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Mark David

Queensland Government gives Adani Group an early Christmas present worth up to $900 million in royalty deferrals

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.

IEEFA notes the Queensland government’s royalty subsidy to Adani is due to be delivered this week.

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.

"That the Adani family have the ability to shift cash and assets around at will and in the future they may well do so at the cost of shareholders and the Queensland economy."

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....

How the world sees Australia's response to climate change

It seems it isn't just our Pacific island neighbours or other members of the United Nations which view Australia as a nation governed by backward environmental vandals intent on destroying their own country.....

https://youtu.be/m6DO3zbD83U


Channel 4 News is made for Channel 4 by Independent Television Network Ltd. Channel 4 is a publicly-owned and commercially-funded UK public service broadcaster.

It is reported that Channel 4 has a monthly audience reach of est. 79% of all UK television viewers.

This is the gist of a 13 minute news segment aired in Britain on 12 November 2019 and, which had over 17 million views on YouTube:

Despite briefly boasting more than 50% renewable power generation on its national grid this year, Australia is struggling to move on from an energy, labour and political market built on a 1950s coal-based model. (Subscribe: https://bit.ly/C4_News_Subscribe) Even as eastern Australia is consumed by flames after years of drought, the New South Wales parliament is today trying to push through a law to stop proposed coal mines from having to examine the carbon impact of the coal they’re exporting. And they’re exporting a lot. Australia's coal export market is the most lucrative on the planet, valued at £36 billion. Three people have been killed, over 150 homes destroyed, Sydney faces ‘catastrophic’ conditions, and at least 45 of the 65 fires burning through the region are out of control. Yet when Australian Green MPs suggest the industry is on the wrong side of history, they get called 'raving loonies’ by the Deputy Prime Minister. Australia is now among the very worst G20 keepers of promises made in the Paris Climate Accord. It plans seven giant new opencast pits for Queensland, even as the bush to the east is incinerated by drought caused by climate change, caused by carbon emission caused - in part - by coal.

UPDATE

The Sydney Morning Herald, 14 November 2019:

Sweden's central bank has sold off bonds from parts of Australia and the oil-rich Canadian province of Alberta because it felt that greenhouse gas emissions in both countries were too high.

Riksbank Deputy Governor Martin Floden said on Wednesday the bank would no longer invest in assets from issuers with a large climate footprint, even if the yields were high.

Tweet of the Week

Planning law in NSW:

1. Independent Commission rejects a coal mine because it doesn’t stack up environmentally or economically

2. Minerals Council tells Govt to overhaul the system

3. NSW Government proposes changes to the law and orders a review of the Commission https://t.co/PIb1DYI7ND

— Elaine Johnson (@ElaineEDO) October 5, 2019

Scott Morrison & Co exceed their previous level of destructive behaviour in the face of climate change

David Rowe, 14 September 2019

By the early hours of Tuesday 24 September 2019 coal-burning power stations in eastern Australian mainland states had released over 99 million tonnes of greenhouse gas emissions into the air this year alone.

Sadly, this comes as no surprise as total all-sector emissions have been steadily rising since the 2013 federal election. Until by September 2016 they had reached 527.2Mt of CO2-e, by September 2017 533.3Mt of CO2-e, by March 2018 535.8Mt of CO2-e, by September 2018 536Mt of CO2-e and by end of March 2019 national greenhouse gas emissions stood at 538.9Mt of CO2-e.

Yet the Abbott-Turnbull-Morrison Government is still continuing to carve a destructive path towards increasing the impacts of climate change for every person living in Australia.

The Sydney Morning Herald, 22 September 2019, excerpt:

As delegates of the United Nations climate change summit - which Mr Morrison has snubbed - prepare to discuss emission reduction efforts this week, briefing notes obtained under Freedom of Information laws detail the emphasis placed on coal in the government's diplomatic relations.

Departmental briefing notes provided to Resources Minister Matt Canavan ahead of his official visit to Singapore and India last month canvass the potential to expand Australia's coal exports into Bangladesh - a nation that is among the most vulnerable to the effects of global warning.

The government is seeking to grow its coal exports in overseas markets as it looks to buttress the economic fallout from a deteriorating relationship with China.

Australian Conservation Foundation climate change campaigner Christian Slattery said Australia was "trashing its international reputation because of its addiction to polluting coal''.

“As major importers of Australian coal move to transition to cleaner forms of energy, the Morrison government is doing the coal industry’s bidding, trying to secure new markets," Mr Slattery said.....

