Controversial Carmichael project: Adani cancels A$2bn contract with Australia's Downer
What's the story
Indian multinational conglomerate Adani Group has parted ways with Australian mining company Downer, terminating an A$2billion ($1.5billion) contract for the proposed, controversial $16.5billion Carmichael coal mine project in Australia's Queensland.
Adani's move is part of its cost-cutting drive, as the embattled Indian conglomerate has failed to raise funds for the project targeted by environmental activists over coal's role causing climate change.
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Simply a change in management-structure; will not affect commitment: Adani
Adani's statement said: "Adani and Downer have mutually agreed to cancel all Letter of Awards and Downer will provide transitional assistance until March 31, 2018. Adani remains committed to develop the Carmichael project and will ensure the highest level of standards and governance."
Challenges
Yet another challenge for controversial Carmichael coal mine?
Adani's cancellation of contract with Downer, the latest challenge to the Carmichael project, comes only a week after the Queensland Government vetoed a concessional (low-cost) A$900million ($690million) loan to Adani.
It raises doubts over the mega project's fate. Downer - one of Adani's two contractors for the venture, the other being Thiess- is capable of handling production of up to 60million-tonnes of coal annually.
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Adani to build and operate mine on its own
Adani stated: "Following on from the NAIF veto last week...and in line with its vision to achieve the lowest quartile cost of production by ensuring flexibility and efficiencies in the supply chain, Adani has decided to develop and operate the mine on an owner-operator basis."
Details
Galilee Basin: One of world's largest untapped coal resources
The Carmichael project has already been delayed several times. It has become the target of a global battle between the environmental activists and fossil fuel industry that led to a series of challenges to the project. It faced difficulties in getting green clearances and as well as a massive loan.
The proposed $16.5billion mine project is located in the Galilee Basin in Queensland.
Rail, Mining Project
Raising money for proposed venture, an "insurmountable challenge"
Adani's owner Gautam Adani wants to build a railway connecting Carmichael mine and Adani-operated Abbot Point port on Queensland's coast near the Great Barrier Reef for shipping coal to India and fuel their power-plants.
Adani board's final approval for Carmichael mine came in June. But securing funds had been a major challenge, owing to the decline in global coal markets and environmentalists' protests.
Chinese Investors
No help from Chinese investors, too
Adani Group had even tried to raise funds from Chinese banks and organizations.
Adani and Downer even held discussions with China Machinery Engineering Corporation's President Zhang Chun for Carmichael project's funding, but they couldn't reach an agreement.
Also, Australia's former Foreign Minister and Director of a China think-tank at University of Technology Sydney, Bob Carr, recently said Chinese investors wouldn't fund Adani's project.
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Another wheel has fallen off the Adani project: IEEFA Director
Director at Institute for Energy Economics and Financial Analysis (Australia), Tim Buckley, said: "It looks like another wheel has fallen off the Adani project. With all of the Chinese banks ruling out involvement in the Carmichael proposal, deal funding has fallen over."