If the Adani mine gets built, it will be thanks to politicians, on two continents



Re-elected Indian prime minister Narendra Modi might have helped the Adani mine in the Galilee Basin to get over the line.
southwind.com.au, CC BY-SA

Quentin Beresford, Edith Cowan University

With the final approval of the Adani Carmichael coal mine now apparently imminent, it is important to ask how it has seemingly defied the assessment of experts that it is not financially viable.

After all, it’s only a week since the Chinese owner of another mine planned for the Galilee Basin, the China Stone mine, suspended its bid for mining leases because of commercial considerations.

The numbers appear not to add up because the location is remote, the coal would be expensive to transport, and the price is expected to fall.

But such a purely financial analysis ignores the political forces driving the development of the coal industry in both India and Australia.

Mates in India, mates in Australia

In short, both are locked into what I describe as a model of crony capitalism, in which special deals are handed out to projects such as Adani that tip the scales in favour of development.

The actions of China and Japan in deploying enormous state power to export their respective coal technologies to Southeast Asia strengthens the hands of those pushing such developments.

In my recent book, Adani and the war over coal, I outline a network of power that for several decades has promoted the development of Australia’s coal resources in the interests of national and international corporations.

The mining companies, then the big four banks became part of it, lending billions in the rush to develop Australian coal mines as Asian countries sought to lock in long-term supplies. The Minerals Council of Australia, the New South Wales Minerals Council and the Queensland Resources Council, with their collective close ties to both political parties, handled public relations.




Read more:
With the LNP returned to power, is there anything left in Adani’s way?


Yet they have faced resistance from the rise of an anti-Adani movement that links grassroots environmentalists, peak environmental lobby groups and progressive organisations such as GetUp!

By mid-2018, these campaigners seemed to have backed the Carmichael mine into a cul de sac by scaring off both Australian and foreign investors. They had also pressured the Queensland government to withdraw its support for a loan to the project from the Commonwealth government’s Northern Australia Infrastructure Facility.

Then Adani surprised them by announcing that it would scale back the project and fund it from its own resources. On the face of it this seemed unlikely, but it had help.

Adani and Modi have history

The chairman and founder of the Adani group, Gautam Adani, has had a long relationship with the recently re-elected Prime Minister of India, Narendra Modi.

Modi played a decisive role in paving the way for Adani’s latest mega deal: selling coal-fired power from a plant in the Indian state of Jharkhand to nearby Bangladesh.

The power for Bangladesh is set to be fired by Carmichael coal. Many Australians would be concerned to learn that our coal is to be used to power one of the most climate-challenged countries on the planet, but we have this on the authority of Adani’s previous Australian-based chief executive, Jeyakuma Janakaraj.

Twelve days before the 2019 Indian election date was announced, the Modi government gave approval for an Adani project in Jharkhand to become the first designated power project in India to get the status and benefits of a Special Economic Zone, saving Adani billions of dollars in taxes, including clean energy taxes.

The Indian state will provide land, infrastructure and water for the project and shoulder the burden of pollution. The cost of the power to Bangladesh is not expected to be cheap.

Will we be asked for more?

Adani’s form suggests it might come back to Australia for more. Following the re-election of the Morrison government it is already being speculated that the pro-coal Minister for Resources, Matt Canavan, will revisit the original proposal for a billion-dollar government-sponsored loan from the Northern Australia Infrastructure Facility to construct the railway from the Galilee Basin to the Abbot Point coal port.

The Adani saga points to a critical flaw in the Paris climate agreement. It is an agreement between nation states, but what those states do is often determined by arrangements between politicians and private companies that feel no particular obligation to keep global warming to less than two degrees.

We are pawns in a larger, climate-destroying game.




Read more:
Interactive: Everything you need to know about Adani – from cost, environmental impact and jobs to its possible future


The Conversation


Quentin Beresford, Professor of Politics, Edith Cowan University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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Morrison government approves next step towards Adani coal mine


Kevin's Walk on the Wild Side

Michelle Grattan, University of Canberra

The Morrison government has ticked off on the groundwater management plan for the proposed Adani coal mine, an important but not a final step for the central Queensland project receiving the go-ahead.

