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IEEFA Report: Proposed Godda Power Project just another financially unviable prop for Adani

Using Australian coal from Adani’s coal mine for Bangladesh, too expensive, too late, too risky

Adani’s plan to provide electricity to Bangladesh using Carmichael coal can only entrench energy poverty

April 10, 2018 (IEEFA.org): Adani’s Godda Power proposal is an attempt by Adani to prop up its struggling Carmichael coal project in Australia, and will lock Bangladesh into an expensive, long-term, and emissions-intensive source of electricity for decades to come, concludes a report published today by the Institute for Energy Economics and Financial Analysis (IEEFA).

“With Adani Power’s Mundra import coal-fired power plant financially unviable, Adani sees the Godda project as a way to provide an alternative destination for coal from the proposed Carmichael mine which has so far failed to secure any funding,” states the report.

Adani Australia chief executive Jeyakumar Janakaraj recently stated that the supply of coal from its Carmichael coal mine project to the Godda power plant will help bring millions of Bangladeshis out of poverty.[1]

Yet the power purchase agreement struck with India’s poorer neighbour is heavily geared to primarily assist Adani companies while simultaneously locking Bangladesh into an expensive, long-term and emissions-intensive source of electricity for decades to come.

Bangladesh is a member of the ‘Vulnerable Twenty Group’ – a forum of nations most vulnerable to climate change.

Tim Buckley, co-author of the report, said that the proposal to import coal from Australia and then rail it 700km into the state with the largest coal reserves in India simply makes any potential electricity being produced too expensive for Bangladeshi consumers.

“The logistics of the proposal can only work because the power purchase agreement allows Adani Power to pass the full cost of importing the coal onto Bangladesh” Buckley said. “The estimated Godda tariff of Rs6.65/kWh (A$0.13/kWh) is far higher than Indian state-owned utility NTPC’s thermal power tariff of Rs3.21/kWh (A$0.06/kWh).”

In February 2018 NTPC won a fuel-agnostic competitive tender to export power to Bangladesh – power that will be far cheaper than that from Adani’s Godda proposal and which makes much more sense for Bangladesh.

IEEFA’s report also highlights the dire financial state of Godda proponent Adani Power. “Adani Power is in clear financial distress with net debt of over US$7 billion and its share price has fallen almost 80% to a near 10-year low – the company has given no indication of how they will secure funding for this proposal,” Buckley said.

“Adani Power is not in any financial position to undertake a major new US$2.1bn greenfield project; the most likely outcome is that this power plant will never get off the ground.”

Adani Power has so far failed to make the full cash deposit required to secure land acquisition for the project whilst the company’s loss-making 4.6 GW Mundra power plant, originally earmarked as the major destination for Carmichael coal, has recently ceased supply of electricity to the state of Gujarat, in breach of its contracted power purchase agreement.

Now that the dire financial status of the Mundra coal-fired power plant has unraveled Adani’s “pit-to-plug” strategy, Adani is obviously keen to try and convince potential Carmichael investors that there are alternative destinations for Carmichael’s coal. IEEFA notes that the Indian Association of Power Producers has stated that, at prices above US$70/t, imported coal is unviable in India. The current cost is US$90 to US$100/t.

IEEFA’s report concludes that both India and Bangladesh would be better off if Bangladesh imported power on a technology-agnostic basis from existing Indian power plants procured by competitive tenders. Given that renewable energy in India is now cheaper than power from existing coal-fired power plants, such imports would be increasingly from renewable sources going forward.

Full report here:  http://ieefa.org/wp-content/uploads/2018/04/Adani-Godda-Power-Project-April_2018.pdf

About IEEFA: The Cleveland-based Institute for Energy Economics and Financial Analysis (IEEFA) conducts research and analyses on financial and economic issues related to energy and the environment. The Institute’s mission is to accelerate the transition to a diverse, sustainable and profitable energy economy.

Tim Buckley, Director of Energy Finance Studies at IEEFA, based in Sydney, Australia, he has 30 years of financial markets experience, including 17 years with Citigroup culminating in his role as Managing Director, Head of Australasian Equity Research. Tim has written broadly on the China and India’s energy transformation and the resulting stranded asset risks for thermal coal exposed projects.

Simon Nicholas, an energy research analyst with IEEFA in Sydney, Australia. Simon holds an honours degree from Imperial College, London and is a Fellow of the Institute of Chartered Accountants of England and Wales and has 16 years’ experience working within the finance sector in both London and Sydney at ABN Amro, Macquarie Bank and Commonwealth Bank of Australia.

