Adani’s coal port debt raises doubts over ability to self finance - bankers and creditors must rule out refinance
The financial viability of Adani’s Carmichael coal mine is looking increasingly shaky. Last week the Sydney Morning Herald reported that Adani’s losses from its climate-wrecking coal project are nearing $800 million dollars. Adani’s accounts warn the coronavirus pandemic could have a significant impact on the valuation of the Carmichael mine and increase its dependence on its parent company in India.
The huge costs of digging the Carmichael mine continue to increase. Banks have refused to finance the project, forcing the Adani group to use their own money. Major contractors have walked away and insurers are now retreating as financial institutions shun new coal projects at an increasingly rapid rate.
The rising costs raise questions about the Adani Group's willingness to continue using its own money to finance the much delayed coal project. To make things even more challenging for Adani its Abbot Point coal port is facing an almost $1 billion debt burden.
Adani’s Abbot Point coal port (officially known as Adani Abbot Point Terminal, AAPT), is just north of Bowen in north Queensland. Abbot Point port is essential for Adani’s climate-wrecking coal project because it is where Adani plans to export the coal from.
Abbot Point coal port owes around $1 billion, due over the next two years in a series of debts products to various banks and creditors. AAPT is having some difficulty refinancing this debt, with a bond issue planned for early 2020 now postponed and the company having to use its own money to repay $100 million in April 2020 for bonds maturing in May 2020. Adani’s financial challenges got even harder today with one of Adani’s previous bond arrangers, South African bank Investec, announcing it will no longer help Adani raise capital for its Abbot Point coal terminal in line with its new climate policy.
“In line with our commitment to climate change, Investec has not lent to the Carmichael coal project and can confirm we have no loan exposure to Adani Abbot Point Terminal (AAPT). We had a historic hedging facility with AAPT which will not be renewed.”
Because Abbot Point is an essential link in the chain that forms the Adani Carmichael coal export project, any financing of AAPT can be considered as support for the Carmichael coal export project.
CommBank and Westpac are owed $170 million from a loan to Abbot Point coal port, but since this loan was issued both major banks have ruled out financing Adani’s coal project and because the port is a critical link in the chain of the coal project it's unlikely they will stump up the funds to refinance this debt.
The fact that 30 major banks around the world have ruled out financing Adani’s coal project is likely to be making it difficult for Adani to refinance the debt.
Korean companies Samsung, the Industrial Bank of Korea and Hanwha are part of a group of existing Abbot Point creditors who have loaned Adani money in the past and are at risk of providing refinancing or further funding to Abbot Point coal port.
Adani is looking to refinance its debts on the Abbot Point coal port right now, so we need to call on existing creditors to rule out further funding of the project and refinancing of existing loans.
Every dollar that the Adani group is forced to spend to repay its Abbot Point coal port debts is another dollar it can’t spend to dig its climate wrecking coal mine.