MICHAEL WEST. Why are we still pursuing the Adani Carmichael mine?

Why, if Adani’s gigantic Carmichael coal project is so on-the-nose for the banks and so environmentally destructive, are the federal and Queensland governments so avid in their support of it?

Adani employs the lobbying firm Next Level Strategic Services.. The director of this lobbying firm is Cameron Milner,who was Bill Shorten’s Chief of Staff, former ALP State Secretary in Queensland and who helped run the last election campaign of the Queensland Premier Annastacia Palaszcuk. The co-director of the same lobbying firm is David Moore  who ran Campbell Newman’s successful 2012 election campaign

Once again the absurdity of building the world’s biggest new thermal coal mine was put in stark relief on Monday evening via an ABC Four Corners investigation, Digging into Adani.

Where the ABC broke new ground was in exposing the sheer breadth of corruption by this Indian energy conglomerate. And its power too. The TV crew was detained and questioned in an Indian hotel for five hours by police.

It has long been the subject of high controversy that the Australian government, via the Northern Australia Infrastructure Facility (NAIF)that is still contemplating a A$1 billion subsidy for Adani’s rail line, a proposal to freight the coal from the Galilee Basin to Adani’s port at Abbot Point on the Great Barrier Reef.

But more alarming still, and Four Corners touched on this, is that the federal government is also considering using taxpayer money to finance the mine itself, not just the railway.

No investors in sight

As private banks have walked away from the project, the only way Carmichael can get finance is with the government providing guarantees to a private banking syndicate, effectively putting taxpayers on the hook for billions of dollars in project finance.

The prospect is met with the same incredulity in India as it is here in Australia:

FOUR CORNERS: “Watching on from Delhi, India’s former Environment Minister can’t believe what he is seeing.”

JAIRAM RAMESH: “Ultimately, it’s the sovereign decision of the Australian Government, the federal government and the state government.

FOUR CORNERS: “But public money is involved, and more than public money, natural resources are involved.

JAIRAM RAMESH: “I’m very, very surprised that the Australian government, uh, for whatever reason, uh, has uh, seen it fit, uh, to all along handhold Mr Adani.”

Here we have a project that does not stack up financially, and whose profits – should it make any – are destined for tax haven entities controlled privately by Adani family interests. Yet the Queensland government has shocked local farmers and environmentalists by gifting Adani extremely generous water rights, and royalties concessions to boot.

Why are Australian governments still in support?

The most plausible explanation is simply politics and political donations. There is no real-time disclosure of donations and it is relatively easy to disguise them, as there is no disclosure of the financial accounts of state and federal political parties either. Payments can be routed through opaque foundations, the various state organisations, and other vehicles.

Many Adani observers believe there must be money involved, so strident is the support for so unfeasible a project. The rich track record of Adani bribing officials in India, as detailed by Four Corners, certainly points that way. But there is little evidence of it.

In the absence of proof of any significant financial incentives however, the most compelling explanation is that neither of the major parties is prepared to be “wedged” on jobs, accused of being anti-business or anti-Queensand.

There are votes in Queensland’s north at stake. Furthermore, the fingerprints of Adani’s lobbyists are everywhere.

Adani lobbyist and Bill Shorten’s former chief of staff Cameron Milner helped run the re-election campaign of Premier Annastacia Palaszczuk. This support, according to The Australian, has been given free of charge:

Mr Milner is volunteering with the ALP while keeping his day job as director and registered lobbyist at Next Level Strategic Services, which counts among its clients Indian miner Adani…

The former ALP state secretary held meetings in April and May with Ms Palaszczuk and her chief of staff David Barbagallo to negotiate a government royalties deal for Adani, after a cabinet factional revolt threatened the state’s lar­gest mining project.

Adani therefore enjoys support and influence on both sides of politics. “Next Level Strategic Services co-director David Moore — an LNP stalwart who was Mr Newman’s chief of staff during his successful 2012 election campaign — is also expected to volunteer with the LNP campaign.”

So it is that Premier Palaszczuk persists with discredited claims that Carmichael will produce 10,000 jobs when Adani itself conceded in a court case two years ago the real jobs number would be but a fraction of that.

If the economics don’t stack up, why is Adani still pursuing the project?

The Adani group totes an enormous debt load, the seaborne thermal coal market is in structural decline as new solar capacity is now cheaper to build than new coal-fired power plants and the the government of India is committed to phasing out coal imports in the next three years.

Why flood the market with 60 million tonnes a year in new supply and further depress the price of one of this country’s key export commodities?

The answer to this question lies in the byzantine structure of the Adani companies themselves. Adani already owns the terminal at Abbot Point and it needs throughput to make it financially viable.

Both the financial structures behind the port and the proposed railway are ultimately controlled in tax havens: the Cayman Islands, the British Virgin Islands and Singapore. Even if Adani Mining and its related Indian entities upstream, Adani Enterprises and Adani Power, lose money on Carmichael, the Adani family would still benefit.

The port and rail facilities merely “clip the ticket” on the volume of coal which goes through them. The Adani family then still profits from the privately-controlled infrastructure, via tax havens, while shareholders on the Indian share market shoulder the likely losses from the project.

As the man who used to be India’s most powerful energy bureaucrat, E.A.S. Sharma, told the ABC: “My assessment is that by the time the Adani coal leaves the Australian coast the cost of it will be roughly about A$90 per tonne.

“We cannot afford that, it is so expensive.”

More questions than answers remain

This renders the whole project even more bizarre. Why would the government put Australian taxpayers on the hook for a project likely to lose billions of dollars when the only clear beneficiaries are the family of Indian billionaire Gautam Adani and his Caribbean tax havens.

