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MAHATMA GANDHI ~ Truth never damages a cause that is just.
Thursday 7 December 2017
Is this the end of the road for Adani’s Australian megamine?
Adani’s operations in Australia appear to be hanging on by a thread,
as activists prove effective at undermining the company’s chances of
getting the finance it needs.
China seems to have ruled out funding for the mine, which means it’s not just Adani’s proposed Carmichael coalmine that is under threat, but also its existing Abbot Point coal terminal, which sits near Bowen, behind the Great Barrier Reef.
The campaign against the mine has been long. Environmentalists first
tried to use Australia’s environmental laws to block it from going
ahead, and then failing that, focused on pressuring financial
institutions, first here, and then around the world.
The news that Beijing has left Adani out to dry
comes as on-the-ground protests against construction of the mine pick
up. Two Greens MPs, Jeremy Buckingham and Dawn Walker, have been
arrested in Queensland for disrupting the company’s activities.
Is China’s move the end of the road for Adani’s mega coalmine in
Australia, and will the Adani Group be left with billions of dollars in
stranded assets?
Environmental laws fail to halt mine
Despite the mine threatening to destroy some of the best remaining
habitat of threatened species of birds and lizards, federal
environmental laws proved unable to stop the mine in the face of a
government that wanted it to go ahead.
The initial federal approval for the mine was overturned after it was
revealed the then-minister for the environment, Greg Hunt, had ignored his own department’s advice about the mine’s impact on two vulnerable species, the yakka skink and the ornamental snake.
But Australia’s environmental law leaves very little opportunity for
challenging the merits of a minister’s decision – it only allows for
challenges on whether those decisions considered everything required by
the law. As a result, the minister needed only approve it again, after
formally considering the impact on the two species.
Another court challenge argued the approval was invalid because the
emissions caused by the mine – which would be greater than those of New
York City – were a threat to the Great Barrier Reef. Hunt argued in court, successfully, that there was no definite link between coal from Adani mine and climate change.
It became apparent Australia’s environmental laws were unable to stop a project like this if the government of the day was determined to push it through.
Two activists unveil a banner protesting coal financing by the Commonwealth Bank in Sydney in May. Photograph: Dean Lewins/AAP
Targeting finance
Although further court challenges remained on the cards,
they could only serve to delay the project. So activists changed
tactics, aiming to undermine the company’s chances of securing finance
for the mine and its associated infrastructure.
While threats to reputational damage were not effective against Adani
Group, since it is family-owned, the same was not true of Australian
banks, which were targeted heavily by activists.
And one by one, each of the big four Australian banks ruled out financing the mine.
The first of the big four banks declared it would not lend to the project two years ago. NAB distanced itself from the mine in September 2015 and ANZ followed suit in December.
Then in April this year Westpac became the third of the big banks to
rule out funding the project, drawing criticism from resources
minister, Matthew Canavan, who said the bank had a conflict of interest because of its interest in other coal-producing regions, and called for a boycott of the bank.
Undeterred, and in the face of a large campaign by environmental groups, the Commonwealth bank followed suit in August this year.
By then Adani had seen the writing on the wall, and had shifted to
seek finance from overseas institutions. It entered negotiations with
the state-owned China Machinery Engineering Corporation (CMEC), which
was thought to raise the potential of subsidised Chinese government
loans.
The Australian government, which was seeking to give Adani its own
subsidised loan, had supported the company’s efforts in China, according
to a freedom of information request by the Australia Institute that
reveals “several hundred pages” relating to formal representations to
foreign financiers by the Department of Foreign Affairs and Trade.
Australian prime minister Malcolm Turnbull (right) meets
with Adani Group founder and chairman Gautam Adani in April 2017.
Photograph: Mick Tsikas/AAP
In a Senate estimates hearing, it was revealed that the minister for
trade, Steve Ciobo, and the deputy prime minister, Barnaby Joyce, had
written a letter to the Chinese government confirming the mine had
received all necessary environmental approvals.
But even support from the highest levels of Australian government
could not secure Chinese financing for the project – the activists won
again.
