Carmichael delays raise questions about whether Indian parent company has allocated the required finance
Adani has sought to delay significant upfront expenses for its Carmichael coalmine by another two years, raising questions about the company’s claims its Indian parent has allocated the required finance.
Guardian Australia can reveal Adani was granted a reissued water licence to take up to 12.5bn litres a year from the Suttor River by the Queensland government on 29 May. The deadline for the $18.5m outstanding payment has now been pushed back until mid-2021.
The company had previously been given a year’s extension beyond the initial July 2018 payment deadline. Adani’s own water modelling shows it requires 3.35bn litres of water during the first year of construction.
Adani says the reason for the delay is because the company is working through the implications of “legal challenges by activist groups” to its water scheme, and will pay when those matters are finalised.
The company has also recently sought and been granted approval by the federal government for a two-year extension to the deadline to legally acquire properties to be used as environmental offsets for the western portion of its rail corridor. Adani will have to negotiate with landholders and pay compensation to secure the offset areas.
Since announcing it had secured finance from within the Adani group to build a scaled-down version of the Carmichael mine in November 2018, Adani’s Australian operation aggressively sought to pressure governments to sign off on outstanding environmental approvals. The campaign included messaging that “we have finance” and “we’re ready to start” and linked the push for environmental approvals to the immediate provision of jobs.
Since gaining those approvals, Adani says it has agreed $450m worth of contracts and has 150 workers on site conducting land clearing, surveying, fencing works, civil earthworks and other construction activities. Financial market sentiment appears to be improving towards Adani’s Australian operations, with bonds in the Abbot Point coal terminal increasing 15% in the past month.
In a statement, Adani said Carmichael was proceeding in line with its schedule and cost estimates and that “minor variations are a matter of course on major mining projects”.
“Works will continue to ramp up over the coming weeks and months and we are on track to deliver our first coal in 2021.”
But satellite images show little physical progress has been made since the notional start of construction in June. Analysis of those images shows the company has cleared about 365 hectares (900 acres) of land at the 28,000 hectare mine site. Guardian Australia understands many of the workers on site are employed by external contractors under short-term agreements.
The energy finance expert Tim Buckley says any notional finance allocated by the Adani group to the Carmichael project was still “sitting in India”.
“The fact they don’t have $18.5m [to pay for the water licence] is pretty telling,” Buckley said. “In the scheme of the Adani group’s business that’s small change.
“[Adani chairman and founder] Gautam Adani has got the cash to build Carmichael and pay for things, let’s not pretend he doesn’t. The money is there now, but it’s sitting in India. By definition, the finance hasn’t come yet.”
Buckley says projects with secure finance were typically then able to spend the money without restriction.
“When a project gets finance, you’re off to the races. You don’t say you’re going to build a quarter of a railway line.”
He said Adani’s attempts to progress the Carmichael mine were “debt on debt on debt” and that was a good indication the Indian parent had at least some hesitation about the project, given the risks that remain from environmental activism, the diving price of thermal coal and additional regulatory hurdles, such as negotiating access to the Aurizon rail network.
Guardian Australia has spoken to contractors who previously discussed working with Adani, and who said the company had proposed an unusual sort of “vendor finance” arrangement that would effectively delay payments for work by up to two-and-a-half years, until after the mine was operational.
Adani Mining’s negative balance sheet and the groups’s lack of assets in Australia, other than the heavily in debt Abbot Point port, have raised concerns about its ability to offer security to contractors and others.
The state government requires financial assurance to cover a potential royalties deferral deal, which is still under negotiation.
Source: The Guardian