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

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Indian groups keep stake in Abbot Point, reef dumping

Indian mining groups –  Adani and GVK-Hancock –  have not waivered to drop their stakes in the controversial Abbot Point Port terminals in Northern Queensland.

The rest had already dropped the deal, including BHP Billiton and Rio Tinto. Anglo American is the latest to announce it is walking away.

Abbot Point in Northern Queensland (Photo: NQBPC)

BHP Billiton has formally withdrawn from the $5 billion worth of project as the preferred developer of Terminal 2  in 2012. It also pulled out of building a rail line linking the port with Bowen Basin mines.

Early on, doubt has been cast over the feasibility of the project.

The recent decision by Anglo American re-affirms the unfeasibility of the project. The firm announced that oversupply of coal in the world market has dampen prices.

As of its December 2013 financial records, “metallurgical coal saw underlying operating profit fall 89% to $46m, while thermal coal profits fell 32% to $541m as a result of lower realised prices.”

Bloomberg’s writer, Elisabeth Berhmann, quoted a Sydney-based commodity analyst from Goldman Sachs Groups Inc as saying, “For these projects to be attractive investments, you need to be quite bullish about thermal coal prices….If you’re a power company, and you’re wanting to secure sources of coal, there’s plenty of coal in the market.”

Mining Australia notes the expansion would see four terminals costing $6.2 billion which would provide an extra annual capacity of 120 million tonnes. this would also support the development of mines in the Bowen, Surat, and Galilee Basins.

Adani and GVK Hancock, however, are all out to develop Terminal 0 and Terminal 3, respectively.

Josh Euler, manager for corporate affairs at GVK Hancock, welcomes the decision to go ahead with the expansion. He said in a  press statement , “This is a significant milestone in developing our Galilee Basin coal projects, which represent the creation of over 20,000 direct and indirect jobs and over $40 billion in taxes and royalties.” .

Double disadvantage

Amid bearish coal market prices, environmental groups have denounced the Government’s decision due to its high risk posing an irreversible damage to the world heritage site. The Great Barrier Reef Marine Park Authority (GBRMPA) approved the dumping of 3 million cubic metres of dredge spoil in the reef marine park

The Australian public has been outraged with the approval. Last year, the United Nations downgraded the world heritage site into the endangered list.

Protesters in mascots against dumping on the reef. (Photo: AAP)

GBRMPA expedited a crisis communication in an attempt to ‘enlighten’ and ‘pacify’ the public.. Its chairman, Russell Reichelt,  has written an article at the academic online paper –The Conversation –  to justify the approval. He said the decision is based on comprehensive study and sound judgment that will not do any lasting harm to the heritage site. Discussion has been open to the public since March 3. Reichelt answers the queries himself although readers– composed of engineers, scientists, researchers, and ordinary citizens — are neither convinced nor impressed with the attempt to “gloss over” the real issue.

Observers said, there is something fishy at the sudden turn around of decision considering the warnings over sediments dumping.

Greenpeace  also found a document that questions the integrity of the decision. It shows that GBRMPA feared the dumping would annihilate the barrier reef. However, the Environment Department ignored the warnings and pressured the marine park authority.

Greenpeace campaign poster against Adani group

Indian firms- the culprit

Furious tour operators and Greenpeace are pointing fingers at the Indian mining tycoons as the culprit of an impending catastrophic disaster awaiting the vast expanse of corals.

Association of Marine Park Tour Operators President Colin McKenzie, the peak industry lobby group covering tourism in the World Heritage-listed reef region, accused the marine park authority of pandering to politicians and for allowing Adani group to undertake a risky business.

“The biggest culprit is Adani, an Indian corporation that wants to build Australia’s biggest coal mine in the Galilee Basin in central Queensland, and needs the dredging to allow huge coal ships to access their proposed new coal terminal at Abbot Point to send their coal overseas,” Greenpeace said.

Related story HERE

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.