Foreign Minister Marise Payne will front the UN climate change summit this week, but will not address delegates - as Australia is among a group of coal-supporting economies singled out as not getting a spot on the list of 63 speakers.

Mr Morrison's snub comes despite him being in the United States on an official visit.

In an email to the Prime Minister ahead of his official visit to Vietnam last month, bureaucrats advise him to push hard for an expansion of Australia's coal exports to the nation, which represented a "growth market".

"We strongly recommend a focus on coal exports to Vietnam as part of the Prime Minister’s planned visit," the email said.

"There is potential for growth in exports to Vietnam to partially mitigate declining exports elsewhere, notably China."

The briefing said coal exports from Australia to Vietnam had more than doubled since the 2017-18 financial year, up from 4,286,390 tonnes or approximately $750 million in value.

A spokeswoman for the Prime Minister said in a statement that the government "promotes all of Australian energy exports in our trade discussions - coal, gas and renewables".

"These exports underpin the Australian economy, delivering billions in revenue to support essential services and support thousands of jobs in regional Australia."

ACF's Mr Slattery said the government "seems intent on selling a 20th century technology to a 21st century world and doing a great deal more climate damage while they are at it".

“Australia’s reported blocking by the UN Secretary-General from speaking at the special climate summit in New York is nothing short of an international embarrassment for a wealthy and developed country that prides itself on being a good international citizen," he said.

Tweed Shire Council abandons its principled stand on foreign multinational Adani's proposed Galilee Basin coal mine

In which Tweed Shire Council decides Australia doesn't need the Great Barrier Reef or the Black-throated Finch......

Echo NetDaily, 19 August 2019: 

The Tweed Shire Council has performed a political back-flip on a 2017 promise to avoid hiring building companies contracted to Adani’s proposed Carmichael mine in central Queensland. 

Councillors voted for the ban two years ago, with Tweed Shire Deputy Mayor Chris Cherry (Independent) saying they ‘wished to represent the views of the community’. Cr Cherry said Adani didn’t have any approvals to mine in Carmichael at the time but people on the Tweed were concerned about potential environmental impacts of the project on the Great Barrier Reef. 

Labor councillor flips anti-Adani ban in favour of jobs 

Last week, Cr James Owen (Liberals) tabled a rescission on the 2017 vote and won majority support, meaning the ban no longer applies. 

Cr Ron Cooper (Independent) was absent from the meeting and had originally supported an anti-Adani stance. 

But a change of heart from Cr Reece Brynes (Labor) was enough to change council policy as he joined forces with Councillors Owen, Pryce Allsop (Independent) and Warren Polglase (Nationals). 

Cr Byrnes told Echonetdaily although he initially voted for the ban and continues to share environmental impact concerns, state and federal government approvals of the Carmichael project mean the council has to ‘accept realities’. 

‘My priority and Labor’s priority is always about creating more local jobs in the Tweed,’ he wrote in an email, ‘I make no apologies that Labor’s priority is always about creating jobs’. 

The council had to ‘move away from a position of protest’ to one that wouldn’t ‘prohibit or hamper future projects and jobs for people in the tweed’, Cr Byrnes wrote.....

BRIEF BACKGROUND

Environmental Defenders Office Qld, Case Explainer: Adani’s North Galilee Water Scheme - Federal Judicial Review

Australian Conservation Foundation, Stop Adani's polluting coal mine

Lock the Gate, Coal Mining: Water Impacts of the Adani Coal Mine

Climate Council, Adani Mine Must Be Stopped

ABC News, What we know about Adani's Carmichael coal mine project

Adani Group's problems continue to make news in 2019

“The commerciality of Adani’s Carmichael mine remains challenging given the significant capital spend and low-quality thermal coal product expected from the mine,” said Brent Spalding, a principal analyst at Wood Mackenzie." [Financial Review, 9 July 2019]

"Adani allowed stormwater discharges from the port in March 2017 (to the marine environment and to the Caley Valley Wetlands) and again in February 2019 (to the wetlands) in excess of licence limits.....In February 2019, Adani announced it had again discharged stormwater into the Caley Valley Wetlands in excess of its EA limit. Government investigations also confirmed the exceedance, and Adani paid an infringement fine of $13,055 for the breach." [Environmental Defenders Office Qld, 23 May 2019]

"....Abbot Point Bulkcoal Pty Ltd, an Adani subsidiary, for a substantial exceedance of a license to pollute the Great Barrier Reef World Heritage Area with coal dust when Cyclone Debbie made landfall in 2017, even though the license was granted specifically to account for possibly increased emissions resulting from the cyclone. During the course of this prosecution, the DEHP discovered that Abbot Point Bulkcoal Pty Ltd may have submitted an altered laboratory report showing reduced levels of pollution." [Environmental Justice Australia, March 2019]

ABC News, 13 August 2019: 

The announcement by Suncorp that it will no longer insure new thermal coal projects, along with a similar announcement by QBE Insurance a few months earlier, brings Australia into line with Europe where most major insurers have broken with coal.

