Adani Faces Financing Gap on Unpopular Australian Coal Project

first_img FacebookTwitterLinkedInEmailPrint分享The Wire:In September 2016, the Adani group decided to scale down the size of the mine from the initially proposed investment of $16.4 billion to $4.2 billion, with production being curtailed at 25 million tonnes of coal per annum in the first phase of operations, instead of the initially proposed 60 million tonnes per annum at peak production.“Between 2010 and now, things have changed drastically for the mine. It is now no longer financially viable, and that is why it has not been able to achieve financial close for seven years. On top of that, there are so many political and environmental risks associated with the project that it becomes toxic from a banking perspective,” said Tim Buckley, Director of Energy Finance Studies, Australasia, within the Institute for Energy Economics and Financial Analysis (IEEFA), a pro-renewables energy research firm. As many as twenty-four Australian and international banks have either refused funding the project or have introduced rules that would make the Carmichael project out-of-bounds for them.To add to its woes, according to a recent report by the IEEFA, the Adani group will need to refinance $1.48 billion of debt on by November 2018 and a cumulative debt refinancing of $2.11 billion by 2020 on its Abbot point port terminal. This at a time when the port is only operating at 50% of its capacity and most of its ‘take-or-pay’ contracts, which currently earn revenue for the port, expire soon. “They have this situation where three-quarters of their debt on the port will have to be refinanced in the next 12 months. With the take-or-pay contracts progressively expiring, they will find it difficult to convince financiers that the port will be fully utilised in the future,” said Buckley, one of the authors of the report.“For them to convince financers that port capacity will be utilised in the future, they need to show that the Carmichael mine will be up and running soon because otherwise, the export volumes will not be enough. So it now makes the mine crucial for the future of the Abbot point port,” Buckley added.Jeyakumar Janakaraj, the chief executive officer (CEO) of Adani Australia, recently told the Economic Times in an interview that the Adani group still needs to tie-up $4.2 billion in finance for the Carmichael mine and rail project, and has a set a deadline of March 2018 to tie up funding.A surfer carries his board as he walks behind protesters participating in a national Day of Action against the Indian mining company Adani’s planned coal mine project in north-east Australia, at Sydney’s Bondi Beach in Australia, October 7, 2017. Credit: Reuters/David GrayAccording to John Quiggin, Australian Laureate Fellow in Economics at the University of Queensland, the project now relies heavily on financial support from the Australian government. “There has been a general move away from financing coal projects. It is increasingly difficult to get finance and this is a marginal project. It is low-quality coal and a long-way away from ports. There is no clear market for the coal. So the project is not very attractive commercially. They (the Adani group) are therefore looking mostly at government or quasi-government financing,” Quiggin told The Wire.The government financing, which the project now crucially hinges on, is a prospective concessional loan of up to $900 million from the Northern Australia Infrastructure Facility (NAIF) which was set up by the government of Australia in 2016 to ‘encourage and complement private sector investment in infrastructure that benefits northern Australia’. The prospective loan is concessional as it can be provided at an interest rate lower than commercial lending rates, and for a period longer than commercial lending periods.“The structure of the NAIF is very opaque. The interest rates could be as low as federal government bond rate, which is currently 2.75%. And the loan period could be 30 years, with the risk profile of the loan likely to be heavily subordinated terms. It would operate like quasi-equity,” said Buckley.In effect, tax-payers in Australia would be subsidising the Adani group’s coal mine, and Julien Vincent, executive director of the environmental campaign group, Market Forces, believes that the project is only possible through tax-payer subsidy. “This project is financially unsustainable. It only works if you are prepared to shift the risk on to the tax payers. So, the NAIF is critical for Adani,” he said.Even with the $900 million NAIF loan, the Adani group will need to secure another $3.3 billion in financing for the project. According to a recent report of the IEEFA, the Chinese state-owned enterprise China Machinery Engineering Corporation (CMEC) is one of the prospective financers that the Adani group has approached. According to a press release on the website of CMEC, in January, a top Adani Mining Private limited executive, Praveen Khandelwal, along with the CEO of Downer EDI group – a company which has a $2 billion contract with Adani Mining Private limited for the construction of the mine in Australia – met with the president of CMEC Zhang Chun. Chun said at the meeting that the CMEC “hoped to cooperate with Adani and Downer to take part in financing, construction and operation of relevant coal mines and railway projects”.“The CMEC is in strategic alliance with the China Construction Bank and the China Import Export Bank which are two state-owned enterprises. They could take equity stakes in the Adani project. They have a history of taking minority equity stakes in projects of this kind,” said Buckley.Aiding that theory is a statement that Janakaraj gave to Reuters in early October, where the CEO of Adani Australia said that the Adani group was ‘looking to sell minority equity stakes in the coal project’.Further fuelling speculation is a recent revelation that certain Australian government ministers wrote to the Chinese government assuring it that the Carmichael coal mine has been approved. The letter was written by the minister for trade, tourism and investment, and by the deputy prime minister, and addressed to the National Development and Reform Commission in China. The secretary of the Department of Foreign Affairs and Trade, told Australian senators that Adani may have requested the letter to help it secure funding from the Chinese.According to Buckley, if the deal materialises, it could effectively mean that the Australian government is providing subsidies to a project owned by an Indian billionaire and a state-owned enterprise of the Chinese government.   However, Buckley argues that the NAIF loan remains critical even for this prospect. “The NAIF loan is absolutely crucial. I don’t think the Chinese state-owned enterprise would even contemplate doing a project in Australia without an explicit endorsement of the project by the Australian government. And there is nothing more explicit than being a key funder. If the Chinese knew that the NAIF wasn’t available, I don’t think they would even give it a moment’s thought. It is too controversial a project,” he said.Effectively, the NAIF loan – a federal government funded subsidy of almost $1 billion – would act as a signal of government support for the project, and would make it a more attractive investment proposition for prospective financers.But government funding in the form of the subsidised NAIF loan is hugely unpopular with the Australian people, with some arguing that it amounts to a bailout. It seems that the NAIF loan has become a double-edged sword for the Adani group, as the project is unlikely to find willing financers without it, and it could face even stronger opposition from citizens if the NAIF loan is provided.More: Adani’s Australia Story: As Financial Concerns Mount, A Fierce Battle for Funding is Underway Adani Faces Financing Gap on Unpopular Australian Coal Projectlast_img read more

