http://www.smh.com.au/business/mining-and-resources/adani-could-be-derailed-if-900m-loan-denied-20171004-gyu4iv.html
Adani's proposed $900 million loan from the Northern Australia Infrastructure Facility (NAIF) always looked more like a drunken punt than actual investment.
With no commercial backers for the $5 billion Carmichael mine and 388-kilometre rail line, the NAIF subsidy seemed simply to be a waste of public money on a project that didn't make economic sense.
This remains the case. The initial market mooted for Adani's coal was Indian power stations. But given that domestic solar is now significantly cheaper than imported coal, the economics have changed.
Adani knows all about this, as the cost of running its Mundra power plant on imported coal was crippling Adani Power, forcing the power station to be put up for sale for one rupee.
Adani could instead turn to the international seaborne market. But that's not good news for other Australian miners. With thermal coal in structural decline, the threat of a new competitor flooding the market and lowering the price for everyone else would loom far greater than anything environmentalists could throw at the industry.
Then there's the opportunity cost. Adani's loan would chew up almost a fifth of the NAIF budget. If it went ahead, many of the dozens of other proposals to NAIF wouldn't stand a chance.
But we learnt this week that the NAIF loan is about much more than making the Carmichael mine possible. It is effectively a corporate bailout, essential for Adani's Australian operations to remain viable.
Adani's Australian book value is largely derived from the Carmichael coal tenements, which it bought the rights to in 2010, and the Abbot Point coal export terminal that Adani acquired in 2012 with 100 per cent debt finance.
A new report from the Institute for Energy Economics and Financial Analysis (IEEFA) shows how both projects are key to the company's Australian survival. Both have a highly uncertain future.
Key contracts to handle coal through Abbot Point are set to expire over the next few years and unless new sources of coal come along to fill the gap, Abbot Point risks sitting idle. That's not a good selling point for Adani, which needs to refinance $1.4 billion of debt to the port in the next year.
Adani hopes that new source of coal will be the Carmichael mine, which initially would provide exactly the 25 million tonnes per year of coal to make up the shortfall in Abbot Point's capacity.
But here, too, Adani is struggling for investors, calling in the boutique advisory firm Grant Samuel to see if it can scrape together a deal in a barren environment where most prospective lenders have already walked away.