US firms have been a little slower to move, but Chubb announced a divestment policy in July, and Liberty has confirmed it will not insure Australia's Adani project.

Other big firms such as America's AIG are coming under increasing pressure.

Even more than divestment of coal shares by banks and managed funds, the withdrawal of insurance has the potential to make coal mining and coal-fired power generation businesses unsustainable.

As the chairman and founder of Adani Group, Gautam Adani, has shown in Queensland's Galilee Basin, a sufficiently rich developer can use its own resources to finance a coal mine that banks won't touch.

But without insurance, mines can't operate. 

(Adani claims to have insurers for the Carmichael project, but has declined to reveal their names.) 

By the nature of their business, insurers cannot afford to indulge the denialist fantasies still popular in some sectors of industry. 

Damage caused by climate disasters is one of their biggest expenses, and insurers are fully aware that damage is set to rise over time......

Sydney Uni Business School Professor Sandra van der Laan: Adani Group's Australia operations effectively insolvent

Image: BBC, 29.11.18

Financial Review,

The Adani Carmichael coal mine set to be built in Queensland’s Galilee Basin has courted controversy like no other project in recent memory. 

Central and northern Queenslanders and MPs alike have lauded the jobs and economic stimulus the project promises to provide. Elsewhere, others scratched their heads as to why the country needed to build a brand new coal mine right next to the iconic Great Barrier Reef. At the same time that Australia tries to meet its Paris climate targets, no less.

KEY POINTS

Adani’s Australian operations could be on the brink of collapse before its Carmichael coalmine is ever built, a forensic accountant has claimed to the ABC.

Professor Sandra van der Laan examined the limited publicly-available financial statements from the private company and concluded that the company was in “a very fragile, even perilous, financial position”.

Adani was quick to reject the claims, slamming them as “false and misleading” and the latest in a series of attacks aimed to destroy the Australian project.

The Adani Carmichael coal mine set to be built in Queensland’s Galilee Basin has courted controversy like no other project in recent memory.

Despite battling for eight years to be approved, receiving the final environmental green light last month, the project finally looked to be going ahead. 

But now, a forensic accountant has warned that the divisive Adani Carmichael coal mine could be on the brink of collapse before it even begins operation. 

University of Sydney Professor Sandra van der Laan has sounded the alarm on the project after analysing Adani’s financial standing.

“It looks to me like a corporate collapse waiting to happen,” she told the ABC. “It has all the hallmarks of the big corporate failures we’ve seen over the last 20 to 30 years.” 

She should know — van der Laan has a track record of picking corporate collapses. It was she and colleague Sue Newberry who warned in 2007 that ABC Learning, Australia’s biggest private childcare provider at the time and the world’s largest publically listed childcare company, was heading for disaster.....

“Adani Mining is in a very fragile, even perilous, financial position,” van der Laan told the ABC. “The gap between the current assets and liabilities is what’s really concerning.” 

According to Adani’s most recent financial statements, provided to the Australian Securities and Investments Commission (ASIC) in March this year, that gap is enormous. The ABC reports that the business’ liabilities exceed its assets by more than half a billion dollars. 

Moreover, the ABC reports that the company will have $1.8 billion in liabilities come due over the next 12 months, compared with just $30 million in assets. Those liabilities are largely made up by an internal loan from parent company Adani Global on which the van der Laan says the Australian operation is reliant. That’s because the Australian mine was forced to self-fund after banks and wealth funds turned their back on it. 

“Effectively on paper, they are insolvent,” van der Laan said. "I wouldn’t be trading with them, as simple as that. I wouldn’t have anything to do with them."....

Once more the Adani Group demonstrates that it acts in bad faith and cannot be trusted

ABC News, 16 July 2019:

The Queensland Government is prosecuting mining giant Adani for allegedly providing false and misleading information to the Environment Department over land clearing at the site of its proposed Carmichael mine.

The ABC understands the charge under the Environmental Protection Act carries a fine that runs into the hundreds of thousands of dollars.

"The prosecution relates to information contained in Adani's 2017/2018 annual return for its Carmichael mine," the department said in a statement to the ABC.

"The annual return requires information about planned and actual disturbance of land at the mine.

