Norway fund excludes Aboitiz Power


A Philippine power company is among the 52 firms worldwide excluded by the Norwegian central bank from its Government Pension Fund Global in the fund’s first ever exclusion based on companies’ significant use of coal in their business activities.

Aboitiz Power (AP) Corp. is the only Philippine company on the list, which was made public in a press statement recently issued by Norges Bank, the Norwegian central bank.

AP was on top of the alphabetical list, which also includes 22 firms from the United States,
seven each from China and India, three from Japan, two each from Chile, Canada, Hong Kong and Australia, and one each from the Philippines, the United Kingdom, South Africa, Poland and Greece.

One of the US firms on the exclusion list, AES Corp/VA, owns the Masinloc coal-fired power plant in Zambales through AES Philippines.

“Norges Bank has decided to exclude 52 companies from the Government Pension Fund Global after an assessment of the new product-based coal criterion. The exclusions follow a first round of analysis by Norges Bank Investment Management. Further exclusions will follow in 2016,” Norwegian bank said.

Norges Bank Investment Management (NBIM) manages the Government Pension Fund Global (GPFG).

According to the bank, the decision to exclude the 52 companies from the GPFG came after the Norway Ministry of Finance introduced a new product-related criterion under the Guidelines for observation and exclusion from the Government Pension Fund effective February 1.

“Where thermal coal is a significant part of a company’s business activities, the company may be excluded from the fund. The new criterion states that coal power companies and mining companies who themselves, or through other operations they control, base 30 percent or more of their activities on coal, and/or derive 30 percent of their revenues from coal, may be excluded from the GPFG.

“Coal in this case refers to thermal coal,” the bank said.

“In the process of considering recommendations for exclusion or observation of companies that breach the thresholds above, emphasis should also be given to the forward looking product/fuel mix transition as well as the degree to which the company utilizes renewable energy in its activities,” it said.

The exclusion guideline stated that while the criterion provides guidance on which metrics and factors should be considered during the operationalization of the criterion, there are certain specifics that need to be defined and measured to ensure a transparent, consistent analysis and related implementation.

In applying the criterion, it said power companies with 30 percent or more of their activities based on thermal coal shall be covered.

“This threshold entails an assessment of what a company bases its business on and is more relevant to companies in the power industry than to mining companies. As an example, companies deriving 30 percent or more of their revenue from self-generated energy production can be identified,” it said.

The mix of fuel sources used in these companies’ energy production can then be assessed. If 30 percent or more of a company’s aggregate self-generated energy production measured in energy units is based on coal, it will be covered by the criterion, it added.

The selection criteria may mean that the way a company chooses to organize its activities could play an important role in whether the company is covered by the criterion or not, according to the guideline.

“For example, integrated power companies with significant distribution or network operation activities may not be covered, even if coal accounts for a significant share of their energy production in isolation.

“At the same time, companies deriving less than 30 percent of their revenue from coal-based energy production may be covered by the threshold referred to in the previous paragraph.

“The criterion focuses on thermal coal. This means that renewable energy cannot be offset against energy production from thermal coal when assessing the thresholds in isolation,” the bank said.

Meanwhile, AP told The Manila Times that NBIM announced their new investment criteria effective February 1, 2016. They have excluded from their investment portfolio companies with 30 percent plus revenue exposure to coal and mining.

“AP was on the initial list of NBIM dated April 14, 2016. According to NBIM, they will continue their research to identify companies that may be excluded according to the product-based coal criterion. The intention is to assess the remainder of relevant companies in the portfolio by the end of 2016,” AP told Manila Times in an email.

“NBIM has already divested all its holdings in AP in the first quarter of 2016,” energy company said. “There was no impact on company performance or share price at the time.

AP will continue to engage with Norges Bank as its revenue mix changes given its pipeline of renewable energy projects and other investments.”

“AP remains committed to provide reliable and reasonably-priced power with the least possible adverse effects on its environment and host communities. AP is currently one of the largest renewable energy providers in the Philippines with over 1,200MW of hydro, geothermal, solar, and biomass power,” Aboitiz Power said.


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