UW looks to lock up bye

first_imgSunday marks the last chance for the Wisconsin women’s basketball team to break even in conference play and make a push toward the postseason as the Badgers (18-10, 7-8 Big Ten) travel to Iowa City hoping to sweep the season series against the Hawkeyes (13-14, 5-9 Big Ten).Last time the two teams met, Wisconsin’s Jolene Anderson and Iowa’s Wendy Ausdemore had career games. Anderson tied a career high with 29 points, and the sophomore Ausdemore led the Hawkeyes with 27 — also a personal best.”Wendy’s a great shooter, got to the basket on us, and really found some open looks,” Wisconsin head coach Lisa Stone said. “She had a career best against us. We’ll be more aware of her in terms of making things a little more difficult for her.””The great players are going to score,” Badger forward Danielle Ward said. “They’re going to get the ball and they’re going to get open. You’ve just got to play the ball and play smart.”Returning to the lineup for the Hawkeyes will be 6-foot-6 center Megan Skouby, who did not play in the team’s previous game against the Badgers. Skouby — who is averaging nearly 15 points a game — broke a bone in her hand in a game against Ohio State earlier this month.”She definitely brings some inside presence,” UW forward Mariah Dunham said. “Last time, they didn’t really have that. It was more of their guards penetrating. … She’s a great player, and we just need to stop her from the beginning.”Freshman guard Teah Gant said the team’s approach will not change much even with the addition of Skouby into the lineup.”It really doesn’t change our game plan,” Gant said. “We’re still going to play hard and do the things that we know how to do and just come out with a win.”Iowa guard Kristi Smith and forward Nicole VanderPol also had double-digit scoring performances in their team’s previous match-up with Wisconsin. With the addition of Skouby in the lineup on top of their other scoring threats, Stone’s team will have their hands full on defense.”Kristi Smith’s playing at a very high level,” Stone said. “I think the fact that Iowa likes to score points and has a lot of weapons to do so, our defense needs to be even better than it was the first time.”On offense for Wisconsin, Stone acknowledges that the Hawkeyes will be focusing on Anderson, but feels confident in the ability of other players to step up.”Iowa’s certainly going to be more aware of Jolene,” Stone said. “They threw a box-and-one at her and she still found ways to score. … The way Mariah and Danielle are playing right now, and Rae Lin (D’Alie), it certainly gives me a lot of confidence going into the game since we have some other options.”Since the last time the two faced off against each other, the Badgers have slumped, losing their last two games to Ohio State and Purdue. Without a game on Thursday, Wisconsin has had an entire week to prepare for Sunday’s contest, which has provided for many opportunities to improve.”It’s a great time to teach, great time to stay fine-tuned and great time to keep our edge,” Stone said. “We want a chip on our shoulder, and take advantage of the bye week and not use it as a disadvantage.”If they hope to earn a first round bye in the Big Ten tournament, they will need to finish in the top five in the conference. A win Sunday will go a long way toward achieving that goal, as the Badgers at 8-8 would secure a fifth seed unless either Penn State or Minnesota wins out. With a loss, UW would need both the Nittany Lions and the Golden Gophers to lose out.It seems likely both Penn State and Minnesota will split their last two games.”It certainly puts us in a position where we’re battling for finishing fourth place (in the conference),” Stone said. “That’s something we don’t get wrapped up in on our team. … All of our focus is on Iowa, and then when we talk next week, the goal will be set.”Ward echoes Stone’s “1-0″ mentality that the team has continued to embrace throughout the season.”If we come out and win, that puts us in a better position tournament-wise. We’ve just got to come out and do the little things and continue to work hard and pay attention to the goals at hand and not worry about the what-ifs.”last_img read more