Adani's Carmichael coal rail line may not be eligible for government funding

Doubts have emerged over the eligibility of Adani’s rail link for public funding as the company pushes ahead with plans for the controversial Carmichael coal project with a promise of 600 jobs at a new operational headquarters in Townsville. The Queensland premier, Annastacia Palaszczuk, said “you can’t get the smile off my face” when commenting on the news of the potential jobs boost in a television interview. The Indian conglomerate’s announcement on Tuesday of new operational headquarters in Townsville comes days after it gained conditional approval of a $1bn federal loan for a coal rail line. It heralds new momentum for a project that has been fiercely resisted by environmental groups and traditional owners. But while Adani has flagged building Australia’s biggest coalmine from mid-2017, doubts remain about its ability to gain bank funding for a project that will require another $10bn of investment over four years. One energy industry analyst said the prospect of a $1bn government loan for Adani’s railway showed a lack of financier interest and raised probity questions, given public money would go to a private entity controlled by the Adani family through offshore tax havens. And there is now a suggestion that Adani’s position that government funding for the rail line was “not critical” could put it at risk of being ruled ineligible to access the Northern Australia Infrastructure Fund. Both the Australia Institute and Environmental Justice Australia argue that Adani – whose spokesman said a subsidy could fast-track the project but was “not critical” and was sought “because it’s available” – may not meet the NAIF investment criteria. That states that for a project to be eligible, it must be “unlikely to proceed, or will only proceed at a much later date, or with a limited scope, without financial assistance”. Palaszczuk told the Nine Network that Adani’s hub in Townsville, a region with double-digit unemployment, was “the economic boost that the people need and the families need before Christmas”. “It’s just great news for the regions ... honestly, you can’t get the smile off my face today,” she said. Adani’s Townsville base would host technical and engineering jobs and also act as a fly-in, fly-out hub for coalminers. The company has touted as many as 10,000 jobs but its economics expert has given court testimony the project would yield 1,464 net jobs a year. The Construction, Forestry, Mining and Energy Union said Adani’s use of automated systems, including driverless trucks, meant it could be doing more to create jobs. “This is all about them cutting costs to try and save a few dollars at the expense of hundreds of workers who’ll miss out,” the CFMEU’s Stephen Smyth told the ABC. Coral scientists are among those who argue the emissions from burning Adani’s coal would be incompatible with the survival of the Great Barrier Reef, which is threatened in main part by climate change. Tim Buckley, a former Citibank analyst now with the Institute for Energy Economics and Financial Analysis, said the Carmichael mine was at clear risk of being a “stranded asset”. In a briefing note, Buckley pointed out the mine’s Indian parent company, Adani Enterprises, which was separately committed to a US$10bn solar investment program, had a “current market capitalisation of equity of just US$1.1bn against… net debts of US$2.4bn”. IEEFA questioned how it planned to fund at the same time “A$10bn greenfield investment program in building the world’s largest new thermal coalmine complex” along with an in-house power station, railway line and new expanded coal port at Abbot Point, Buckley said. “Given market dynamics and Adani Enterprises’s small and financially leveraged balance sheet, it would seem highly unlikely any bank would consider the project economic without a multibillion dollar equity injection,” he said. Reports of the possible $1bn federal loan for “de-risking” the railway through the Northern Australia Infrastructure Fund was “testament to the lack of private interest in the project”. “This is of particular concern around the Galilee rail line, which is held not by the listed Adani Enterprises, but instead by a private entity controlled by the Adani family through a string of offshore tax havens (Singapore, Cayman Islands, Mauritius and the UAE). “The ability of Treasury to do due diligence is minimal,” Buckley said. He added that the Indian government was currently running multiple investigations into the Adani Group in relation to allegations of profiteering or over-valuing of coal. The investigations are part of an 18-month investigation by the Indian Government against dozens of energy companies. An Adani Group spokesman told Guardian Australia in April that it was “aware of the investigations being conducted, and has fully co-operated, and shall continue to co-operate with the investigating agencies”. “Adani Group denies the allegations of over valuation and there is no show cause notice received till date. Buckely said the price of imported coal in India was now more expensive than solar power, which dropped 80% in the past five years. He said while the Carmichael proposal “seemed a feasible, if risky, proposition at the height of the coal boom in 2011, today it is collateral damage of India’s energy transition – a relic aligned with the energy policy of the previous Indian government”. Adani has flagged just over half the coal from a network of six open pits and five underground mines producing up to 40 million tonne a year would be for the Indian electricity market. The approval of an enormous new source of foreign coal for Indian power stations is at odds with pledges by the country’s energy minister, Piyush Goyal, to increase India’s reliance on its own large coal reserves. Goyal’s plan to eliminate coal imports completely within three years so far appears to be on track, with plentiful domestic stocks spilling over to make India an exporter for the first time. A former secretary of India’s power ministry, E A S Sarma, told the Guardian that a new coal pipeline was unlikely to help the Indian government achieve its goal of electrifying villages in the country. He said Indian electricity generation was already overly reliant on the steady base-load power produced by coal and other thermal energy sources, resulting in shortages of peak-time power – the kind produced by hydro energy or wind turbines – and a higher overall cost. “Adani coal will only accentuate the problem further, adding to the cost of electricity,” he said. “To say that it will help reduce poverty in India is a highly misleading statement.” In the favour of Australian coal is that it is of higher quality than that extracted from India, and requires less “washing” to be used in new, more advanced power stations. But the quality of coal from Carmichael would be well below Australia’s benchmark Newcastle coal in both energy content (4,950 kilocalories versus just over 6,000 kcal) and ash content (26% versus 15%). And India has also announced a building blitz of new washeries to treat domestic coal, which should further reduce the value of any coal extracted from the Carmichael mine.