Adani’s mega mine: it’s not over yet
A couple of months ago, Adani looked set to defy economic logic, popular opposition and the urgent reality of climate change.
Before Queensland’s election campaign began, the prospect of Adani receiving a $1 billion public bailout from the Northern Infrastructure Facility (NAIF) loomed large.
It then emerged that Adani had been in discussions with China Machinery Engineering Corp (CMEC) about its possible involvement in the Carmichael mine. In CMEC, Adani had a prospective engineering partner, but also an investor and one that would open doors to Chinese financial institutions providing credit.
Adani even had the n government on its side, providing assurances to the Chinese embassy that everything was tickety-boo with the proposed mega coal mine and rail complex.
All of a sudden there was a plausible – albeit absurd on many levels – pathway that Adani might find to secure the billions of dollars it needed for the Carmichael mine to proceed.
And then it all fell to pieces.
A week into the Queensland election campaign, Premier Annastacia Palaszczuk committed to vetoing Adani’s NAIF loan, a promise that became her first act once re-elected.
Then, one by one, major Chinese banks ruled out participating in the project. Starting with China Construction Bank, the Industrial and Commercial Bank of China, Bank of China and then China Merchants Bank.
By the end of 2017, 28 global banks had ruled out all or part of the Galilee Basin coal export projects by policy or direct statement.
The banks’ statements were obviously not coincidental, as the Chinese embassy responded to lobbying from former foreign minister Bob Carr to confirm that “the relevant company will discontinue discussions with Adani over possible co-operation. No Chinese financial institution will involve itself”.
But it didn’t end there.
In December, Downer EDI left the project. Adani claimed this was a cost-saving measure, which makes you wonder why in 2014 it gave Downer the “letters of award” to construct the mine in the first place.
So is that it then? Is it over? Don’t count on it.
Remember: the Carmichael coal project still makes up half the book value of the parent company, Adani Enterprises. Admitting defeat would be halving the value of the company and doubling its debt to equity ratio overnight.
More significantly for Adani’s n operations, failure to build the mine puts Adani’s Abbot Point coal export terminal at significant risk of becoming stranded, as the Carmichael mine was Adani’s best chance of replacing coal-handling contracts otherwise set to expire over the next five years.
Adani will push this project until no other funding options remain. It has said it can build the rail line without the NAIF loan.
Let’s also keep in mind Adani’s NAIF proposal was not the only one, as Aurizon had made its own pitch for an alternative rail line to open up the Galilee Basin.
Bizarrely, Aurizon still appears to be pursuing this proposal, even though its current sustainability report demonstrates how n coal export volumes would fall as the world meets the Paris climate change agreement.
Opening up the Galilee Basin would surely just undermine other Aurizon clients in Queensland and NSW who have to compete in a shrinking and saturated market.
The Queensland government is yet to decide whether it would veto Aurizon’s loan, though this would make sense given the rationale for rejecting Adani’s loan was the Carmichael project should have to stand on its own two feet financially.
Aurizon’s proposal would potentially be of greater benefit to Adani, as it would reduce the overall cost of the Carmichael mine and rail project by $2 billion.
But we’ve learned that what is sensible and rational need not square with the Carmichael project.
After all, here we are at the start of 2018 still talking about the prospect of allowing the largest thermal coal mine in to proceed, heavily subsidised by the taxpayer, opposed by over 70 per cent of people who know about the project, in a context of the thermal coal trade in structural decline and in the middle of a climate crisis.
Its pulse may be faint, but Adani’s proposed coal mine lives on – for now.
Julien Vincent is the executive director of Market Forces.Posted in: 老域名出售