[1] https://www.themorningbulletin.com.au/news/adani-wants-cqs-coal-to-lift-millions-out-of-pover/3371530/

HoldfastIEEFA Report: Proposed Godda Power Project just another financially unviable prop for Adani
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Controversial NT golden shale well Amungee – doesn’t stack up economically: IEEFA

Commenting on a new report that Origin Energy erased all evidence of a frack well casing deformation in a submission to the NT Fracking Inquiry, Bruce Robertson, Gas/LNG Australasia analyst, the Institute for Energy Economics and Financial said:

“Apart from the very serious allegation that the Northern Territory Government and fracking Inquiry are implicated in a cover up by Origin, the hype of the Amungee well, in the Beetaloo basin does not match its economic reality.

“While Origin’s Amungee well is being touted as the golden child of shale wells, flow rates of gas are a fraction of those in the early US discoveries of shale gas in the Marcellus Shales[1].

“The claims by the industry that the Beetaloo basin will save the East Coast gas market are built on hope not on drilling results.  It is far too early to declare a major gas province from the small number of wells drilled and the disappointing results from those that have been.

“The Beetaloo is a remote gas province and piping costs to market are prohibitive.  Nearly all reputable commentators including Wood MacKenzie rate the Beetaloo a high cost field.

“The likelihood of development of a major onshore gas industry in the Northern Territory is low[2] due to the high cost of the gas, and prohibitive piping costs to market, in a low cost gas world.

“Pricing for long term gas contracts has fallen gain by around 20%. This runs counter to the narrative from the gas industry that the gas glut has past[3].

“With ever more production coming on stream between now and 2022 the global gas glut has not disappeared and pressure on global pricing in the medium term remains.

“The fact that Origin did not follow best practice and fracked too near a fault line resulting in deformation is lamentable and does not bode well for future activities in the Northern Territory.

END

[1] See page 21 for 2008 Shale production curves from the USA.  http://media.corporate-ir.net/media_files/irol/10/104617/PDAnalystMeetingSession1.pdf See page 63  for current Marcellus production profiles http://www.chk.com/Documents/investors/20161020_CHKAnalystDay.pdf

[2] Page 46 https://frackinginquiry.nt.gov.au/inquiry-reports?a=456790

[3] https://www.platts.com/latest-news/natural-gas/london/shell-ceo-dismisses-prospect-of-global-lng-glut-26882946

HoldfastControversial NT golden shale well Amungee – doesn’t stack up economically: IEEFA
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BHP and MCA at loggerheads on coal, again: ACCR

Commenting on the Mineral Council of Australia’s renewed advocacy for HELE coal, Executive Director of Australasian Centre for Corporate Responsibility (ACCR) Brynn O’Brien said:

“The clear, formal request from BHP to MCA to refrain from hardline coal advocacy has had no effect. Instead of taking BHP’s review and the concerns of its shareholders seriously, MCA is back  to its old tricks, continuing this disproven nonsense that HELE coal is “clean”.

HoldfastBHP and MCA at loggerheads on coal, again: ACCR
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IEEFA Report: China Continues to Position Itself for Global Clean Energy Dominance During 2017

As the U.S. Withdrew from the Paris Climate Agreement and Moved to Support Coal, China Accelerated its Domestic Reorientation Away from Coal and Enhanced its New Energy Technology Capacity as a Prelude to a Global Roll-Out

 January. 10, 2018: (IEEFA.org) – In 2017, China has continued to be the world’s dominant force in the building and financing of clean energy technology globally, concludes a report published today by the Institute for Energy Economics and Financial Analysis (IEEFA).

“Indications are that renewable energy will dominate global power capacity additions for at least the next two decades. China is preparing now to lead this new energy world,” states the report.

Tim Buckley, co-author of the report and IEEFA’s director of energy finance studies, said that the withdrawal of the U.S. from the Paris climate agreement along with an increased U.S. government emphasis on coal and away from renewables is at odds with the direction being taken by China.

“The clean energy market is growing at a rapid pace and China is setting itself up as a global technology leader whilst the U.S. government looks the other way,” Buckley said.

“Although China isn’t necessarily intending to fill the climate leadership void left by the U.S. withdrawal from Paris, it will certainly be very comfortable providing technology leadership and financial capacity so as to dominate fast-growing sectors such as solar energy, electric vehicles and batteries.”

This report follows on from IEEFA’s previous summation of China’s expanding new energy capacity from last year. In this new report, China’s further progress in clean energy sectors during 2017 is analysed, including advancements led by the nation’s large and influential state-owned utility, engineering and finance companies.

Growing Chinese dominance is led by the Belt and Road Initiative (BRI) that is driving outbound infrastructure investment along ancient trading routes. 2017 saw the significance of the BRI further enhanced. Despite encountering some headwinds in 2017, it remains a central feature of China’s foreign and economic policy.

“It has become clear that renewables will be the dominant energy technology of the following decades with even the cautious International Energy Agency (IEA) accepting that renewables will receive the majority of energy investment going forward,” Buckley said.

