‘Big 4′ banks under pressure to rule out funding of coal projects

The Australian Conservation Foundation (ACF) has released a report calling on Australia’s “big four” banks to rule out involvement in financing controversial coal projects proposed for Queensland’s Galilee Basin near the Great Barrier Reef World Heritage area.

The report called ‘The Equator Principles and financing of coal projects in the Galilee Basin‘ names Australia’s “big four” banks   – Australia-New Zealand Banking Corp (ANZ), Commonwealth Bank of Australia (CBA), National Australia Bank (NAB), and Westpac Banking Corp – as signatories to the Equator Principles (EPs) and calls on all four to rule out any involvement in the Galilee Basin projects.

The report is a result of research undertaken by ACF energy analyst Tristan Knowles which investigates how Australian banks should deal with financing coal projects in the area. The EPs are a voluntary framework the banks have signed up to guide them in the assessment and management of environmental and social risk in the projects they consider financing.

Anti-coal activists hang a huge banner in front of Commonwealth Bank's headquarters, calling on to follow international banks: rule out finance for new coal export terminals at Abbot Point in the Great Barrier Reef World Heritage Area.  (Photo: Market Forces)

Anti-coal activists hang a banner in front of Commonwealth Bank’s headquarters, calling on to follow international banks: rule out finance for new coal export terminals at Abbot Point in the Great Barrier Reef World Heritage Area. (Photo: Market Forces)

The EPs serve as a guide to the best practices and a “gold standard” in environmental and social risk management. ACF said the EPs are relevant to proposed coal projects in the Galilee Basin because mines and infrastructure require project finance and advisory services to proceed. More notably, the project value is well over US$10 million – the current threshold for coverage by the EPs.

ACF insists that coal projects in the Galilee Basin are a litmus test for the EPs stating, “If they’re truly a gold standard for environmental and social risk management, Australian banks should rule out further financing of these projects because they will result in serious damage to the environment… We hope this report focuses the debate about Galilee Basin Coal projects back on the banks’ commitments to be environmental leaders.”

Anti-fossil fuel protesters call on Australian four major banks to divest from financing coal projects during the Divestment Day rally. (Photo: Market Forces)

Anti-fossil fuel protesters call on Australian four major banks to divest from financing coal projects during the Divestment Day rally. (Photo: Market Forces)

Several foreign banks have already backed out from financing Adani Group’s coal port expansion, including US banking giants Citigroup, Goldman Sachs, and JPMorgan Chase.

Prior to those banks’ rejection, the Deutsche Bank, Royal Bank of Scotland, HSBC and Barclays all ruled out funding the development of the Adani’s $16.5bn project

The report said the massive projects will destroy tens of thousands of hectares of land, consume huge amounts of water and potentially impact on the Great Artesian Basin, and result in significant greenhouse gas pollution.

The UN World Heritage Committee, which visited the site in 2013, also said coal projects will cause irreparable damage to the World Heritage Area and warned the Australian government to delist the site.

News blog link: The Green Journal @ Asian Correspondent

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Deutsche bank rebuffs Adani’s funding request

The Deutsche Bank of Germany announced it will not lend money to the Indian mining firm Adani Group to finance the development of Abbot Point Terminal I. The decision came after an AGM held on Thrusday.

We stress that we take the future of the Great Barrier Reef very seriously. We observe that there is no consensus between UNESCO and the Australian government regarding the expansion of Abbot Point. Since our guidance requires such a consensus as a minimum, we would not consider a financing request. – Deutsche Bank Group

Deutsche Bank Group convenes AGM 2014 (Photo: Deutsche Bank Group FB)

Adani is one of the last remaining investors standing for the port terminal, along with another Indian firm, GVK Group.

Other investors have long abandoned their stakes, including mining giants Rio Tinto, BHP Billiton, Lend Lease and Anglo American. Market and financial analysts said the multi-billion dollar investment is unfeasible due to the end of the mining boom, with the downward spiraling of coal market prices worldwide. Galilee Basin in northern Queensland, where coal will be extracted,is also extremely remote and without basic infrastructure.

