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Adani Ports and Special Economic Zone Ltd (APSEZ) has sold its investment in Bowen Rail Company Pty Limited (BRCPL), the rail logistic unit in Australia, to Adani Global Pte Limited, for an undisclosed value as India’s biggest private port operator looks to become carbon neutral and improve its environment, social and governance (ESG) ratings.
APSEZ executed the Share Purchase Agreement with Adani Global Pte Limited (Singapore subsidiary of Adani Enterprises Limited) for the sale of investment in BRCPL, APSEZ said in its annual report for 2020-21.
“The transaction is awaiting regulatory approval by the Foreign Investment Review Board of Australia. In the interim, APSEZ will reflect the investment as ‘held for sale’ in its books of accounts,” the annual report said.
BRCPL was incorporated in December 2019 as a subsidiary of Bowen Rail Operation Pte Ltd, a Singapore based unit of APSEZ, to undertake rail haulage for coal produced from the Carmichael mine in Australia.
The Adani group had to resort to ‘self-financing’ after a growing global campaign to ensure no financial institution is involved in the Carmichael mine project.
BRCPL had intended to use APSEZ’s balance sheet to fund investments – estimated up to A$500m (US$350m) for 27 million tonnes a year rail haulage capacity for locomotive and coal wagon purchases, plus associated maintenance facilities and equipment.
As a part of the annual ESG performance review by the management, APSEZ decided to divest its investment in BRCPL to fulfil the carbon neutral commitments.
This is the first divestment by APSEZ from a segment that has come under increasing scrutiny with environmental, social and governance (ESG) risk evaluation assuming a key criteria in global financial markets.
APSEZ has been looking at dollar loans for its funding needs. The firm raised $1.55 billion through three issuances of cross-border listed US dollar bonds over the past few months. Currently, 69 per cent of the company’s long-term debt is in US dollars.
APSEZ has often been accused of overlooking environmental and social rules in its rise to become India’s biggest port operator in just under two decades.
The firm now aims to become the first global carbon-neutral port company by 2025 with the entire port cargo operations powered by renewable energy.
“We are taking steps to improve our ESG rating,” the report said.
The ESG risks occupy a central place in our assessment process as they can have a significant impact on the company’s business model and value drivers (revenues, margins and capital outlay), it said.
In today’s global economy, environmental and social responsibility are critical. APSEZ’s ESG strategy is based on the premise that sustainable value creation is not just beneficial for the company but the entire value chain.
As it seeks to become the world’s top port company by 2030, APSEZ said it will encourage practices that improve the environmental and social impact of its operations.
Due to the high carbon footprint of the marine sector, APSEZ is in a unique position to drive positive change by implementing strategies to mitigate, measure and report environmental impact.
“As India ramps its port-led development, while committing aggressively to mitigate the impacts of climate change, we are in a position to deepen decarbonisation,” it added.
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