INSTITUTE FOR ENERGY ECONOMICS AND FINANCIAL ANALYSIS (IEEFA):
29 November 2019 (IEEFA Australia) – Queensland Treasury are expected to sign off on a massive early Christmas present worth up to $900m packaged as a seven-year royalty deferral – another term for a capital subsidy – for the Adani Group on 30 November 2019 (likely to be announced on 29 November), ironically on the one-year anniversary of Adani declaring it will self-fund its Carmichael thermal coal mine in the Galilee Basin, Queensland.
Adani Australia – part of the Adani Group of India – announced the Carmichael thermal coal mine would ‘stand on its own two feet’, without any subsidies, in November 2018.
One year later and the Adani Group is not only expected to receive a $900m royalty present from the Queensland government, but the Adani Group is also set to receive over $4.4 billion in total tax exemptions, deferrals and capital subsidies from taxpayers for the life of the Carmichael mine.
“If you give enough subsidies, anything becomes viable.”
“If you give enough subsidies, anything becomes viable,” says Tim Buckley, director of energy finance studies at the Institute for Energy Economics and Financial Analysis (IEEFA).
“Global and domestic banks and insurers have turned their back on financing the Adani Group, joining the massive global financial exit away from thermal coal. To-date, 111 globally significant banks and insurers have implemented formal thermal coal restriction policies, including the latest just this week, being UniCredit, the largest bank in Italy.
“Yet the Queensland government still wants to give an early $900m Christmas present to the Adani Group for a product that faces technological obsolescence, is reliant on ongoing subsidies, and is only viable absent a price on carbon emissions.”
Under existing arrangements, Adani will effectively receive 17% of their coal for free compared to the royalty regime applying in NSW, according to The Australia Institute.
Any deal should be publicly transparent given rising stranded asset risks
“Queensland’s generosity in providing such a lavish gift to India’s richest man means local Queenslanders will NOT see royalties from Adani’s Carmichael thermal coal mine for a decade,” says Buckley. “Any deal should be made transparent to the public, and credible financial assurance needs to be put in place as a minimum to ensure eventual payment, given rising stranded asset risks....
Read the full article here.
BACKGROUND
ABC News, 14 March 2017:
Up to $3 billion from Adani's planned Carmichael coal mine will be shifted to a subsidiary owned in the Cayman Islands if the controversial project goes ahead, an analysis of company filings shows.
Key points:
- 'Royalty deed' gives shell company rights to recieve $2-a-tonne payment beyond first 400K tonnes mined for two decades
- Entitlement owned by company registered in Cayman Islands, controlled by Adani family
- Carmichael coal mine's production capacity means payment ammounts to about $120 million per year
An "overarching royalty deed" gives a shell company rights to receive a $2-a-tonne payment, rising yearly by the inflation rate, beyond the first 400,000 tonnes mined in each production year for two decades.
The company with this entitlement is ultimately owned by Atulya Resources Limited, a secretive entity registered in the Cayman Islands, and controlled by the Adani family.
"In plain English, the upshot for the Adani family is [that] if the mine goes ahead, they receive a $2-a-tonne payment, so up to $3 billion, via a Cayman Islands company, a company owned in a tax haven," says Adam Walters, principal researcher and Energy Resource Insights.
With a production capacity of 60 million tonnes or more a year, that amounts to about $120 million per annum in payments, increasing each year in line with the CPI, potentially flowing offshore.
"I would describe it as a structure that means that the Adani family enriches themselves if the mine goes ahead but that other shareholders are impoverished," associate professor Thomas Clarke, director of the Centre for Corporate Governance at UTS told the ABC.
"The worry is that this may be just the beginning.
He said the billions flowing to the Adani private company would come at the expense of minority shareholders in the company listed on the Bombay stock exchange which ultimately owns the Carmichael mine.....
Read the full article here.
ABC News, 21 December 2016:
Giant Indian conglomerate Adani, which plans to build one of the world's largest coal mines in Queensland's Galilee Basin, has set up a complex network of companies and trusts in Australia which are owned in one of the world's major tax havens, the Cayman Islands.
The Adani Group is also attempting to shift ownership of the existing Abbot Point coal port — which it bought for $1.8 billion — to a Singaporean company ultimately owned in the Cayman Islands.
An exhaustive search of company filings and documents across the globe has cast light on this opaque structure of ownership and control.
It has alarmed environmental activists and legal experts, who fear it could make it harder to gain compensation from Adani in the event of an environmental disaster from Adani's planned mine and port expansion on the edge of the Great Barrier Reef.
"I've been a businessman for most of my life, as well as an environmental activist, and the risks are great," said Geoff Cousins, former Optus CEO and chairman of the George Paterson advertising agency, now a board member of the Australian Conservation Foundation.
"With these kinds of approvals of big mining operations or port operations, you always get a set of conditions that the Government puts on.
"But those conditions aren't worth anything if, when something goes wrong, you try to find the company responsible and either it has no money or if it has money it's in a tax haven and you can't reach it."
It is a view echoed by David Chaikin, a professor of business law at the University of Sydney.
"The advantage of having the money in tax havens is that you are able to conceal the source of money, the use of money, and also to minimise tax," he said…..
Adani has created four companies and two trusts in Australia for the rail project.
The parent company for all these entities is Carmichael Rail and Port Singapore Holdings Pte Ltd, a company registered in Singapore where the corporate tax rate is 15 per cent.
This Singapore parent company is in turn owned by Atulya Resources Limited, a private company controlled by the Adani family and based in the Cayman Islands.
The port expansion has a similar structure: five companies and two trusts in Australia, ultimately controlled by Atulya Resources in the Cayman Islands……
The Guardian, 29 August 2018:
Mining conglomerate the Adani Group is trying to prevent Indian authorities from accessing its business records as part of an investigation into an alleged $4bn fraud by power companies.
Lawyers for Adani on Tuesday filed a plea asking the Bombay high court to quash a formal request by Indian investigators to Singaporean authorities to force the company to produce information regarding its coal imports from Indonesia.
The request is part of an investigation by India’s Directorate of Revenue Intelligence (DRI) into a $4.4bn alleged fraud by 40 power companies including six Adani subsidiaries.
According to DRI documents, the companies allegedly used fake middlemen to inflate the price of coal they were importing from Indonesia. The scheme allowed the companies to charge higher tariffs by exaggerating their production costs, the DRI claimed.
If true, the alleged scam would also have allowed the companies to siphon billions of dollars from India into offshore bank accounts where Indian authorities would struggle to tax or account for the money....
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