Extract from The Guardian
Exclusive: slimmed-down Carmichael plan calls into question eligibility to delay royalties payment
The Adani mining company has still not signed a royalties agreement with the Queensland government, despite its claims to be just weeks away from green-lighting the Carmichael mine.
This week, Adani’s Australian mining head, Lucas Dow, gave a series of interviews claiming the company was close to financing a slimmed-down, $2bn integrated Carmichael mine, rail and port proposal.
Analysts say the strategy is to get the mine into production while spending as little upfront cash as possible. Guardian Australia understands it relies heavily on vendor financing agreements, in which payments to contractors and suppliers are effectively withheld for several years.
Adani now insists it can start Carmichael for a fraction of the investment previously required. But Queensland government sources say the slimmed-down plan calls into question Adani’s eligibility to delay payment of royalties.
The Queensland treasurer, Jackie Trad, confirmed in a statement that Adani had not yet signed any royalties deal. The government and Adani reached an in-principle agreement about royalties 18 months ago that it is understood would have allowed Adani to defer royalty payments analysts estimate are worth up to $315m in the early years of production.
“Our position was originally put to Adani in May last year and we are awaiting their agreement to these terms,” Trad told the Guardian on Friday.
The framework also includes clauses that demand mining companies develop common-use infrastructure and provide state development benefits, such as acting to open up resource basins, if they want to defer royalties during construction.
A government source, familiar with the framework but not specific negotiations between the state and Adani, said it was “at least arguable” whether Adani’s slimmed-down plan still met those requirements.
Adani plans to build a single-gauge rail spur line that the company says would be capable of carrying 40m tonnes a year from the Galilee basin and have “additional capacity for other proposed mines”.
But that plan is reliant on coal freight ultimately using the Aurizon network, which does not have significant additional capacity. The Aurizon Goonyella to Abbot Point line has 50m tonnes a year capacity, and based on existing volumes would need to be upgraded in order to haul coal from Carmichael alone.
Plans for a new terminal at Abbot Point would be shelved, leaving little or no excess capacity.
“The deal that was struck was for ‘first movers’ and the concept was they would get to defer royalty payments as an incentive to build infrastructure that others could use. A rail spur line is not what we envisaged when the framework was signed,” the government source said.
John Quiggin, a professor of economics at the University of Queensland writing for the Guardian last month, said the combined effect of Adani’s slimmed-down rail and port plans was to: “keep the Adani project alive for the moment, while closing off any realistic prospect of a massive expansion in the Galilee basin as a whole”.
Adani said in a statement: “We look forward to working with the state government to finalise our royalties agreement and to being part of the enormous contribution that coal industry royalties make to all Queenslanders.”
“Government policy announced last year stipulates that all royalties be paid in full and any deferred royalties be paid with interest.”
“A rolling series of shell games”
Dow, a former BHP executive, became head of Adani Mining in Australia in May. He inherited the Carmichael project on life support, six months after the company’s first self-imposed deadline to obtain finance.Dow’s appointment has signalled a change of tack: his singular focus has been to get Carmichael off the ground without largescale backing from external investors; reducing the project’s initial scope so it can be entirely underwritten by the Indian conglomerate.
In recent months, Adani has executed a series of manoeuvres to cut capital costs.
Guardian Australia understands suppliers and contractors have been asked to provide “vendor finance” for a period of more than two years, effectively meaning payments for services or equipment for Carmichael would be deferred.
Engineering firm AECOM had been designing Adani’s rail line to Abbot Point until its contract was ended earlier this year. The company claims it was not paid about $17m and lodged a grievance with the Queensland Building and Construction Commission.
Last month, it was revealed in the Queensland parliament that Adani had asked for a year’s grace to pay for its $18.5m water extraction licence, citing project delays. In July Adani told the state government it wanted to delay the “significant capital expense” of building a new coal loader and in September Dow announced the new rail plan.
Tim Buckley, the director of energy finance studies at the Institute for Energy Economics and Financial Analysis, said Adani’s Australian mining, rail and port operations were “a rolling series of financial shell games”. He said Adani Mining’s most recent financial accounts show very few tangible assets and significant debt of about $1.6bn to its Indian parent.
Buckley said that meant governments, suppliers and contractors risked non-payment if the project fell over.
“What they’ve done is pursued this ultra-capital light plan, where they use heavy financial leverage to avoid spending equity capital.”
“The government would be right to ask for some protection or security in a royalties deal. If the company goes bankrupt you don’t get repaid and Carmichael becomes a stranded asset. The risk here, global action on climate change, is a known and quantifiable risk.”
Buckley said a royalties deferral deal would be a critical component to the viability of Carmichael. He said it would increase the company’s cash flow during the early years of operation by about $45m a year. That money could be used to pay deferred up-front vendor costs instead.
“Queensland Labor has already given Adani free water and a free road,” said Ben Pennings from the Stop Adani movement. “Trad must rule out giving Adani a royalty holiday too.”
“Adani can’t be trusted to ever pay Queenslanders back, and we can’t afford the dangerous climate change impacts of their disastrous mine.”
The timing of Dow’s interviews this week raised eyebrows among those closely watching Adani.
The company has consistently claimed, for more than a year, that its finance was imminent. But the prospect of a $16.5bn mega-mine able to proceed to production quickly, with a $2bn upfront investment, has conservation groups particularly nervous.
“Right now Adani is playing chicken with Australia,” 350.org Australian CEO, Blair Palese, said. “The company is desperate to start operations while the coal-loving Coalition is still in power in Canberra, because it needs to get to financial close before the next federal election.
“We will do all we can to ensure there is no financial close, [and] this mine is killed off.”
No comments:
Post a Comment