SYDNEY: 17 November 2014 Coal addicted Australian politicians have stepped up with public cash where international financiers wouldn’t dare to tread, announcing taxpayer funded support for unviable and highly questionable Queensland coal projects, according to the Institute for Energy Economics and Financial Analysis (IEEFA).

“Many would consider this a Government simply pissing taxpayers’ money up against the wall,” Tim Buckley, Director of Energy Resource Studies Australasia at the Institute for Energy Economics and Financial Analysis (IEEFA) said.

“The people of Queensland and Australia should be outraged at this idea of questionable politicians spending many billions of tax payer dollars to make an unviable, unwanted and dangerous mega coal project a reality,” Mr Buckley said.

It should be noted that Newman has historically been at pains to say that the state of Queensland is in dire financial straits with huge debt – $80 billion.

“The Galilee coal projects are totally, commercially unviable. Any project undertaken is highly likely to end up as a stranded fossil fuel asset as the rest of the world rapidly transitions to lower carbon solutions. Coal has entered structural decline – there is no two ways about that fact,” he said

Premier Campbell Newman would not put a figure on its role, but it was likely to be a big ticket infrastructure item such as the rail or ports. An announcement is expected to tie-in with the visit of the Indian Prime Minister Narendra Modi and Guatum Adani, who has been putting together the $15 billion Carmichael project – with limited success in securing funding support.

“We are prepared to invest in core, common-user infrastructure,” Mr Newman said. “The role of government is to make targeted investments to get something going and exit in a few year’s time.”

“We want a new coal basin to open,” Newman has repeatedly stated without acknowledging the structural decline of the sector or the climate related implications.

The US-China Agreement combines with India’s articulation of their new energy plans to cease importation of thermal coal serves to cement the structural decline of seaborne thermal coal.

“8 of the largest global financiers have already said they wont provide financing to the Galillee projects,” Mr Buckley said.

On Wednesday 12 November 2014 India’s Energy Minister Piyush Goyal said he plans for India to cease importing thermal coal within 2-3 years.

“This makes a mockery of the plan by Adani to export 2/3 of the Carmichael coal back to India. His own energy minister is making it clear India cant afford to solve energy poverty using hugely expensive imported coal.”[i] Mr Buckley said.

India’s Energy Minister Piyush Goyal early last week cited distributed solar and microgrids, wind farms, energy efficiency, grid efficiency, plus domestic coal and hydro as the preferred domestic solutions.[ii]

“This is a taxpayer subsidy of a private foreign company who has to-date invested almost no equity capital into the Australian economy.

“The $3bn of assets collectively held by Adani Abbot Coal Terminal and Adani Mining Australia are secured against over $3bn of net debt. Adani has net negative tangible assets in Australia – this whole thing is a financial illusion,” Buckley said.

Only two days ago POSCO distanced themselves from the project: Both POSCO E&C and potential funding partner South Korea’s Export-Import Bank said any agreements were at very early stages. “It is hard to predict when a contract will be signed,” said a POSCO E&C spokesman in Seoul, distancing themselves from Adani’s continually bullish optimism.[iii] This also highlights a point Adani has conceded only last week, that financial close will be at the end of 2015 at the earliest.

The project is not commercially viable: “On a standalone basis, the economics just don’t stack up – I’m talking about costs and return on capital. You’d need a price of about $100-$110 a tonne for it to stack up,” said Daniel Morgan, global commodities analyst at UBS[iv] Wednesday 12 Nov’2014.

[ENDS]

Tim Buckley is the Director of Energy Finance Studies, Australasia for the Institute for Energy Economics and Financial Analysis. He has 25 years of financial markets experience, including 17 years with Citigroup culminating in his role as Managing Director and Head of Australasian Equity Research.

Mr Buckley has spent the past five years investigating the trends in global renewable energy and as a result questions viability of the Galilee developments.

Tim has produced detailed reports on both GVK and Adani. http://www.ieefa.org/category/reports/