The decision, taken by Environment Minister Melissa Price, comes after intense pressure from Queensland Liberal National Party members, including a threat by senator James McGrath to publicly call for Price’s resignation if she failed to treat the Adani project fairly.




Read more:
View from The Hill: It’s the internal agitators who are bugging Scott Morrison on Adani


But the Adani decision will not help Liberals fighting seats in the south, with strong anti-Adani campaigns in some key electorates.

Price said in a statement on Tuesday: “CSIRO and Geoscience Australia have independently assessed the groundwater management plans for the Carmichael Coal Mine and Rail Infrastructure project”, and both had confirmed the revised plans…

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Shorten goes colder on Adani coal mine as the battle for Batman begins


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Bill Shorten said he had become increasingly sceptical of Adani in recent months.
AAP/David Crosling

Michelle Grattan, University of Canberra

Opposition Leader Bill Shorten has taken a further step toward opposing the proposed Queensland Adani coal mine as he starts campaigning for the Batman byelection, where Labor is fighting off a strong challenge from the Greens.

Shorten was appearing with Labor’s candidate Ged Kearney, who on Friday resigned as ACTU president to contest the byelection.

Shorten seized on a Guardian Australia report that said Adani put in “an altered laboratory report” when appealing a fine for contamination of wetlands near the Great Barrier Reef.

Shorten said he had become increasingly sceptical of Adani in recent months.

If Adani was “relying on false information, that mine does not deserve to go ahead”.

He called on the government to investigate the claim, and said that if it didn’t, Labor in government would do so.

Kearney said she did not see the mine going ahead. “I know Adani are not good employers,” she said.

Adani will be a big issue in the byelection, with the Greens running hard on it and a grassroots campaign underway. Directly behind Shorten at his news conference demonstrators held up “Stop Adani” signs. A big protest is planned in Canberra when parliament resumes next week.

Earlier this week, Shorten hardened his position on the mine, telling the National Press Club: “We’re certainly looking at the Adani matter very closely. If it doesn’t stack up commercially or if it doesn’t stack up environmentally it will absolutely not receive our support.”

Last year, Shorten was looking on the positive side of the project. In May he said: “There’s no point having a giant coal mine if you wreck the reef but, on the other hand, if the deal does stack up, if the science safeguards are there, if the experts are satisfied, then all well and good and there’ll be jobs created.”

But he did not support the government giving a loan subsidy for the railway that would support the mine.

Greens leader Richard Di Natale tweeted on Friday:

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Meanwhile, the Greens moved to up the ante for Labor on the issue of power, releasing a policy calling for the return of the national electricity grid into public ownership, beginning with the acquisition of the interconnectors between regions.

It said the cost of acquiring the five privately owned interconnectors would be A$2.8 billion. “A return to complete public ownership can ensure investment decisions are made in the public interest, not in the interests of profit,” the policy says.

The ConversationKearney said renationalisation was worthy of consideration but Shorten was dismissive, saying it was not going to happen.

Michelle Grattan, Professorial Fellow, University of Canberra

This article was originally published on The Conversation. Read the original article.

The Queensland election outcome is a death knell for Adani’s coal mine


John Hewson, Crawford School of Public Policy, Australian National University

The coal mine proposed for Queensland’s Galilee Basin by Indian mining giant Adani has been a moveable feast, with many stories about its scale, purpose, financing, job prospects, and commerciality. The prospect of a return of the Palaszczuk government in Queensland is effectively the death knell for the project.

Labor has so pledged to block a concessional, taxpayer-funded loan, while embracing a significantly expanded program to develop regional solar thermal power in the state.

It seems the proposal has been reduced in scale, with the original A$21 billion plan reined back to just its initial stage, costing about A$5 billion. Its purpose has changed from exporting coal to India’s Adani Power, to now possibly shipping coal to Bangladesh and Pakistan. Its job prospects are confusing with early estimates well in excess of 10,000, down more recently to fewer than 1,500, after Adani admitted that the mine’s operations will be heavily automated.

