi-years

    …Scroll.in examined financial statements of several Adani Group companies including the group’s six listed companies: Adani Enterprises, Adani Ports and SEZ, Adani Power, Adani Transmission, Adani Green Energy and Adani Gas and the financials of the unlisted group companies filed with the Registrar of Companies, in the last few years.

    The study found that the group is increasingly raising money from overseas and within India, in the form of bank loans, borrowing against shares and pledging assets.

    The report lists six ways in which the group raises the money: 1.Companies buy shares in other group firms, even if they are in unrelated businesses, 2. Companies use borrowed funds to buy equity in other group firms, 3.Group companies lend to each other, 4. Some of the money from step-down subsidiaries goes to other holding companies, 5. Group companies prop up struggling firms and 6. The Adani Group raises debt and equity from overseas.

    By such practices, a few Adani Group subsidiaries, despite recurring losses, had never defaulted on debt repayments.

    Adani stocks cheer incumbency wave in India, Australia May 20, 2019
    livemint.com/companies/news/adani-stocks-cheer-incumbency-wave-in-india-australia-1558350977334.html

    Adani Enterprises rose as much as 29% in afternoon trade, its sharpest intraday gain in over two years.
    Shares of Adani Enterprises have risen by about 170% since Modi assumed power, compared to around 40% under the previous Congress-led regime.

    Adani stocks rally up to 30%, cheer incumbency wave in India, Australia. May 20, 2019
    economictimes.indiatimes.com/markets/stocks/news/adani-stocks-rally-up-to-30-cheer-incumbency-wave-in-india-australia/articleshow/69412659.cms

    Adani Enterprises rose as much as 29% in afternoon trade, its sharpest intraday gain in over two years. Other Adani Group stocks such as Adani PowerNSE -0.11 %, Adani Gas and Adani Green Energy Ltd were all up more than 15% in afternoon trading.

  9. It’s a bit rich to call the Greens “economically irrational”. After all, what could be more rational than pointing out that if we destroy the environment then we will have NO economy?

  10. Svante,
    I guess Modi isn’t the only one in a position of significant power to be close to Adani. Makes you wonder about the Indian enthusiasm (on a scale of pure political tokenism to complete at any cost transition) for the advancement of renewables.

  11. and from 2004:

    Philip Hopkins (2004), “Pulp mill move has Gunns shares firing”, The Age, 29 October 2004 [Factiva].

    Bruce Felmingham (2004), “Pulp mill gain with little pain”, Sunday Tasmanian, 31 October 2004 {Factiva}.

    Nick Tabakoff (2004), “Gunn fight at the old-growth corral; Tasmanian timber behemoth Gunns is likely to grow with a returned Howard government”, The Bulletin, 2 November 2004 [Factiva].

    Blair Speedy (2004), “Gunns chipper about pulp mill”, The Australian, 3 November 2004 [Factiva].

    Dow Jones International News (2004), “Australia Indus: Gunns Plan Would Narrow Pulp Trade Gap”, 3 November 2004 [Factiva].

  12. The Australia Institute has given up (though more in sorrow than in anger, like they’ve seen the ghost of Australian environmental activism)

    “While it would be an environmental disaster for the Adani mine to go ahead, at least if it does Queensland voters might finally see that that it is the LNP, not those concerned with climate change, that have been playing politics with their futures,”

    The LNP? Well, yes, them, but it is the Labor Premier who has been hurrying things along this week..

  13. “The Australia Institute has given up”

    I suppose this is why it has organised two events for Queensland Climate Week the week after next, one of which is being held at the HQ of an ALP-affiliated union.

  14. The event and union are described in a supporters-only communication which I received.

  15. Unfortunately for Australia the die is cast – for another 6 years or so. This election is like the 1998 return of Howard, he dumped unpopular policies and sandbagged marginals. The LNP just ignored policies and went the man and the marginals.
    The LNP in Govt have shown complete disregard for principle when it comes to distributing public funds to “mates” so watch for the twisted logic of funding for Adani supporting/related infrastructure.
    It is good though to see the twinkling stars of hope in the outside world – but remember the universe is 27% dark matter and 68% dark energy. Australian Politics seems the same at the moment.

  16. Paul Norton

    Let me guess, a protest against the CFMMEU.

    Do you think it’s funny (but not laugh out loud funny) that Queensland Climate Week is an initiative of the Queensland government?

    It’s hard to think what an analogue might be, perhaps a Europe Unity Week organised by Nigel Farage.

  17. Adani is moving into renewables, though not as fast as Tata, the other big private generator, which has dumped new coal altogether. It remains to be seen whether the Head Office shares Lucas Dow’s unqualified enthusiasm for an uneconomic project.

  18. tata sold out of steelmaking in UK for 1, yes 1 pound .

    the enterprise is kaah put.

    (no public funding for yuuu)

  19. Adani’s big win frim the Indian election is the bailout ofvits huge and loss-making 4GW Mundra plant. This was announced late in the campaign and buried under other news. Congress might have reviewed it, who knows, but now it will go ahead. In comparison, Carmichael is now a sideshow.

  20. Adani is a clever person. Perhaps it’s a tariff rise for energy his coal power corporation provides, but there is no actual requirement it come from coal. I know that’s pretty much the definition of chutzpah, demanding more money to compensate for coal price increases and then supplying some of that from cheaper solar, but it is a possible silver lining on the old toxic cloud.

  21. Totally OT. As someone on the other side of the world, in the phrase “they were wood-ducked ” what does wood-ducked mean?

    Here in my part of Canada (Southern Ontario) a “wood-duck” is a duck of the quack, quack variety. Being “wood-ducked” would probably mean being taken out by a low-flying bird. A mallard almost got me that way.

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