ADANI v HINDENBURG; CLIMATE CAPITAL FORUM LAUNCHED; SAFEGUARD MECHANISM UPDATE

10 February 2023

ADANI'S HINDENBURG MOMENT? |

On 24 January, US based research firm and short seller Hindenburg dropped a bombshell on the Adani Group. CEF has keenly followed the conglomerate for a decade and has been busy examining this latest twist in the Adani story.

Hindenburg’s 100 page report alleged "the largest con in corporate history" involving longstanding “brazen accounting fraud, stock manipulation and money laundering,” also pointing to a substantial burden of debt and a network of hundreds of tax haven and private family entities. Adani’s 400 page refutation called Hindenburg’s claims baseless, and its intervention a “calculated securities fraud under applicable law”. The Adani family wrapped itself in the Indian flag, claiming this was "an attack on India, its growth story and ambition” and threatened legal action. 

Since the accusations, Adani has suffered a major share price rout of over $100bn and cancelled a $2.4bn share offering. The accusations are yet to be proven, but there is ample supporting documentation suggesting that a forensic examination is urgently needed by regulators such as the SEC and the Securities and Exchange Board of India (SEBI).

If true, the allegations have wide ramifications. Adani Group has close ties to the Indian government, exercises dominance over many sectors of the Indian economy and holds major assets of national strategic and security significance.

For Australia, it is worth remembering that Queensland Senator Matt Canavan tried to give a $1 billion subsidy to Adani’s Carmichael coalmine-related rail project, ignoring the impossibility of credible due diligence, even as the LNP took political donations and anti-ALP advertising in return. Fortunately, Premier Palaszczuk vetoed the subsidy, allowing Australia to largely dodge the alleged Adani con.  And the hugely successful decade-long grassroots StopAdani movement removed the company's social licence and saw the planned mine reduced from 60 million to six million tonnes per annum.

What's next for the beleaguered giant and what are the broader implications for Adani, Australia and more? 

 >>> Read our Adani analyses and see our media commentary in New York Times, Forbes, Economic Times, Washington Post, on BBC, Bloomberg, ABC TV's The Business and News Breakfast, RN Drive, Renew Economy and more.

CLIMATE CAPITAL FORUM LAUNCHES ENERGY POLICY ROADMAP |

CEF was delighted to join the newly-formed Climate Capital Forum, devised by Blair Palese, philanthropy director at Ethinvest, which late last month co-launched a federal energy policy roadmap at the Smart Energy Council Industry Climate Action summit. The roadmap proposes a bold reform program with policy recommendations to position Australia as a global zero emissions trade and investment superpower.

We join roadmap signatories the Smart Energy Council, Ethinvest, Rewiring Australia/Saul Griffith, LAUTEC Group, Future Super, Australian Impact Investments, Northstar and Supercharge Australia.

Australia currently shares global laggard top-3  fossil fuel exporter status with Russia and Saudi Arabia, and our export history is largely dig-and-ship. The key to our transformative, once in a century opportunity is rapid, strategic decarbonisation of the Australian economy, as we help drive the global energy transition, accelerate public and private investment, build our future prosperity and ensure a safe climate. 

This demands clear strategies and policies, and profound economic reform in Australia, including a redesign and reindustrialisation of our economy and energy systems that adds value to our critical mineral and metals pre-export; leverages our global competitive advantage in low-cost firmed renewables at world scale; onshores and expands manufacturing as we electrify everything; and creates innovative systems that support zero-emissions partnerships with our trade partners.

It requires true partnership with First Nations and regional communities, and a "nature positive" approach that is careful not to repeat the mistakes of the past.

>>> Read the Climate Capital Forum decarbonisation roadmap here and see coverage in Renew Economy, Sky Afternoon Agenda, and AAP.

SAFEGUARD MECHANISM UPDATE |

The federal government's plan to pass its proposed Safeguard Mechanism reforms through parliament by the end of May has progressed. The SGM is a key policy centrepiece of scope 1 decarbonisation, designed to drive down emissions from Australia's 215 biggest emitting companies, put a rising firm price on carbon emissions, and incentivise investment in clean tech. 

