Why Adani would abandon Charmichael project?

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In 2010, Adani group initiated the Charmichael project with plans to develop a coal mine and a rail link with Abbot  Point port. It captured headlines, as it was a big overseas investment running to multi billion dollars. The Company had acquired 100% interest in the Galilee Coal Tenement in Queensland, Australia having estimated resource of 7.8 billion tonnes. The mine is capable of producing up to 60 million tonnes of coal at peak capacity. The coal mine is located in Central Queensland, approx. 300 km south of Townsville and 280 km west of Mackay. The proposed investment by the Company in Australia represented the largest ever Indian investment in Australia. Their target was first coal by the end of FY 2015 and a production of between 50 and 60 MMTPA to be achieved by FY 2022.

But, what we read now is his plan to exit the project. “You can’t continue just holding. I have been really disappointed that things have got too delayed,’’ – Gautam Adani, Chairman of Adani Group.

According to Richard Denniss, Chief Economist of The Australian Institute, a think tank, every objective analysis of the project has found the project unviable. There were many protests by the environmentalists after the declaration of the project

Mr Adani said if there were no more unexpected delays he had confidence the project would get financing and “still be competitive’’ against other alternative sources of coal in India and Indonesia. Would a person like Gautam Adani step in to a project without  feasibility assessment? Hard to believe.

Something changed.

Was it Coal Price? Bloomberg reports that Coal prices are steadily rising, so markets are good for coal.

Delay? Can’t agree, Adani has run his empire in the country with longest red tapes. A delay of a year or two, is acceptable, especially when you are dealing with a long-term project.

So what is the mysterious cause for the reluctance to continue now? Is it the change in the power sector outlook?

Government all over the world are focusin towards renewable, clean source. Reasons could be reduced dependence on Oil Exporting countries, reduced imports, reduced pollution, environmental groups, whatever. But the entire world is focusing towards solar, wind, hydra as green field projects. It questions the viability of the thermal power projects.

Last month energy minister Piyush Goyal made a statement that has been quoted widely in the global media, that solar is already cheaper than coal. HSBC Global Research quotes, “Wind is now cost competitive with new coal while solar will likely reach parity over 2016-18, in our view; we raise our solar installation forecasts .”  Now who would want to try the dirty, expensive coal?

Bloomberg Renewable Energy 2016 report shows the investment trend in renewable energy:

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Investments have now tilted towards green energy and many doubt the viability of thermal coal energy for long run. The campaigns all over the world like Germany’s Ende Gelande, Break Free 2016, Climate protestors in UK-US, Japan and many more are making financiers difficult to lend to fossil fuels. Over 10 international banks, including Adani’s former chief financier for Carmichael, Standard Chartered, and the Commonwealth Bank of Australia, have said that they have withdrawn from Carmichael project. In a separate news report, The Sydney News Herald had reported that Adani Mining had lost one of its two big external customers with Korean giant LG confirming it would not be purchasing coal from the Carmichael mine.

With commentators predicting the nightfall of coal era, it is hardly a surprise, that Mr Adani is rethinking about Australian coal mines citing delays as reason.

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