03/10/17

Adani needs Carmichael mine to stave off income crash, report says

The Indian mining giant faces plummeting revenue and risks losing the Abbot Point coal terminal, while new questions have arisen about its ownership structure, reports The Guardian.

Adani’s ambitions face a grave new risk in Australia, where its grip on its only operating asset, a Queensland coal port, is threatened by a crash in income unless its contentious Carmichael mine becomes a reality, a new report says.

Adani must refinance more than $2bn in debt on the Abbot Point coal terminal – more than it paid for the port in 2011 – despite earning $1.2bn in revenue and paying virtually no tax in Australia since, according to the Institute for Energy Economics and Financial Analysis.

And Adani must gain fresh lender backing at a time when the port faces plummeting revenue that only its $5bn mine proposal, itself yet to secure finance, can make up for, the analysis says.

IEEFA’s analysis was included in an ABC Four Corners program on Adani on Monday that also featured a former Indian environment minister saying he was “appalled” by Australia’s approval of the mine.

Jairam Ramesh told the program Adani’s environmental history in India “leaves a lot to be desired” and questioned whether the Australian and Queensland governments had properly considered this or its financial conduct, including allegations of large-scale fraud.

“There’s no reason for me to believe that Adani would be a responsible environmental player globally,” he said.

The IEEFA report found new links between Adani’s Australian corporate structures and a Caribbean tax haven, the port in particular having a “complex and opaque ownership structure [that] appears well-suited to minimising tax”.

It was previously thought that local companies relating to Abbot Point and a proposed rail link with the Carmichael mine – for which Adani is seeking a concessional loan of up to $900m from Australian taxpayers – were owned by an Adani family company in the Cayman Islands, Atulya Resources Limited.

But Singapore corporate filings show Atulya is owned by another Adani family company in the British Virgin Islands, ARFT Holding Ltd.

And two trusts related to the Carmichael rail project are potentially held by another BVI-registered company called Carmichael Rail Australia Ltd, according to the IEEFA analysis. One of the trusts holds a $2/tonne royalty deed that would net the Adani family income from the Carmichael mine, which is expected to yield up to 60m tonnes a year.

Contracts that force Abbot Point’s coalmining customers to pay for using the port’s full capacity have begun to expire, with the port actually running at just over half its capacity as the bullish predictions of a coal boom gave way to a downturn.

To refinance the port, Adani needed to “convince financiers that [Abbot Point] will be fully utilised into the future” with its own Carmichael mine the only candidate to pick up this looming shortfall of about 25 million tonnes a year, IEEFA said.

The port thus ran “the risk of becoming a stranded asset” if the Carmichael mine, itself a $5bn greenfield project that represented a “high-risk gamble”, did not secure financial backing overseas, it said.

IEEFA’s Tim Buckley told Four Corners a potential $1.5bn loss on any decision to walk away from the mine proposal explained why the Adani Group remained focused on securing Australian taxpayer support through a Northern Australia Infrastructure Facility loan.

“To the extent able to be analysed from Asic records, Adani’s entire mine, rail and port operation in Australia looks to be 100% debt-financed and shareholders’ funds now tally an unprecedented negative-$458m combined,” he said. “The value at stake for the Adani Group’s Carmichael mine proposal is far bigger than previously understood.”

Abbot Point must refinance $1.48bn by November 2018 and cumulative debt of $2.11bn by 2020.

The first of seven payments of $85m each to the State Bank of India (SBI) for the port was due last Friday.

SBI in 2013 blocked the sale of Adani’s port companies to private Adani family companies in tax havens, insisting these seven payments had to be made first.

IEEFA noted that while Adani’s debt from Abbot Point rose to more than $2bn from the $1.83bn it paid in 2011, it had also given $182m in loans to the Adani family’s Carmichael rail proposal and $52m to the family’s proposal for a new terminal at Abbot Point, since postponed.

Public interest lawsuit filed in India calling for investigation into Adani Group

Buckley’s report co-author, Adam Walters, said the port companies had effectively taken out extra debt to “prop up” the family-owned proposals.

Walters said a range of major Australian banks including the Commonwealth Bank had “heavy exposure” through lending for Abbot Point but it was not clear if any had since on-sold the debt to other institutions.

The Queensland premier, Annastacia Palaszczuk, on Monday defended the “strict environmental conditions” attached to Adani’s project, including the postponed port expansion.

“We stopped the dumping of dredge spoil in the Great Barrier Reef,” she told reporters.

Adani responded by saying it operated within the law and defended its environmental record, citing cases before India’s supreme court.

“Adani Group adhere to the laws of the land in which we operate, be it India or any other of the 50 geographies we work in,” the company said in a statement. “We cannot be held to either ransom or blackmail by media organisations that indulge into sensationalism without any basis and contrary to facts.”