Saturday, May 24, 2014

Green pressure: Two top European banks withdraw support to Adanis' $12 billion Australian coal project

By Our Representative
In a major setback to Gujarat's powerful Adani group known to close to Prime Minister designate Narendra Modi, Germany's largest bank, Deutsche Bank AG, has declared it will not finance the “controversial” coal port expansion in Australia near the Great Barrier Reef. The bank said, it was responding to calls from environmental groups and tourism operators. The move comes nearly a fortnight after Australia’s provincial Queensland government approved a proposal to build Australia’s biggest coal mine – Adani’s Carmichael mine in the Galilee Basin.
Meanwhile, an Institute for Energy Economics and Financial Analysis (IEEFA) report has warned investors it is too risky to invest in the project. Authored by Tim Buckley, director of Energy Finance Studies, Australasia, the report believes 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”.
Pointing out 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”, the report states, for “a new Greenfield power plant, imported coal would cost Rs5.40-5.70/kWh and rise 4% pa thereafter, whereas wind would cost Rs4.60/kWh and solar Rs5.50/kWh, with no inflation impact over time – making this a straight commercial decision for India to aggressively expand its investment in renewables” (click HERE to read report).
Following Deutsche Bank’s announcement, HSBC, Europe's biggest bank declared it was “extraordinarily unlikely” it would go near the project. HSBC's chief executive Stuart Gulliver said his bank had not received any proposals to finance the project and would need to consider it if one were made, but added it would appear to fall foul of its commitment to the Equator Principles - a framework adopted by banks to determine whether to lend on projects where there is environmental and social risk -- and UNESCO's position.
"If you look at what we set out in terms of the Equator Principles and if UNESCO's stance is as you say, I think it would be extraordinarily unlikely that we would go anywhere near it," he said when asked at HSBC's annual shareholder meeting. Australian environmental groups consider the two banks’ stand as “a win for those opposed to $26 billion worth of coal projects that plan to use the Abbot Point port.” Groups led by Greenpeace Australia fughting to protect the World Heritage-listed reef took their campaign to Europe, urging Deutsche Bank, Societe Generale and HSBC not to back the Queensland coal projects.
“They want to stop a government-approved expansion of Abbot Point that would involve dumping 3 million cubic metres of dredged soil about 25 kilometres (15 miles) from the Great Barrier Reef, an issue that is also of concern for UNESCO's World Heritage committee”, an Australian media report said, adding, “Campaigners against the Abbot Point expansion failed to win support from Societe Generale.”
"As we have seen, there is currently no consensus between UNESCO and the Australian government regarding the expansion of Abbot Point in the vicinity of the Great Barrier Reef. Our policy requires such a consensus at the least," Deutsche Bank co-chief executive Juergen Fitschen was quoted as saying at the bank’s the annual meeting. "We therefore would not consider applications for the financing of an expansion any further." Deutsche Bank was targeted because it helped refinance the lease on Abbot Point.
Those defending the port project say that it needs support for exporting coal from massive new mines planned by Adani and GVK, which is working with Australian billionaire Gina Rinehart.” GVK’s spokesperson has been quoted as saying that the Deutsche Bank decision to withdraw “doesn't impact our proposed projects in any way." Ieven then, The Financial Times, one of the world’s most powerful business dailies, describes the bank’s decision as “symbolic.”
The green groups in Australia have long campaigned to stop a government-approved expansion of Abbot Point that would involve dumping 3 million cubic metres of dredged soil about 25 kilometres (15 miles) from the Great Barrier Reef, an issue that is also of concern for UNESCO's World Heritage committee. The campaign has forced most investors out of the project. Adani is one of the last remaining investors standing for the port terminal, along with the GVK Group. Other investors have long abandoned their stakes, including mining giants Rio Tinto, BHP Billiton, Lend Lease and Anglo American.

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