Adani Enterprises Carmichael Proposal: IEEFA

Commenting on reports that the Carmichael mine has been given the final go ahead from the Adani’s Indian Parent, Adani Enterprises Ltd Tim Buckley, Director of Energy Finance Studies, Australasia for IEEFA said:
“An internal Investment Decision for the Carmichael mine is very different to an externally legally binding Financial Close. This proposal is still a pipe dream.

“Today’s Investment Decision from Adani Enterprises Ltd (AEL) is all part of the theatrics to securing the $900m NAIF funding subsidy, plus the $370m royalty holiday from the Queensland government, and to pressure the Federal government to change legislation so as to over-rule the W&J Traditional Owner rights. Adani is still far from able to proceed with this much delayed $5bn project proposal. AEL simply does not have the capital available to fund the project. Adani Mining Pty Ltd (Australia) has negative $230m shareholders funds and net debts of A$1,478m as of 31 March 2017.

“In a Bombay Stock Exchange (BSE) released on the 23 May 2017, AEL clarified to its Indian investors that this “Investment Decision” involved just “certain internal budget approvals for pre-construction activities”. Further, in AEL’s full year to March 2017 annual results release on the 24 May 2017, the Carmichael proposal did not warrant a single mention in the 19-page document. This omission is very bizarre in the context that Carmichael represents more than 50% of the net book value of equity of AEL.

IEEFA notes today’s announcement is not deemed material sufficient to warrant AEL making an BSE announcement.

“A deeper look at what is going on in India further demonstrates why any initial construction activity like building sealed roads to the mine site in Australia to give the guise of a fully functioning coal operation, is likely to become a stranded asset

“Last month solar India solar became cheaper than even existing mine-mouth domestic coal for the first time. The implications this has for transforming global energy markets are profound and the implications for the Carmichael mine can not be overstated.

“Admissions by the Adani Power Ltd management that its $5 billion investment in the existing import coal power plant at Mundra, Gujarat, are no longer viable, because of the prohibitively high cost of imported coal relative to the long-term electricity supply contracts signed, is adding to the rise of stranded assets across the Indian power generation sector.

“It is telling that Adani Power is reported in India overnight as trying to sell a majority stake in its flagship, loss-making Mundra import coal fired power plant to the Gujarat government. This highlights a major flaw in the vertically integrated “Pit-to-Plug” strategy the Adani group has been pushing for the last six years.

Holdfast
Adani Enterprises Carmichael Proposal: IEEFA