The environmental lobby group Greenpeace has taken an unusual step in its opposition to a major Queensland coalmine project by examining and questioning the finances of the development company.
Greenpeace has released analysis that it says shows plans to develop one of the world’s biggest coalmines in Queensland’s Galilee Basin are in doubt because one of its major proponents cannot afford the project.
According to a report by the Institute for Energy Economics and Financial Analysis commissioned by the environmental group the Indian conglomerate Adani has too much debt, its main business is not turning a profit, and its planned Carmichael mine scheme is “uncommercial”.
The Carmichael, at 10 billion tonnes, is considered the largest single coal deposit in the world.
ABC TV news reports last year, Adani announced plans to proceed with a $10 billion development of its Carmichael scheme, including large-scale infrastructure investment that would create 9000 jobs, and export coal to India from 2016.
However, those ambitious plans have been questioned.
Author Tim Buckley, a financial analyst, told ABC TV news that Adani was “betting the entire company on their Australian foray into opening the Galilee”.
Mr Buckley said Adani’s finances were pinned to its core business, its Adani Power arm, which was losing money.
“Debt is not necessarily a bad thing, as long as you’re making money,” he said.
“Their core business isn’t making money and they’re not able to cover the interest costs. So debt, when you’re not making money, is a problem.”
Mr Buckley said the coal price had fallen about 40 per cent since Adani had acquired the Carmichael deposit, which “dramatically changes all of the economics relating to this entire project”.
The Greenpeace analysis has been rejected by Adani, which says it had “complete confidence” in the viability of its projects in Queensland.
Those projects also include the expansion of a coal port terminal at Abbott Point, which it paid almost $2 billion for in 2011.
The group also criticised Greenpeace, saying its motivation was “short-sighted, vested interests that ignore the long-term fundamentals”.
However, Greenpeace, which previously issued a similar warning about Adani rival and fellow Indian conglomerate GVK, is not alone in warning on the viability of the Galilee.
GVK has a partnership in coal deposits in the same region in partnership with Australia’s richest woman Gina Rinehart.
The fall in the coal price and a recent re-evaluation by China of its reliance on coal for power generation has spooked the whole sector and led to investments being scaled back or delayed.
Queensland Resources Council chief Michael Roche told a conference in the state capital, Brisbane, the industry was struggling in the wake of falling coal prices.
“We’re seeing the perfect storm of a collapse in coal prices, a stubbornly high Australian dollar and very high costs,” he said.
Adani’s project is vying for Galilee coal with mining magnate Clive Palmer’s Waratah Coal and the GVK Hancock partnership.
Coal-market analyst Matthew Trivett, of stockbrokers Patersons echoed Greenpeace’s concerns about the exposure of Adani, like other Indian groups with large US dollar debts, to global currency movements.
Queensland’s conservative Liberal National Party state government, which relies heavily on revenues from mining, this month offered a tax incentive to the first company to bring coal out of the Galilee Basin, a huge but as yet untapped deposit.
Deputy Premier Jeff Seeney acknowledged that the low coal price “is certainly making it difficult and causing everyone to be a little hesitant”.
