Abbot Point coal terminal: Westpac may not refinance Adani loan
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.
Abbot Point coal port may not get the refinancing it requires from Westpac.