Tony Brown, tour operator for the Whitsundays, speaks at the bank’s AGM 2014 (Photo: Market Forces)

Australian mining goddess Gina Rinehart, herself, sold most of her coal assets in 2011. GVK bought them.

But despite Indian interests, the project has been stalled for two years. Adani is required to complete all environmental approvals and then raise AU $8 billion of additional debt and equity financing, and hence allow construction to commence on the Carmichael coal, rail and port proposal. Read the scale and magnitude of funding HERE.

There are speculations that the two companies tried to sell their equity holdings. GVK allegedly offered Coal India Ltd, but was rebuffed due to its uncommercial value. Adani is also rumoured to have approached several Chinese firms, including China Railway Corp.

Early this month, the Institute for Energy Economics and Financial Analysis (IEEFA) warned investors it is too risky to invest in the project. Local banks which were appointed to finance the project include National Australia Bank, Commonwealth Bank, and Westpac Banking Corp- on top of a few other international banks.

Tim Buckley , director of Energy Finance Studies, Australasia for the Institute for Energy Economics and Financial Analysis said that India cannot afford the price of imported coal:

India’s perilous economic and financial situation creates further uncertainty for companies relying on its ability and willingness to import coal, with its associated implications for inflation, current account deficits, economic instability and energy security’.

He also said that “imported coal would require double the current price of India’s wholesale electricity, which categorically discredits the nonsense argument that it might alleviate India’s energy poverty.” Buckley has produced detailed reports on Adani and GVK.

Whitsundays tour operator Tony Brown joins the rally in Germany (Photo: Market Forces)

Various environmental and civic groups have written the Deutsche Bank not to lend Adani.  Australian-base civic groups also linked with their European counterparts to “pressure” the bank. Some travel operators in Queensland further travelled to Germany to join the rally.

At the end of the AGM on Thrusday, the bank released the Deutsche Bank’s Environmental and Social Reputational Risk Framework (ES Framework), which stipulates the bank’s  environmental and social due diligence as an integral part of the approval process for doing business.

One of the specific guidelines recently adopted addresses activities in the close proximity to World Heritage Sites. It precludes transactions within or in close proximity to World Heritage Site unless there is a prior consensus between the relevant Government and UNESCO that such operations will not adversely affect the Outstanding Universal Value of the Site. This implies that we would not consider a request to finance an expansion unless we had the assurance of both the government and UNESCO that it would not adversely affect the Value of the Site.

Read: Deutsch Bank official stand and UNESCO’s State of Conservation

Blog Link: The Green Journal/ Asian Correspondent

Largest port to kill the Barrier Reef

The “Asian Century” has arrived in Queensland. The world’s largest port will rise soon that will pave the link between the Australian state and Asian market– India in particular.

Aerial view Abbot Point T2 and T3

Aerial view Abbot Point T2 and T3

The Federal government gave the green light to the massive expansion of three major port terminals at Abbot Point, 26 km north of Bowen in Central Queensland– positioned to become one of the world’s largest industrial sea ports.

The approval gives Adani Enterprises Pty. Ltd. and GVK, among other mining companies, a breakthrough in the multi-billion coal industry which will exploit the potential of the coal-rich Galilee Basin.

Adani’s most recent performance at T0

Environment Minister Greg Hunt announced the decision on Tuesday after a ”rigid assessment” and the project’s environmental impacts. After a long delay, the minister approved four Queensland projects under the National Environmental Law, including the capital dredging program for the proposed Terminals 0, 2 and 3 at the Port of Abbot Point, the Adani T0 project, the Arrow Liquefied Natural Gas Facility on Curtis Island, and the Arrow Gas Transmission Pipeline to Curtis Island. The terminals will provide the necessary infrastructure to accommodate the ”bullish” coal industry within the Galilee Basin.

The approval of Terminal 0 (T0) is sure to boost Adani’s ambitious prospect to ship the coal to India. “Coal from this project will predominantly service the Indian market,”  Adani admitted. The group acquired the terminal for about two billion Australian dollars under a 99-year lease in 2011. T0 is estimated to have a 70 metric tonnes per annum mtpa (35 mtpa x two stages) handling capacity. T2 will be built by an Australian-own company, while T3 will be undertaken by GVK.

