Adani Enterprises’ long-delayed Carmichael coal mine project in Australia hit a major road-block when the newly-elected Queensland government vetoed a plan to give a $900-million concessional loan for the construction of a rail line to connect the coal mine with the sea port. The Indian company, which hoped to generate 40 million tonnes of coal a year from the Carmichael mine by March 2020, has been facing years of delay because of legal appeals from activists.
Last month, the project faced yet another problem after China’s two major state-run banks said they had no plans to finance the venture. This has, once again, raised concerns about the financial viability of the project, particularly given the direction the world has taken toward utilising renewable energy resources.
The issue
Adani Group’s overseas subsidiary Adani Australia entered Australia in 2010 with the purchase of the Carmichael coal mine in the Galilee Basin in central Queensland, and the Abbot Point port near Bowen in the north. The A$16.5-billion project has run into trouble on account of environmental concerns raised by the public.
Adani Australia expected the mine to produce 2.3 billion tonnes of coal over 60 years — an average production of 40 million tonnes a year. The company had planned to export most of the produce to India through sea. The produce was to be brought to Abbot Point for which the rail line was to be laid. The Adani Group had applied for the Northern Australia Infrastructure Facility (NAIF) loan worth $900 million to build this rail line.
Last month, Premier of Queensland, Annastacia Palaszczuk vetoed the loan, which came on the back of strong opposition from the public against the project as it raised major environmental concerns, including its potential impact on the Great Barrier Reef, groundwater at the site and the generation of carbon emissions. Environmentalists fear that the development of the coal mine, rail line, the port and the burning of coal will damage the Reef.
The mine is expected to consume 12 billion litres of water every year and a total of 297 billion litres in 60 years.
Move towards renewables
As per COP 21 (the climate change conference) many countries are reducing their carbon emission by cutting down on the use of coal. Hence, the pace of thermal power generation is expected to slow down as renewable energy gains ground.
With Adani making huge investments in coal generation, further delay could cost it dear. Adani Mining Private Limited is a 100 per cent subsidiary of Adani Enterprises Limited (AEL). In 1HFY18, AEL’s total debt increased from ₹20,783 crore to ₹23,880 crore at the end of FY17. Benefits from the coal production in Australia was expected to kick-in from FY21.
In addition, the company has invested A$3.3 billion across existing projects in Queensland.
Available coal capacity
At present, Adani Group has coal reserves in India, Indonesia and Australia (including Carmichael mine),with 12 billion metric tonnes of mining capacity; the production as on March 31, 2017 was 12 million metric tonnes . Adani is a major importer of coal in India — it has set a target of increasing coal trading and mining volumes to 200 million metric tonnes by 2020.
Adani Power had sold 60.19 billion units of electricity during FY17 as against 64.62 billion units in FY16 from all the plants with reduced plant load factor (PLF) to 70 per cent from 76 per cent. The PLF reduced on account of planned maintenance shut-downs, domestic coal shortages and more. With the Carmichael project getting operational, the coal required for power generation will be available with the group, increasing the PLF. Any delay in the project will pressurise the group to increase coal production from one of its other mines.