"The department alleges that Adani's annual return contained false and misleading information about the disturbance already undertaken at the mine during the annual return period."

Last September, Adani notified the Department of "an administrative paperwork error" in its annual return for the Carmichael mine.

The company admitted that areas "that were disturbed during the final three-and-a-half weeks of the annual return period should have been included".

The prosecution against Adani is listed for mention at the Brisbane Magistrates Court on August 16......

Cartoon of the Week

@cathywilcox1

Did ABC Radio bow to pressure from the Adani Group?

One of the worst kept secrets in Australia is that the multinational Adani mining group, for reasons known only to its company board in India, wants to build a mine in the Galilee Basin but has no intention of building a financially viable mine.

And Adani really dislikes the media mentioning this fact......

ABC, Media Watch, transcript excerpt, 3 June 2019:

But now let’s come back closer to home to Adani, whose controversial Carmichael mine in Queensland’s Galilee Basin gets ever closer to construction, despite this scathing piece in The Sydney Morning Herald by Bloomberg columnist David Fickling:

The numbers on Adani simply don't add up

Comparable projects like Glencore's Wandoan have been mothballed for years.

- The Sydney Morning Herald, 24 May, 2019

Fickling’s op-ed 10 days ago argued that the Adani mine may never be built — even if it does get final approval — because it’s currently much cheaper to buy coal than dig it out of a brand-new coal mine.

And over at ABC Radio, Saturday AM thought that was worth a story.

But after being worked on by Isobel Roe, a young award-winning journalist in Brisbane, it never made it to air.

So, why was that? Well, Media Watch can reveal that Adani complained to the ABC in advance. And the story was spiked.

So how did this all unfold?

Bloomberg has confirmed to Media Watch that David Fickling was interviewed by the ABC on the afternoon of Friday, 24th of May.

And just over an hour later, at 4.20pm, Adani say Roe contacted them for comment.

And not long after that, at 5.50pm, the producer of Saturday AM, Thomas Oriti, told ABC staff he was killing the story.

Now, newsrooms at the ABC are open plan and not very private and four witnesses tell Media Watch that Oriti made it clear Adani had complained.

Indeed, one claims he told Roe:

‘Sorry. It’s nothing to do with you, but we’re not going to be able to run this’.

- Phone interview, ABC staffer, 31 May, 2019

While another claims he said:

‘It’s not my decision, it’s come from on high.’

- Phone interview, ABC staffer, 31 May, 2019

The ABC denies this and maintains his decision was taken entirely on editorial merit, because the story didn’t stack up.

So what can we be sure of?

Well, there’s no doubt Adani did complain, both to the reporter when she rang and, shortly after, to her bosses. A company spokesperson told us:

… we raised concerns with ABC management when approached to comment on a story that contained inaccuracies and was potentially biased ...

- Email, Adani spokesperson, 31 May, 2019

Adani says it told the reporter she should talk to an analyst more friendly to the mining sector.

And when she asked them to suggest someone, Adani’s PR team cracked it and went over her head to ABC management:

Adani complained that it was not reasonable that the onus for ensuring that ABC news coverage was fair and balanced should fall back onto the company and not onto the ABC’s well-resourced newsrooms.

- Email, Adani spokesperson, 31 May, 2019

A key feature of Adani’s complaint was that the ABC had not given it enough time to respond.

But in fact by Friday afternoon Fickling’s work had been up for more than 36 hours. 

And Adani was able to send a statement to the ABC almost immediately.

So, who at the ABC dealt with the company’s complaint?

We’re told Adani went straight to the top — ABC News boss Gaven Morris — who we understand is the person they normally contact.

So to clarify what happened, we asked Morris a series of questions, which included:

Did Adani contact you last Friday afternoon to complain about the story?

What was the nature of the complaint, and how did you respond?

Why was the story pulled, given that it had been commissioned for Saturday AM only hours beforehand?

Was the decision to pull the story taken after Adani’s complaint?

Why was this complaint handled personally by you?

- Email, Media Watch to Gaven Morris, 31 May, 2019

We did not get a response from Gaven Morris or answers to most of those questions.

Instead, an ABC spokesperson told us:

There was no complaint.

- Email, ABC spokesperson, 31 May, 2019

Which is remarkable, because Adani says there was…..

Full transcript here.

BACKGROUND

“The numbers on Adani simply don't add up”, The Sydney Morning Herald, 24 May 2019 at https://www.smh.com.au/business/companies/the-numbers-on-adani-simply-don-t-add-up-20190524-p51qoy.html.