Ab­bot Point coal ter­mi­nal: West­pac may not refinance Adani loan

The Guardian Australia - - News - Michael Slezak

Adani’s fi­nanc­ing for its pro­posed Carmichael coalmine could face a fur­ther hur­dle, with West­pac ap­pear­ing to in­di­cate it will not refinance its ex­ist­ing loan to Adani’s coal ter­mi­nal at Ab­bot Point.

A re­cent re­port by the In­sti­tute for En­ergy Eco­nom­ics and Fi­nan­cial Anal­y­sis (Ieefa) re­vealed Adani needed to refinance more than $2bn worth of loans for its Ab­bot Point coal ter­mi­nal in the com­ing year – an amount that is more than it paid for the port in 2011. That means the com­pany has neg­a­tive equity on the fa­cil­ity – ow­ing banks more than it is worth.

The re­fi­nanc­ing of its port comes as the com­pany must find $5bn of loans for its Carmichael coalmine, which ev­ery Aus­tralian bank – and many in­ter­na­tional banks – have said they will not sup­port.

More­over, the two projects are en­tirely linked, mean­ing any bank that de­cides to sup­port one project is sup­port­ing the other and tak­ing a bet on its suc­cess: the Port’s fi­nan­cial vi­a­bil­ity de­pends on coal com­ing from the mine, and the mine will not be able to be built with­out the port op­er­at­ing.

The news that one of Adani’s ma­jor ex­ist­ing lenders is likely to with­draw sup­port for Ab­bott Point there­fore adds to on­go­ing doubts about the abil­ity of the com­pany to find fi­nanc­ing for the con­tro­ver­sial coalmine, and could jeop­ar­dise any po­ten­tial loan it might get from the gov­ern­ment’s $5bn North­ern Aus­tralia In­fra­struc­ture Fa­cil­ity.

West­pac’s rev­e­la­tion came un­der ques­tion­ing by Greens cli­mate and en­ergy spokesman Adam Bandt at a House of Rep­re­sen­ta­tives stand­ing com­mit­tee on eco­nom­ics.

In April West­pac re­leased its new cli­mate pol­icy, in which it re­vealed it would only lend money to projects sup­port­ing ex­ist­ing coal basins – not ones that opened up new coal basins. It also said it would only lend to projects that sup­ported min­ing of coal that had en­ergy con­tent “in at least the top 15% glob­ally”.

Both rules would rule out West­pac lend­ing to the Carmichael mine. But West­pac al­ready lent hun­dreds of mil­lions of dol­lars to Adani for its Ab­bot point ter­mi­nal, and ques­tions re­mained whether it would refinance that loan at the end of its term.

Bandt asked West­pac chief ex­ec­u­tive Brian Hartzer whether the rules would ap­ply to ex­ist­ing loans for in­fra­struc­ture that were re­quired to open up new coal basins, such as Ab­bot Point.

Un­able to name any spe­cific project or cus­tomer, West­pac chief ex­ec­u­tive Brian Hartzer said: “If in the end you had a piece of in­fra­struc­ture that only re­lated to fi­nanc­ing in a new basin then that would most likely not meet our [lend­ing] cri­te­ria.”

Fol­low­ing the hear­ing, Bandt said: “West­pac’s po­si­tion on in­fra­struc­ture fi­nance is another nail in the cof­fin of the Adani mine.”

Tim Buck­ley from Ieefa said the terms Adani is forced to accept for re­fi­nanc­ing of the port will be “a lit­mus test of whether the mar­ket will want to have any­thing to do with it”.

He said if lenders de­mand a nor­mal amount of equity put into the project by Adani – which he said would be about 30% or about $600m – the com­pany might strug­gle to find enough cash to get both Ab­bot point re­fi­nanced and find loans for its Carmichael mine.

Mean­while, with Aus­tralian banks turn­ing their backs on Adani’s Aus­tralian coal op­er­a­tions, the Aus­tralian Fi­nan­cial Re­view has re­ported the com­pany is about to mar­ket US$500m worth of bonds, hop­ing to at­tract in­ter­na­tional in­vestors to help refinance the port.

Julien Vin­cent from fi­nan­cial ac­tivist group Mar­ket Forces said all eyes will now be on the re­fi­nanc­ing ar­range­ments with Com­mon­wealth Bank, with whom Adani has bor­rowed more money for Ab­bot Point.

The Com­mon­wealth Bank, has not said it will not con­tinue to in­vest in Ab­bot Point, but in Au­gust it did ex­plic­itly say that it would not be lend­ing to the Carmichael coalmine.

Adani has been con­tacted for com­ment.

Pho­to­graph: Dean Draper/ACF

Ab­bot Point coal port may not get the re­fi­nanc­ing it re­quires from West­pac.

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