However, the Coalition has learnt precisely nothing from its electoral drubbing, reigniting the climate wars by confirming this week that it will oppose the SGM reforms, calling it “one of the world’s biggest carbon taxes”, despite pushback from Liberal moderates. Energy Minister Chris Bowen responded succinctly: “hypocrites.” (AFR). The Greens have also threatened to withdraw support unless the government  rules out new coal and gas. (Australian).

Yes, the SGM proposal and the ALP's approach to decarbonisation are imperfect  –though we would note it should be considered in the context of the suite of policy reforms that make up the supporting ecosystem for the SGM, e.g., the Climate Act, 82% RE by 2030, the $15bn Reindustrialising Australia Fund, the $20bn Rewiring the Nation program, progress on critical minerals, the global methane pledge and so on.

The foundational premise of CEF is that financial markets are phenomenally powerful, but they need an explicit, high, permanent price on carbon to drive rapid decarbonisation and ensure alignment with 1.5°C. 

It is CEF’s view that the SGM reforms create a credible framework to re-establish a price on carbon emissions in Australia. 

>>> Read our submission to the federal government consultation on the SGM reforms, and see coverage in Renew Economy and Smart Company 

AEMO QUARTERLY ENERGY DYNAMICS REPORT |

The Australian Energy Market Operator (AEMO) released its fourth quarter of 2022 Quarterly Energy Dynamics report at the end of January.

It was a stark and welcome reminder that the energy transition in Australia is well established and accelerating beyond expectations. While rampant hyperinflation of all things fossil fuels caused mass disruption in 2022, the underlying trends are clear – the burgeoning of renewables and decline of coal and gas in the grid, which ultimately spell permanent price relief.

We note that wholesale electricity prices have continued to decline significantly on the back of the federal government market intervention.

>>> Read our full analysis here. See our media commentary on ABC Radio National's The world Today and AM, and op ed in Renew Economy.

MAJOR REPORT ON CRITICAL MINERALS  |

CEF produced a comprehensive 120-page submission to the federal government's consultation on a national critical minerals strategy, and we look forward to releasing our full report soon. Please email us for a copy.

 >>> Read our existing work on critical minerals here.

SUBMISSION ON WINTERBOURNE WIND FARM |

CEF made an extensive supportive submission to the NSW government on the proposed Winterbourne Wind Farm in Walcha in the New England region. The project is expected to generate approximately 2,100,000 megawatt hours  per year of clean, renewable energy — enough to power more than 375,000 average NSW homes.

As one of the largest private investment proposals for zero emissions electricity generation in NSW, Winterbourne is key to the NSW Government’s target to cut carbon emissions by 70% by 2035. It is also entirely consistent with the NSW Government policy priorities of establishing Renewable Energy Zones, accelerating decarbonisation, and facilitating low cost, domestic zero emissions generation capacity to replace rapidly approaching end-of-life coal fired power plants NSW has historically relied upon.

Our 8,000 word submission takes a deep dive into the context for the proposal, looking at energy transition policy in NSW and more broadly.

>>> Read the full submission here.

MEDIA |

CEF director Tim Buckley has been active in the media on a range of topics.

>>>  See all our media here.

Our previous newsletters covering major energy news can be accessed here. Our highlights tracking progress in 2022 and 2023 wishlist are here.

Feel free to get in touch anytime at the email below, and enjoy your weekend! 

Tim, Annemarie, Nishtha, Matt, Xuyang (see more on our team here).

This newsletter is not intended to provide, and should not be relied on for, tax, legal, investment or accounting advice, nor is it an offer or solicitation of an offer to buy or sell, a recommendation, endorsement, or sponsorship of any security, company, or fund. CEF is not responsible for any investment decision made by you. Unless attributed to others, any opinions expressed are our current opinions only. Certain information presented may have been provided by third parties. CEF believes that such third- party information is reliable, and has checked public records to verify it wherever possible, but does not guarantee its accuracy, timeliness or completeness; and it is subject to change without notice.