The Adani Group's entire $3.5 billion (Rs 178 billion) debt-funded 'investment' in Australia is gravely at risk, the US-based Institute for Energy Economics and Financial Analysis (IEEFA) said on Monday.
In a new report, it details how Adani's Abbot Point Coal Terminal has excessive financial leverage, negative shareholders equity and runs the risk of becoming a stranded asset if Adani's Carmichael mine does not get a $1 billion Australian subsidy.
The Abbot Point Coal Terminal is due for a $1.5 billion debt refinancing next year and a cumulative debt refinancing of $2.11 billion by 2020.
Currently, operating at just over 50 per cent capacity, the Abbot Point Coal Terminal needs the Carmichael mine to fill the gap created as its current take-or-pay contracts progressively expire.
"Securing this refinancing is going to be a real challenge, not the least because the port value has been tied to the success of the Carmichael coal mine proposal which is itself yet to secure funding and which the 'big four' Australian banks have refused to touch," an official statement quoting report co-author Tim Buckley said.
Buckley's the IEEFA's Director of Energy Finance Studies, Australasia.
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"The potential for a loss of up to $1.5bn on any decision to walk away from Carmichael mine and rail proposal, explains why the Adani Group has been so focused on securing Australian tax payers money and royalty holidays to subsidise his loss making ventures," he said.
"To the extent able to be analysed from Australian Securities and Investments Commission records, Adani's entire mine, rail and port operation in Australia looks to be 100 per cent debt financed and shareholders funds now tally an unprecedented, negative $458 million combined. The value at stake for the Adani Group's Carmichael mine proposal is far bigger than previously understood," Buckley added.
Whilst Adani continues to search for overseas project funding, the report, "House of Cards: The Escalating Financial Risk of Adani's Abbot Point Coal Terminal", the report traces events that make the Carmichael project an even greater financial risk.
The events include Adani's major proposed off-take coal customer, Adani Power Ltd's 4.6 GW power plant at Mundra in Gujarat, is financially distressed and its equity is for sale for just Re 1 but has no buyers so far.
India's thermal coal imports have continued the downward trend of the last two years and are down 13 per cent year-to-date in 2017 compared to the prior year.
And, in the light of new solar infrastructure projects delivering electricity at prices now 20 per cent below many Indian thermal power plant tariffs, financial analysts don't see any imported coal demand to justify more expensive seaborne supplies.