My view is that this project is a white elephant and will not proceed. Given the commitment by our elected leaders however, it may be that some huge holes in the earth may still be dug before it falls apart.

Michael West is an Adjunct Associate Professor, School of Social and Political Sciences, University of Sydney

This article first appeared on michaelwest.com.au on 4 October 2017


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6 Responses to MICHAEL WEST. Why are we still pursuing the Adani Carmichael mine?

  1. Quite mysterious still for me as to how with all the above details the project is still supposed to go ahead. ” I realize yet again that the enemies of Australia are in our midst when I read, “Adani employs the lobbying firm Next Level Strategic Services.. The director of this lobbying firm is Cameron Milner,who was Bill Shorten’s Chief of Staff, former ALP State Secretary in Queensland and who helped run the last election campaign of the Queensland Premier Annastacia Palaszcuk. The co-director of the same lobbying firm is David Moore who ran Campbell Newman’s successful 2012 election campaign” Why are these operators not boycotted by felloe Australians? They are more likely to do more damage than ISIS to Australia and our interests.
    Then there is the perennial argument, “It will create jobs”. That may be but so does organized crime or ethnic cleansing. The real question is are the jobs ethical jobs or immoral ones? Nah what is the real hold Adami has on the Qld Goverenment or Shorten?

  2. Bruce Waddell says:

    It will be a misuse of EFIC if it is to be used as the lender of last resort to this mendacious group. This mine should never open.

  3. Peter Church says:

    It is hard to see how the Northern Australia Infrastructure Facility (NAIF) could be used to finance Adani. One only has to read the Act and the associated regulations governing NAIF to see the issues.

    For example, some of the relevant provisions of the Investment Mandate Direction 2016 are very relevant:

    Article 16 — “The Facility must not act in a way that is likely to cause damage to the Commonwealth Government’s reputation, or that of a relevant State or Territory government. ” (The NAIF Board clearly needs to satisfy itself that the reputation of Adani Group, its shareholders and directors are not likely to cause damage to the Commonwealth Government’s reputation.)

    Article 17 — “The Facility must have regard to Australian best practice government governance principles, and Australian best practice corporate governance for Commercial Financiers, when performing its functions, including developing and annually reviewing policies with regard to: (a) environmental issues; Authorised Version F2016L00654 registered 04/05/2016 (b) social issues; and (c) governance issues.” (Again the NAIF Board is on notice of the reputation of Adani in this area in India. Certainly Adani will be required to comply with strict guidelines as contained in its licence but surely the NAIF Board should also look at and be satisfied there is an exemplary track record of Adani complying with similar environmental, social and governance laws in India and elsewhere.)

    Schedule 1 of the Direction creates some significant hurdles:

    5. — “Facility’s loan monies are not the majority source of debt funding. The Project proponent must show that the finance (provided by way of a Financing Mechanism from the Facility) will not exceed 50 per cent of total debt for the proposed Project. This is in keeping with the principle that the Facility will work in partnership with Commercial Financiers and any other financiers, who should provide an equal or majority source of finance. A relevant substitute for this criterion should be used for assessing Projects which request alternative Financing Mechanisms, as determined by the Board.” (No Australian bank will apparently lend to this project and, as Four Corners reveals, there are major strains in the finances of the whole Group. Indian banks with pressure from the Reserve Bank of India and the Indian Federal Government have been pushing Indian groups which gorged on debt to get their debt under control. Many have been forced to sell assets . How Adani will be able to satisfy the NAIF Board on this point surely must be in question.)

    6. “The loan will be able to be repaid, or refinanced. The Project Proponent must present comprehensive financial modelling to demonstrate the ability of the Project to repay the debt in full and on time, or refinance, based on assumptions acceptable to the Board. A relevant substitute for this criterion should be used for assessing Projects which request alternative Financing Mechanisms, as determined by the Board.” (Given what we know, how could Adani satisfy this requirement?)

    Having regard to the foregoing it would appear there are a number of significant issues on which the Board of NAIF will need to satisfy itself before lending moneys to Adani. It is also difficult to believe the Australian Federal Government could itself provide guarantees for a loan by a private syndicate to Adani without the Federal Government following the same conditions the Australian Parliament has placed on loans by NAIF.

  4. Thanks Michael, I have shared around because
    Everyday I am relieved about quitting the ALP and signing with the Greens, for my own conscience and sanity sake. Becoming a Grandmother with the illogical, anti-environmental pursuit of the Carmichael Mine is mind-boggling.
    What about the loss of the Reef, how extraordinary to sacrifice it and the visitors who won’t come to see the wonders of the Earth which we are supposed to be protecting.
    So my petition is – protect the babies being born now against the fossil fuel burden on their tiny lungs – on the welfare of their families, dying in the heat and burning in the acid ocean.
    Please sign and share: https://www.communityrun.org/p/solarbabies

  5. Dog's breakfast says:

    Thanks Michael, from here it looks like it must be one of two things, either extravagant and exorbitant stupidity, or corruption in one form or another, and that doesn’t necessarily mean payments via brown paper bags, but may very well mean political contributions. The idiocy of the Qld electorate has to come into play as well.

    Somehow we have to come up with donations laws that mean something, and preferably invest in viable and useful projects in Qld so that we don’t have to rely on cockamamie non-viable, land-destroying projects from the private sector.

    I’m still aghast, and will remain so until this project is finally kyboshed.

  6. Don Macrae says:

    So the explanation is political donations or pork barrelling? Corruption or irresponsibility? The LNP are climate change deniers and a lost cause, but what about the ALP? Bill Shorten should be put on the spot and made to explain himself.

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