The project’s financing has been under a continuous cloud given the scale of the debts of the Adani Group, and the reluctance of global banks in a world transitioning to low-emission technologies. All of this is complicated by the potential for concessional finance from the Northern Australia Infrastructure Fund (NAIF) and Chinese money. As a high-cost, low-grade coal project, its commerciality has bounced around, given variations in “offtake prices” and expectations on coal futures prices.


Read more: Why big projects like the Adani coal mine won’t transform regional Queensland


The latest version is that the project has been scaled down from some 60 metric tonnes per year (mtpa) to about 25mtpa, requiring an extra investment of some A$2 billion for the mine development, and A$3.3 billion for the rail link to the export terminal at Abbot Point, but avoiding the need to expand Abbot Point. Adani Enterprises is already financially strapped, with net debt exceeding market capitalisation, and the Adani family needing to refinance Abbot Point. The Adani family has already spent some A$3.5 billion on acquiring the deposit and developing their Australian project to date.

So with virtually no capacity to inject additional equity, the focus is on whether even this scaled-down proposal can be financed by additional debt? This is why a government-sponsored concessional loan of up to A$1 billion from the NAIF to build the rail link has been seen as crucial to the project moving forward. It could be accepted by potential financiers as low-cost, high-risk “quasi equity”. It would also effectively hand Adani a monopoly position in standard gauge rail, in turn creating monopoly conditions at Abbot Point.

A more recent constraint on sentiment towards to the project has come from the Indian government’s rapidly changing attitudes to future power generation, accelerating the transition from coal-fired power to renewables. Recent statements by RK Singh, India’s Minister of Power and New and Renewable Energy have confirmed that India can exceed its target of 275 gigawatts of renewable energy by 2027, a massive shift from its historic reliance on coal.

This accelerates the likely end to coal imports by India, which has seen the Adani project seek alternative markets in Bangladesh and Pakistan.

Indeed, there is now documentary evidence of an electricity offtake agreement with the Bangladeshi government’s power board, setting a contractual “cost plus plus” supply of low-quality imported coal delivered at prices that are likely to approach 50% above the current coal spot price. But even at the current futures price of about US$80 per tonne, the Carmichael mine could be cashflow-positive.

Funding the Carmichael mine

Can the Adani group hope to raise the necessary additional debt? This is a two-pronged challenge – the family needs to refinance Abbot Point requiring some A$1.5 billion over the next 12 months, and the A$5 billion-plus project itself.

It looks like the family had to enlist the services of second-tier investment bank Jeffries to initiate a bond refinancing for Abbot Point – to be rated just above junk bond status. However, Jefferies reportedly pulled out within a week, its reasoning unstated.

With some 20 to 30 global banks, including Australia’s big four, having ruled out financing the mine, and Indian banks strapped for capacity, the focus has shifted to Chinese group CMEC as a potential financier, against likely Bangladesh or Pakistani alternatives. However, even with such offtake agreements the project’s longer–term viability is questionable.


Read more: The future of Australian coal: an unbankable deposit


Obviously the Chinese Communist Party, and other Chinese authorities, will need to think carefully about the potential consequences of getting involved now that the project lacks direct financial support from state and federal governments in Australia. This is especially so when the issue of Chinese influence and involvement in Australia generally, and in our politics specifically, is becoming controversial.

I also suspect that the federal Labor opposition may now adopt a position against the Adani project, in light of Queensland’s state election result.

The bottom line for financing is an assessment of the longer-term risks with Adani Enterprises, the family, and the project. Both the company and the family are already heavily exposed financially, and the project is a high-cost, high-risk one.

Bearing in mind the Paris climate agreement, the rapidly falling costs of reliable renewables, and India’s shifting energy strategy, the development of any new coal mine is certainly a very big call.

I suspect that the Adani project is already a stranded asset, and definitely not worthy of either Australian taxpayer support or Chinese investment.

Interactive: what the Adani coal mine means for Queensland

The Conversationhttps://cdn.theconversation.com/infographics/134/1cbeb15f9237d4fbc13472fb72fa7981bc16961f/site/index.html

John Hewson, Professor and Chair, Tax and Transfer Policy Institute, Crawford School of Public Policy, Australian National University

This article was originally published on The Conversation. Read the original article.