“China is not going to buck this trend; although it is still investing in some coal projects around the world, China will embrace the direction energy markets are moving in and is setting itself up as a global technology leader.”

India is now following China’s energy sector lead, adding its economic weight to further accelerate global renewable energy deployments at ever greater economies of scale, driving deflation.

Excerpts from the report:

  • IEEFA’s identified list of large overseas clean energy projects for 2017 is even greater than the prior year’s list. The total for large projects (valued at US$1 billion or more) in 2017 exceeds US$44 billion. This compares to US$32 billion identified in 2016, which was itself a record year for Chinese low-emissions-sector investment overseas.
  • Chinese M&A activity in countries that are part of the Belt and Road Initiative (BRI) soared in 2017. Through the whole of 2016, Belt and Road-related acquisitions totaled US$31 billion; this figure was surpassed in 2017 by the month of August.
  • The BRI was enshrined in the Communist Party constitution in 2017, creating more pressure than ever for it to succeed and confirming China’s desire to expand its role in the global economy.
  • Chinese solar manufacturers account for about 60% of global solar cell production, and China’s solar manufacturing leadership was cemented in 2017.
  • Major Chinese wind energy companies, including the world’s largest wind power developer, continued to expand overseas.
  • Large Chinese hydro power firms continued to either acquire, or to win contracts to build, major hydro projects. Latin America, Africa and Asia continue to be areas of focus for Chinese hydro companies.
  • State Grid Corporation, the world’s largest power utility, leads persistent Chinese international investment in power grids.
  • China is outmaneuvering other economies in securing supplies of new energy commodities.
  • Chinese companies have maneuvered into a position to dominate the cobalt market with the majority of supply heading back to China. Chinese miners are expected to have been responsible for 62% of global supply in 2017.
  • Securing new energy commodities will allow China to dominate battery and EV manufacturing going forward.
  • Chinese electric vehicle (EV) manufacturers are rapidly building domestic capacity. Gaining such a head start in the EV sector domestically is a prelude to a push into international markets. Chinese manufacturers like BYD have ambitions to sell more EVs overseas than domestically in the future.
  • China’s energy sector has many major financial institutions at its disposal to support its overseas energy ambitions.

The full report is available here: ‘China 2017 Review: World’s Second Biggest Economy Continues to Drive Global Trends in Energy Investment’

 

HoldfastIEEFA Report: China Continues to Position Itself for Global Clean Energy Dominance During 2017
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BHP’s millions for Minerals Council speak louder than words

Commenting on a report that BHP will not support the Minerals Council of Australia’s bid to strip environmental groups of their ability to advocate for policy change, Executive Director of Australasian Centre for Corporate Responsibility (ACCR) Brynn O’Brien said:

“BHP remains the Minerals Council of Australia’s biggest funder. While this is the case, it should expect to be held to account by shareholders for using their money to bankroll the MCA’s advocacy efforts, including their obstructive and misleading public policy positions on climate change and energy, and their attacks on civil society.

“MCA has been a toxic drag on Australian public debate and democracy. They have played a leading role in this country’s last decade of climate policy failure.

“Proper scrutiny of corporate payments to coal lobbyists would advance both local and global progress on climate and energy policy. BHP shareholders have an opportunity to get this work underway at BHP’s AGM by voting in favour of ACCR’s resolution.”

The ACCR BHP shareholder resolution will be heard at BHP’s Australian AGM on 16 November. It calls for the termination of paid membership of industry bodies like the MCA that have demonstrated a pattern of advocacy on policy issues at odds with the company’s positions over the period 2012 to the present day.

View the resolutions and supporting statements with references here.

CONTACT
Brynn O’Brien ACCR Executive Director +61 423 951 316
Brami Jegan Holdfast Communications  +61 448 276 945

 

HoldfastBHP’s millions for Minerals Council speak louder than words
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Adani seeks financing from a Chinese State Owned Enterprise (SOE) for it’s Carmichael Mine: IEEFA

A Chinese government state owned enterprise (SOE) is understood to be being courted as a new partner in return for securing much needed additional government funding for the Adani Carmichael coal mine and rail proposal in Queensland, according to a new report by the Institute for Energy Economics and Financial Analysis (IEEFA).

HoldfastAdani seeks financing from a Chinese State Owned Enterprise (SOE) for it’s Carmichael Mine: IEEFA
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The Minerals Council of Australia strikes again – kills off Clean Energy Target in Australia: ACCR

Malcolm Turnbull’s decision to drop his Chief Scientist’s key recommendation of a Clean Energy Target is another win for the Minerals Council of Australia (MCA), the biggest funder of which is BHP,” said Brynn O’Brien, Executive Director of Australasian Centre for Corporate Responsibility (ACCR).

HoldfastThe Minerals Council of Australia strikes again – kills off Clean Energy Target in Australia: ACCR
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