Indian conglomerate rejects IEEFA claim it will struggle to attract finance for Australian coal mine, railway and port
By Megan Darby
A controversial coal mine in Queensland, Australia, is commercially unviable after a restructuring of owners Adani, analysts say.
The US$16.5 billion Carmichael venture, set to be the country’s largest mine, is unlikely to attract finance since the Indian conglomerate split its mining operations from its power generation business.
That is the conclusion of a report by the Cleveland-based Institute for Energy Economics and Financial Analysis (IEEFA). Adani rejected the findings.
“Carmichael is already a stranded asset in the making,” said Tim Buckley, IEEFA’s director of energy finance studies.
Adani’s restructure has slashed the market capitalisation of Adani Enterprises – which owns the coal mining business – 80% to US$2.5 billion.
That makes the prospect of finding cash for the Australian mega-mine “increasingly remote”, according to Buckley.
And the coal production arm no longer has a guaranteed internal buyer, with the conglomerate’s 20GW of proposed coal power stations in India now separately run by Adani Power.
With global coal prices low and India’s government aiming to treble domestic production, the Queensland mine faces stiff competition.
Meanwhile, India has a target to install 125GW of renewable energy by 2022.
Adani Enterprises is developing two major solar projects worth US$9 billion, which IEEFA argues could divert funds from the mine.
Buckley said: “Carmichael will likely be collateral damage.”
A spokesperson for Adani dismissed IEEFA as “anti-mining activists” and said the think-tank’s report was based on “flawed assumptions” and underestimated India’s appetite for coal.
India has added 23GW of power generation capacity recently, of which 92% is coal-powered, the spokesperson said, “with more to come”.
Carmichael is the biggest of nine coal mining projects in Queensland’s Galilee Basin.
If fully exploited, Greenpeace estimates the basin would generate emissions equivalent to the seventh biggest fossil fuel burning country in the world.
Its export route encroaches on the Great Barrier Reef, with a major port expansion planned at Abbot Point, next to the sensitive coral ecosystem.
UNESCO is to decide next month whether to add the reef to its list of endangered world heritage sites, as pollution, overfishing and climate change threaten its future.
Coral reefs worldwide are declining amid rising ocean temperatures, acidification and – a study this week revealed – diseases that thrive in such conditions.
The dash for coal is hotly debated in Queensland, where the promise of mining jobs is set against an estimated AU$6 billion a year of benefits from a healthy reef.
Felicity Wishart, Great Barrier Reef campaign director at the Australian Marine Conservation Society, urged the Queensland government to review the need for coal ports in light of IEEFA’s report.
“Adani’s new corporate structure will mean its Carmichael mine project will need to be competitive in the global market and the reality is it’s not,” she said.
“This means the last thing the Queensland government should be doing is supporting the Abbot Point coal port expansion alongside our troubled but precious Great Barrier Reef.
“The Queensland government has the opportunity to stop the Abbot Point coal port expansion dead in its tracks, rather than leaving it to slowly wither away, creating uncertainty for years to come.”