Investment News Analysis

Wealth fund’s investment circuit breaker

A leading Philippine power-generation corporation has effectively been blacklisted from access to the world’s biggest sovereign wealth fund, Norway’s Government Pension Fund Global (GPFG), an oil fund with assets of US$847.6 billion.

Aboitiz Power Corp. (APC), a subsidiary of Aboitiz & Company, is one of 52 firms which have been sidelined by the fund’s operator, Norges Bank Investment Management (NBIM), the investment arm of the Norwegian central bank.

Companies on the list have been excluded “based on an assessment of the risk of particularly serious violations of fundamental ethical norms,” according to an NBIM statement. In the case of APC, that risk relates to an excessive reliance on coal for its electricity-generation and distribution businesses. Aboitiz and the other 51 companies appeared on the first list – other companies are presently under review – in April. NBIM has since divested all its holdings in APC.

The list is the result of vetting power and mining companies based on a new criterion for energy and mining products, drawn up by Norway’s Ministry of Finance last February. Qualification for the fund puts a ceiling of 30% for revenues earned by power companies from coal-powered plants.

Last year, APC sold 6,580 gigawatt/hours of coal-produced electricity – more than half its total of 12,550 GWh. This was a 19% increase in output from 2014 and, along with the company’s power-distribution business, produced revenues of US$374 million.

APC operates 45 power-generation facilities across the Philippines. These comprise coal and oil plants, hydro, geothermal and some solar. The company has coal-fired plants in Luzon, the Visayas and Mindanao with three new facilities under construction at Subic Bay, Pampanga, Pagbilao, Quezon and Toledo City, Cebu. These are set to generate, respectively, 600 megawatts, 420MW and 340MW.

In a statement accompanying last year’s financial results, APC President, Antonio R. Moraza, referred to the company’s portfolio of power plants as “a right mix of renewable and non-renewable technology”. Evidently, NBIM begs to differ on that assessment.

Despite the ruling, APC has said that it will continue to work with Norges Bank, adding its revenue mix will change as its pipeline of renewable energy projects comes on stream.

Others Asian companies on the NBIM list are – China: China Coal Energy Co.; China Power International Development Ltd; China Resources Power Holdings; China Shenhua Energy Co.; Datang International Power Generation Co.; Huaneng Power International Inc.; Yanzhou Coal Mining Co. Hong Kong: CLP Holdings; Huadian Power International Corp. India: CESC Ltd, Coal India Ltd; Gujarat Mineral Development Corp.; NTPC Ltd; Reliance Infrastructure Ltd; Reliance Power Ltd; Tata Power Co. Japan: Hokkaido Electric Power Co Inc., Shikoku Electric Power Co. Inc.; The Okinawa Electric Power Co Inc.

Despite its name, GPFG – formerly the Petroleum Fund of Norway – is backed by oil profits. It is not a superannuation fund. NBIM is responsible for investing the fund’s assets in global equity markets, fixed-income and money-market instruments and derivatives, as well as the fund’s management.

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