MAC: Mines and Communities

The Midweek Essays: Adani continues heedlessly on its appalling way

Published by MAC on 2019-10-30
Source: The Wire (2019-10-29)

Not least in India

Adani, the Indian mega-business outfit, has never hesitated to dip its fists into highly dubious ventures -notably coal mines - that increasingly scare away other financial entrepreneurs.

Despite being mired in debt, and beset by virulent civil society opposition, both inside and outside its domestic realm, Adani still seems able to raise fresh monies.

In the first of these essays, reputed analyst Tim Buckely traces the company's recent corporate "killings" in what many of us would regard as an unecessarily optimistic fashion.

We follow this with a carefully laid-out analysis by India's magazine, The Wire, examining how Adani has managed uniquely to escape responsibility for the output of noxious emissions from two domestic coal-fired power plants. It follows a familar Adani path.

The Adani Juggernaut Is Expanding on All Fronts, Australian Coal Need Not
Be One of Them

Tim Buckley

The Wire (India)

29 October 2019

It would a pivotal moment if the Adani Group were to show global
leadership and walk away from its long stalled Carmichael mine proposal.

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 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 though, 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.

The crown jewel is without doubt Adani Ports & SEZ, built up into the
largest port owner operating in the nation, from the 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 now be 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 (AEL).


In 2019, most investors and banks are understandably in full retreat from
the Indian thermal power generation sector, highlighted by financial
distress, promotor collapses (GVK, Lanco et al), the debt-funded
governance debacle of IL&FS and continuing run of expanding non-performing
assets continually eroding the capital base of most public banks. 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, which over the last couple of years has acquired the
1,320MW subcritical coal power plant at Udupi, then 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).

In other areas, the Adani group continues to expand at a rapid rate of
knots. More recently, AEL has announced completely new business
developments in areas as unrelated as developing data storage services,
defence 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.

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 AEL 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.

The second offshore foray was to acquire a huge coal deposit long stranded
in the remote Galilee Basin in Queensland in 2010, but almost decade and
$1 billion later, this purchase remains remote and undeveloped, having
generated enormous controversy and ongoing community backlash across
Australia. 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. This 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), but nine years later APCT has
never operated at more than 55-60% of capacity and barely breaks even
after debt funding. A target to build 1,500MW of solar across Australia in
2017 has seen just 65MW built 3 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.

And earlier this month the Adani Group announced a major milestone,
selling 37.4% stake in its recently listed Adani Gas Ltd to Total for Rs
6,155 crore (US$850m). 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, this announcement is a major international capital markets
endorsement of Adani’s 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 taking an international
leadership role on decarbonisation, renewable energy infrastructure and
electric vehicles.


With the growing international focus on India’s increasingly important
role on the centrestage 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.

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 can’t afford it. Far better Adani 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 thermal existing large scale, higher
quality coal export mines available at increasingly bargain prices –
BHP’s Mt Arthur mine being just 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.


 

Exclusive: Pollution Norms – That All Power Plants Except Adani's Were
Complying With – Diluted

According to correspondence and file notes accessed by The Wire, there was
no consensus between the Central Pollution Control Board and the Ministry
of Power on relaxing air pollution standards until May 2019.

Dheeraj Mishra

The Wire

3 October 2019

New Delhi: The Union Ministry of Environment, Forests and Climate Change
has given in-principle approval for relaxing air pollution standards for
coal-fired thermal power plants. The decision was taken on May 17, 2019 in
a meeting chaired by the ministry’s joint secretary, Ritesh Kumar Singh.

Authorised documents accessed by The Wire reveal that for a long time, the
Union Ministry of Power has been demanding that the standard limit for air
pollution set for thermal power plants be increased to 450 mg/Nm³
(mg/normal cubic meter) from 300 mg/Nm³. Although the Central Pollution
Control Board (CPCB), the apex organisation that sets pollution standards
in the country, had opposed this, the power ministry’s demand has
ultimately been accepted.

It is noteworthy that before the meeting, the CPCB had sent a monitoring
report on seven units of four thermal power plants to the Ministry of
Environment on May 2, 2019. The pollution body found that emissions at
just two units out of the seven exceeded the 300 mg/Nm³ emission limit.

Both units found to be exceeding this limit during the monitoring are
owned by Adani Power Rajasthan Ltd. The monitoring was carried out jointly
by the CPCB and the Central Electricity Authority (CEA) of the Ministry of
Power.

After a longstanding disagreement between the CPCB and the CEA, it was
decided that the two would conduct joint monitoring of selected thermal
power plants and a decision would be taken based on the report.

Subsequently, the CPCB and the CEA monitored Adani Power Rajasthan Ltd
situated in Rajasthan’s Kawai, NTPC Mouda Super TPS in Nagpur, Mahatma
Gandhi TPS in Jhajjhar, Haryana and Nabha Power Ltd in Rajpura, Punjab
between February 13, 2019 and April 2, 2019.