Pressure from the Australian Conservation Foundation, with assistance
from former foreign minister Bob Carr, has resulted in news this week
that China will not be cooperating with Adani on the Carmichael project.
In a letter to ACF’s Geoff Cousins, China’s Australian embassy said
that Beijing had “taken note” of his concerns, and that while a Chinese
entity had been negotiating with Adani, it had terminated the
negotiation process “due to the absence of commercial feasibility”.
It also noted that “no Chinese banking institution has made any financing commitment to the project”.
Where to now for Adani?
Adani’s spokesman in Australia says he isn’t willing to comment on the revelation, without seeing the communication from China.
But according to most commentators, financing from China was the end of the line for the company’s operations in Australia.
The Abbot Point coal port bordering the Caley valley
wetlands. Photograph: Dean Draper/The Australian Conservation Foundation
and Australian Marine Conservation Foundation
“Approaching China would seem like the last roll of the dice so
Carmichael is now looking even more like the definition of a stranded
asset,” says Simon Nicholas, an analyst from the pro-renewables
Institute for Energy Economics and Financial Analysis (Ieefa).
“Although there have been many twists and turns on Carmichael
already, which makes it hard to predict,” Nicholas says. “Adani is faced
with writing off their A$1.4bn investment if they can’t get the project
going so they’ll continue to state that they are pursuing funding and
make it sound like everything’s under control.”
Tim Buckley, also from Ieefa, says the news is a major blow to the
Carmichael project, and will mean there is unlikely to be much movement
from Adani until after the federal court hears a case brought by representatives of the Wangan and Jagalingou, the traditional owners of the site of the mine.
Julien Vincent from financial activist group Market Forces agrees,
saying the company is a bit hard to predict, and has a lot hanging on
the project’s success.
But Vincent says the fact every major bank in Australia has
ruled out financing it, and the Chinese government is saying the project
is not viable, it will be surprising if another financer jumps on
board.
“We’ve now got probably the vast majority of the top 20 coal-funding
banks worldwide saying they’re not going to fund the project,” Vincent
said. “That’s massively influential.”
The two options that might seem possible are loans from banks in India, or financing from other Adani Group companies in India.
Cousins says both these options are unlikely to work. “I believe [the Carmichael project] is dead in the water.”
He says when he was travelling in India, lobbying against the
project, he was told by “people connected to the Bank of India” that it
had never loaned any money to the Carmichael project. He said without a
loan from the Australian government, loans from Indian banks seemed
unlikely.
And the idea that other Adani Group companies might cross-subsidise
the Carmichael project was counter to the apparent strategy of Adani
Group to buffer itself from the risky Australian operations.
And if the Carmichael project doesn’t succeed, that makes keeping the
Abbot point venture afloat harder. That project is due for refinancing,
and Westpac – currently one of its major lenders – has already
indicated it would not refinance its loans on environmental grounds.
“Abbot Point needs to refinance A$1.5bn in 2018 which was already going to be difficult,” Nicholas says.
A report he recently co-authored with Buckley shows the port is only
being half-utilised, and needs Carmichael to succeed in order to make
Abbot Point profitable. “With Carmichael looking ever more doubtful, the
task of refinancing Abbot Point has become even harder.”
Buckley says Adani will make sure the refinancing happens, but at a
significant cost to the company. “The $1.5bn debt refinancing by
November 2018 will be problematic – they’ll get it done, but the price
will be high.”
Buckley says without financing, coalmining in the Galilee basin is dead.
“There will be no other buyer – Adani has invested $1.5bn, invested
seven years, they are one of the richest groups in India,” Buckley says,
adding if it isn’t able to get the project over the line, nobody will
be.
“That’s why we’ve heard nothing from GVK,” he says, referring to the
proposed Alpha coalmine in the Galilee Basin, adjacent to the Carmichael
mine. It is a joint venture between Indian company GVK and Gina
Rinehart’s Hancock Prospecting,
“That’s why the Galilee has not been developed for 50 years. The coal
industry has known about it for the last couple of decades,” he says.
“Nobody has built anything there because it is too remote – the costs
are too high.”
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