• Adani owner rich enough to fund Carmichael mine himself, analyst says
Adani owner rich enough to fund Carmichael mine himself, analyst says
13 Mar, 2018, No Comment

Summary: A leading energy analyst says a reluctance by banks to finance the controversial Adani coal mine is no longer an insurmountable hurdle because the billionaire family behind the proposal has enough wealth to fund the project itself.....

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Should Indian mining magnate Gautam Adani decide to personally finance the controversial plan, it would clear one of the last remaining roadblocks to the mega-mine becoming reality.

It could also force Labor to firm up its fluctuating position on the project, rather than resting on the assumption the mine will not proceed because it does not stack up financially.

Former head of equity research at Citigroup, Tim Buckley, now a director at the Institute for Energy Economics and Financial Analysis, says Mr Adani was recently valued at $US15 billion on the Indian stock market - a quadrupling in his wealth in four years.

“Adani now has dramatic equity market wealth and he could easily do margin loans against those shareholdings and that would be, in my view, how he could manage to fund the project,” Mr Buckley said.

“That was not an option two years ago."

Australia's big four banks have ruled out funding the project, as have several overseas lenders.

Mr Buckley said the exceptionally strong performance of the Indian stock market since the election of Prime Minister Narendra Modi in 2014 had transformed the fortunes of the Adani group, meaning Indian banks could fund the Adani family against its listed equities.

The Adani mine proposal has encountered strong public opposition and has struggled to secure bank backing.

The Adani mine proposal has encountered strong public opposition and has struggled to secure bank backing. Photo: Dominic Lorrimer

However, such a financing arrangement could face challenges. Last week, senior Indian MP Subramanian Swamy criticised the Adani Group’s excessive financial leverage, which Mr Buckley said wiped $US2 billion from the family’s net wealth in four days. This could potentially make it harder to secure margin loans.

Adani also says coal from the Carmichael mine would mainly be shipped to India. However, the Indian government wants to reduce the nation’s reliance on imported thermal coal.

Mr Buckley questioned whether Mr Adani would want to put his own money into the high risk project and said "if India is no longer keen on imported thermal coal, where is Carmichael [coal] to be sold?”

Mr Buckley said Mr Adani was risk-averse and would “want to see a very strong endorsement of the project" by the Turnbull government - potentially in the form of a public loan - in order to use his own money to make the mine a reality.

Adani's application for a public loan to fund a rail line from the mine to its Abbot Point coal terminal was thwarted by the Queensland Labor government.

Adani's application for a public loan to fund a rail line from the mine to its Abbot Point coal terminal was thwarted by the Queensland Labor government. Photo: Glenn Hunt

Comment was sought from Adani on Monday.

MineLife senior analyst Gavin Wendt said the Carmichael mine was always going to struggle to secure private finance due to challenges such as its remoteness, which will increase capital expenditure and operating costs, and falling thermal coal prices.

He said despite Mr Adani's personal wealth "it's atypical for  a wealthy individual ...  to bankroll their own financial projects", and joint venture partners were usually brought in to offset risk.

Opposition Leader Bill Shorten has said he does not support the mine, but claims a future Labor government would not “rip up the contracts" entered into by the current government.

On Friday Labor frontbencher Anthony Albanese was pressed on whether Labor had been sufficiently tough on Adani to win over voters in the Batman byelection. He said Labor would not give public subsidies to the mine and it was “clear that this is a project that doesn’t have finance”.

Executive director of environmental campaign group Market Forces, Julien Vincent, agreed Mr Adani could now fund the project personally, setting up “the ultimate test of whether Adani is serious about this mine”.

“The question is whether they are prepared to take the economic risks that over two dozen banks around the world have shied away from?” he said.



smh.com.au 12/3/2018

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