The environment ministry had issued a notification on December 7, 2015
setting air pollution standards for thermal power plants. According to it,
nitrogen oxide emission from thermal power plants set up between 2003 to
2016 should not exceed 300 mg/Nm³.


However, after the Ministry of Power objected to it, the Ministry of
Environment has given in-principle approval in May 2019 to increase the
emission limit of nitrogen oxides from 300 mg/Nm³ to 450 mg/Nm³.

According to the minutes of the meeting obtained by The Wire,
representatives of the Ministry of Power, the CPCB, the NTPC and the
Ministry of Environment were present in the meeting. The final decision in
this matter will be taken by the secretary of the Ministry of Environment
and the Ministry of Power.

According to the monitoring report of the CPCB and the CEA, the emission
of nitrogen oxides from both units of Adani Power Plant was 509 mg/Nm³ and
584 mg/Nm³, which is much higher than the prescribed 300 mg/Nm³ limit. On
the other hand, nitrogen oxide emission from five units of the other three
plants was between 200-300 mg/Nm³.

Pollution from nitrogen oxides causes respiratory problems and exposure to
it over long periods can cause severe lung damage. After vehicles, thermal
power plants are the biggest contributors to nitrogen oxide pollution in
India. In February this year, researchers at Switzerland’s ETH Zurich
University released a report which said that India’s thermal power plants
are the unhealthiest in the world.

According to a report published by Business Standard on August 12, the
Supreme Court had noted while hearing the matter in its order dated August
5, 2019 that a general consensus for diluting air pollution standards has
been reached between the Ministry of Environment, the CPCB, the Ministry
of Power and the Environment Pollution Control Authority appointed by the
court.

However, according to the correspondence and file notes accessed by The
Wire, there was no consensus between the CPCB and the Ministry of Power
until May 2019 to relax air pollution standards. The CPCB had claimed that
the standards set in 2015 can be easily achieved. According to the minutes
of meeting, “The CPCB official stated that five out of seven units which
were monitored are following the 300 mg/Nm³ limit of nitrogen oxide
emission at full load. However, some units are unable to follow it at part
load.”


According to documents obtained, apart from Adani Power Plant, Nabha Power
Ltd situated in Punjab’s Rajpura was unable to follow the 300 mg/Nm³
standard at part-load, that is 50% load. The nitrogen oxide emissions from
the plant were recorded at 522.7 mg/Nm³ and 559.4 mg/Nm³ during this
period. However, when it was functioning at full load, its nitrogen oxide
emissions were 92.8 mg/Nm³ and 282.3 mg/Nm³, which means the plant was
able to meet the 300 mg/Nm³ standard.

The Ministry of Power had also demanded that in addition to the thermal
power plants set up between 2003 and 2016, the power plants that began
operations from 2017 should also be allowed to emit pollutants at 450
mg/Nm³. As per earlier norms, the limit of nitrogen oxide emission from
plants functioning since 2017 has been fixed at 100 mg/Nm³.

The Union Ministry of Environment, Forests and Climate Change sets the
environmental standards for various departments based on the advice of the
CPCB scientists. After long negotiations with experts and industrialists,
the ministry had set standards for thermal power plants regarding water
consumption, sulphur dioxide emission and nitrogen oxide emission in
December 2015.

In response to the questions sent by The Wire, Adani Power said, “All
Power Plants of Adani Power, including the 2×660 MW Kawai Thermal Power
Plant of Adani Power Rajasthan Limited are complying with all the norms
applicable at present. At present, there are no norms for NOx. As per
CPCB’s directions dated 11.12.2017, APRL has to comply with the new norms
of NOx by the year 2022.”

However, in a meeting held on September 1, 2017, the Ministry of
Environment had decided that the new norms should begin to be implemented
from 2018. The maximum NOx emission from the two units of Adani Power
Rajasthan Ltd were 685.45 mg/Nm³ and 616.73 mg/Nm³ in August 2019, while
the minimum emissions from these units during this month were 129.77
mg/Nm³ and 190.20 mg/Nm³.

According to a Ministry of Power letter dated October 13, 2017, a total of
650 units with 1,96,667 MegaWatt capacity across the country are to follow
the new norms by 2022. Previously, the ministry had sought to fix the
deadline for the year 2024.

All these standards should have been implemented by the thermal power
plants within two years, that is by December 2017, but owing to pressure
from the Ministry of Power and the CEA, the date of its complete
implementation has been increased from 2017 to 2022.

In addition to nitrogen oxide emission, the water consumption limit has
already been diluted. Documents reveal that a reply was sought several
times from the CPCB on the Ministry of Power’s demand for relaxing air
pollution standards between 2017 and 2018, and each time the CPCB stated
that there was no technical or operational hindrance in achieving the
goal.

The Wire has sent a questionnaire to the environment ministry and the CPCB
on the standards being relaxed. This article will be updated if they
respond.

Translated from Hindi by Naushin Rehman.

 

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