Extract from ABC News
The federal government has been asked to step in and provide finance to companies building Adani's Carmichael mine and rail link, after one of Adani's biggest contractors revealed it was unable to insure its work on the project, leaving it in breach of its contract.
Key points:
- Many big insurers have dropped support for coal on the basis that it is too risky for the companies
- Contractor BMD says its failure to secure insurance leaves it in breach of its contract with Adani
- The company has suggested the federal government could step in and help insure the coal industry
BMD Constructions is one of Australia's largest construction companies, and one of Adani's most significant contractors.
In a submission to a federal government inquiry instigated by Queensland National Party MP George Christensen, BMD said it found itself in the extraordinary position of being unable to find any insurer for its work on Adani-related projects.
BMD reportedly has a $350 million contract for work on the rail network that will deliver coal from the mine to the port.
BMD said being uninsured created a "risk so substantial that if it materialised, could easily impair the company's ability to continue to trade".
"An inability to obtain the insurances listed … placed BMD in breach of its contracts under which it was delivering the projects."
BMD said it was unable to obtain public liability insurance, environmental protection insurance or director and officer insurance, despite searching around the globe for insurers.
The submission said the lack of insurance meant Adani would not be legally required to pay progress payments of $20 million dollars each month, and put at risk the employment of 600 workers.
Banks and insurers have been warned by financial and prudential regulators in Australia and around the world to reduce their exposure to fossil fuels, and in particular, to thermal coal.
Regulators have warned investments in those projects face serious risks as climate change becomes more extreme, and the world transitions away from fossil fuels.
In April this year, the Australian Prudential Regulation Authority (APRA) issued draft guidance to the finance sector, warning of the "unprecedented" and "far-reaching" impact of climate risks to all parts of the financial system.
Big insurers in Australia including Suncorp and QBE have dropped support for thermal coal, on the basis that it is too risky for the companies.
Climate activists in Australia have also targeted Adani contractors and insurers, claiming victories as insurers around the world refuse to back the project.
Insurers pressured by policies 'In Europe', BMD says
In its submission, BMD said the insurers were being forced into the position "by broad worldwide policies that are often forged in Europe and fail to consider the impact to the Australian and other markets dependent on a lawful coal industry".
It suggested that the federal government could step in, and insure the coal industry in Australia.
"Failure
to take any action can only result in very few contractors being
willing or able to undertake these critical infrastructure works," it
said.
BMD was clear in the submission that the difficulty with insurance was only to do with its work on Adani's projects.
In an appendix, BMD published an example of the exclusions one insurer insisted on, when insuring the company. It ruled out paying any claim in relation to work for any Adani group entity.
With Adani blacklisted by so many insurers, other contractors are likely to face difficulties getting the insurance required to work on Adani's Carmichael mine too.
In a statement, a spokeswoman for Bravus Mining & Resources — the trading name now used by Adani mining operations in Australia — told the ABC: "Details on insurance providers for the Carmichael Project are commercial in confidence, however we have the requisite insurance requirements in place."
The submission was posted online, as part of the joint parliamentary inquiry into the prudential regulation of investment in Australia's export industries.
It was set up by resources minister Keith Pitt after lobbying by Mr Christensen.
"It is of great concern to me that a legitimate industry like coal mining, which makes a significant contribution to the national economy and employs thousands of Australians, is being held back by what can only be described as corporate activism," Minister Pitt said announcing the inquiry in February this year.
BMD did not respond to a request for comment.
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