Morgan Stanley "negative" report: Aussie environmentalists say Adanis put on hold $10 billion coal project
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| An anti-Adani poster in Australia |
Is Gujarat’s powerful Adani Group thinking of withdrawing from one of its most ambitious international ventures in Australia, the $10 billion Carmichael coal mining project in Queensland, following opposition from the top environmental group Greenpeace? Citing “Hunkering Down; Waiting for Resolution on Adani Power”, a report prepared by investment banker Morgan Stanley, well-informed sources in Australia are learnt to have reached the conclusion that this may well happen sooner rather than later. The Morgan Stanley report specifically says, “While the company expects the environmental clearance to come through in F2H14, it does not plan to spend money on developing the mine until coal prices rise from current levels” (click HERE to download the full report).
An Australian eco-group, the Sunrise Project, launched in July 2012 out of the need to support communities directly impacted by the massive expansion of coal and gas projects, has quoted the4 Morgan Stanley report to say that the Adani Group’s Carmichael coal mining project “has been put on hold. An Australian online news portal (click HERE to see) has also quoted a Surprise Project media release to say that Morgan Stanley believes “the Indian coal conglomerate has no intention of developing its planned Carmichael mine in Queensland’s Galilee Basin until coal prices increase.” The eco-group emphasizes, “Morgan Stanley’s research report values the Indian coal conglomerate’s Carmichael project at $ 0.”
The media release, forwarded to Counteview, says that Stanley Morgan’s view is “directly at odds with Adanis’ own December 2013 quarter results report issued on January 31”, adding, “The 40 million tonne per annum coal project will be the biggest black coal mine in Australia, with the export coal aimed predominantly at the Indian market.” The release points out, “The proposed mine is the driver behind Federal Environment Minister Greg Hunt’s approval in December 2013 of the highly contentious new ‘Terminal Zero’ port development at Abbot Point near Bowen in Queensland, which will demand dredging and dumping three-million cubic metres of seabed in the World Heritage listed Great Barrier Reef to accommodate up to six new coal ship berths.”
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| Morgan Stanley report says new value of Adanis' Australian coal mining project is zero dollars |
Late last month, Greenpeace sharply objected to the Great Barrier Reef Marine Park Authority’s approval for dumping of dredge spoil at Abbot Point as “a blow for the Reef” (click HERE), adding, “Conditions on the approval mean dredging is unlikely to start until 2015, giving us time to pressure the true villains behind the dredging plans – like multinational coal company Adani Mining.” It underlined, “Australians are rightly angry about the Great Barrier Reef Marine Park Authority’s (GBRMPA) decision to approve the dumping of 3 million cubic metres of dredge spoil in the Reef Marine Park near Abbot Point in north Queensland. The Authority’s charter says ‘our fundamental obligation is to protect the Great Barrier Reef Marine Park and the World Heritage Area’.”
Greenpeace further said, “They’ve given permission for coal companies to dump dredging waste inside the Marine Park, just 10 km from the fringing reefs of Holbourne Island National Park and close to a sunken World War Two plane wreck. This flies in the face of opposition from tens of thousands of Australians who contacted the Authority urging them to reject the plan, and ignores the concerns of local fishermen and tourism operators, worried about the impact on their livelihoods. GBRMPA is normally a good guardian of the reef, so what could have convinced them to make such a bad decision?
You can bet that the multinational coal companies behind the expansion of the Abbot Point coal port have been lobbying hard to get their way.”
Calling Adani Enterprises Ltd as the “biggest culprit”, it said, the “Indian corporation 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. Right now, Adanis are pushing for approval of its proposed Carmichael coal mine, approximately 300 km south-west of Abbot Point. This mega-mine would destroy endangered finch habitat, drain precious water supplies and dig up 40 mega-tonnes of coal each year. The mine would be linked to the coast by a new railway line, crossing farmland and floodplains, and spreading toxic coal dust. The coal will be loaded into ships at the new Terminal Zero jetty at Abbot Point.”