But the New York Times reported Adani bought the port in 2011 for 1.8 billion Australian dollars taking advantage of the area still recovering from a series of floods.

 “Abbott Point is our contribution to India’s global ambitions,” said Gautam Adani, chair of Adani. Adani. “An Indian billionaire and real estate magnate, runs the largest private sector coal importer in India, a country hungry for energy resources. He already has other investments in Queensland….”

The T0 alone is projected to generate  a financial value of A$ 1.4 – 2.8 billion annually in gross revenue which will contribute significantly to the Queensland and Australian economy. It will directly benefit Bowen locality and the wider Whitsunday region, Adani said in its presentation paper earlier this year.

Estimated employment stands at 500 jobs in construction and 200-250 jobs in operation, while it provides opportunity for expansion of permanent working population at the Port of Abbot Point. This projection, however, is based on the estimated export of thermal coal from Adani’s Carmichael Coal Mine and Abbot Point Coal Terminal 0 projects.

GVK, on the other hand, will undertake the expansion of  T3  port facilities and Galilee Basin coal assets including the Alpha, Alpha West and Kevin’s Corner coal projects. It will also construct a rail connection to the Abbot Point Port. “Together with the previously received clearances for the Alpha mine, the rail to Abbot Point ,GVK Hancock has solidified its leading position in the Galilee Basin of Queensland, Australia, ” the company said in a press release.

GV Sanjay Reddy, Vice Chairman  of the GVK Power & Infrastructure Limited, said the approval will enable the “provision of billions of tonnes of high quality, low sulphur, low ash, and cleaner burning coal for consumption in the Indian and Asian market.” He added, “this approval takes our projects in to the final stageof project development and we look forward to successfully developing and consolidating our position as the leading Indian infrastructure development company.”

The North Queensland Bulk Ports Corporation  (NQBC) has been commissioned as the port authority responsible for managing the project.

The extensive industrial projects along the eastern coast of Queensland. The darker blue line sketches the boundary of the world heritage area (Image: Fight for the Reef)

State Premier strengthens economic ties with India

The Galilee Basin is strengthening the economic ties between Queensland and India. Premier Campbell Newman admitted the potential of the region which could be a bigger contributor to Queensland’s economy than the coal seam gas industry.

Newman had visited Adani’s operation in India and believes in the export potential of the region. Further, he considers a long-term strategic business partnership with Indian companies. Mining Australia quoted him as saying, “They want coal to come for their thermal power stations day in, day out, week in, week out, month after month, for not 10 years or 20 years or 50 years; they want it to come for 70 to 100 years” .

On Gautam Adani, Newman is mesmerized with his business empire-building enthusiasm: “He owns the power lines, he owns the retail, he wants that coal. Now, the current coal price is not really a big thing in his calculations,” Newman said. “What he wants is supply security, and he wants to get that supply chain cost down as low as possible.”

Environmental concerns

Greenpeace lambasts the dredging and dumping of industrial waste into the vicinity of the reef.

Environmental groups, however, are enraged with the developments.

The terminals will require dredging of about three million cubic meters of sediments from the bottom of the sea. Local communities and environmental groups are outraged on how and where would the dredging spoils be dumped. The long-term effect after the area after the mining projects is also a matter of concern.

Hunt said he made an agreement with the Gladstone Ports Authority that they will not dispose of up to 12 million cubic metres of spoil within the Marine Park, but will instead use the material for land infill.

Hunt and Newman are already under fire from Green groups. The WWF, for one, is now pressing the Great Barrier Reef Marine Park not to issue a permit to the NQBPC to dump the dredge spoil into the reef waters.

The WWF-Australia, in partnership with the Australian Marine Conservation Society, has also launched a nationwide and international campaign, Fight for the Reef, that educates people about the implication of the large-scale industrialization of Australia’s east coast- more significantly its impact on the world-listed heritage site – the Great Barrier Reef.