Greenpeace further said, “They’ve given permission for coal companies to dump dredging waste inside the Marine Park, just 10 km from the fringing reefs of Holbourne Island National Park and close to a sunken World War Two plane wreck. This flies in the face of opposition from tens of thousands of Australians who contacted the Authority urging them to reject the plan, and ignores the concerns of local fishermen and tourism operators, worried about the impact on their livelihoods. GBRMPA is normally a good guardian of the reef, so what could have convinced them to make such a bad decision?
You can bet that the multinational coal companies behind the expansion of the Abbot Point coal port have been lobbying hard to get their way.”
Calling Adani Enterprises Ltd as the “biggest culprit”, it said, the “Indian corporation 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. Right now, Adanis are pushing for approval of its proposed Carmichael coal mine, approximately 300 km south-west of Abbot Point. This mega-mine would destroy endangered finch habitat, drain precious water supplies and dig up 40 mega-tonnes of coal each year. The mine would be linked to the coast by a new railway line, crossing farmland and floodplains, and spreading toxic coal dust. The coal will be loaded into ships at the new Terminal Zero jetty at Abbot Point.”
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| Another Greenpeace campaign poster in Australia |
Sunrise Project release quotes financial analyst Tim Buckley, director, Energy Finance Studies, Australasia, at the US Institute for Energy Economics and Financial Analysis (IEEFA), to comment, “Morgan Stanley has belled the cat by reporting that Adani has put the Carmichael project on the backburner. Adanis’ house brokers have underlined for the market what the company has been unwilling to admit - the Carmichael project is uncommercial for investors. We now have an unambiguous market signal that investors should stay away. The market price of coal does not support the cost structures of this project and latest reports show AEL is overleveraged and drowning in interest. The remoteness of the Carmichael project’s location is an almost insurmountable obstacle to the project ever becoming operational.”
Buckley co-authored with the former first deputy comptroller of New York Tom Sanzillo a November 2013 report by IEEFA into the viability of the Adanis’ Carmichael project. The report, which was sponsored by Greenpeace, had sought to warn market analysts and global financial institutions that the Adanis’ “mega coal projects, like the mine and port development planned for Queensland’s Galilee Basin, are economically and environmentally unsustainable.” The report said, “If developed, this massive Greenfield project would have a profound impact on the global seaborne traded thermal coal market. The climate change implications are also enormous.”
The report had doubted the “scope for the Adani Group to fund this $10 billion project”, saying, “The Adani Group already has $ 12 billion of net debt, more than double its current external market capitalisation of $ 5.2 billion. The Adani Group is also part way through a dramatic expansion of almost every business division it operates, further straining its free cashflow profile. The financial profile of the Adani Group has been undermined by a significant portion of its debt being US dollar denominated at a time when the Indian Rupee has been consistently devaluing. Adani Enterprises reported a net loss in each of the last two quarters, in large part due to rising interest expense charges and mark-to-market losses on its largely unhedged foreign exchange positions.”
Buckley co-authored with the former first deputy comptroller of New York Tom Sanzillo a November 2013 report by IEEFA into the viability of the Adanis’ Carmichael project. The report, which was sponsored by Greenpeace, had sought to warn market analysts and global financial institutions that the Adanis’ “mega coal projects, like the mine and port development planned for Queensland’s Galilee Basin, are economically and environmentally unsustainable.” The report said, “If developed, this massive Greenfield project would have a profound impact on the global seaborne traded thermal coal market. The climate change implications are also enormous.”
The report had doubted the “scope for the Adani Group to fund this $10 billion project”, saying, “The Adani Group already has $ 12 billion of net debt, more than double its current external market capitalisation of $ 5.2 billion. The Adani Group is also part way through a dramatic expansion of almost every business division it operates, further straining its free cashflow profile. The financial profile of the Adani Group has been undermined by a significant portion of its debt being US dollar denominated at a time when the Indian Rupee has been consistently devaluing. Adani Enterprises reported a net loss in each of the last two quarters, in large part due to rising interest expense charges and mark-to-market losses on its largely unhedged foreign exchange positions.”
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