Companies

Adani’s Australia coal project may turn a ‘stranded asset’: Citi

M Ramesh Chennai | Updated on January 23, 2018 Published on August 24, 2015

The Citi group has implied that Adani’s proposed Carmichael coal project Queensland, Australia, might become a “stranded asset” and hence unviable.

In a recent report titled Energy Darwinism II, in its ‘Global Perspectives & Solutions series of reports, Citi has noted that “high cost, long-life projects would be most vulnerable if produce demand and prices weakened over time.” The report goes on to count “new coal provinces such as Australia’s Galilee Basin, which would require major investment in new export infrastructure to be developed,” among coal assets that might get “stranded”. The Adani’s Carmichael project is in the Galilee Basin.

“The ‘stranded assets’ concept is already in play,” warns the report, observing that fossil fuel assets could face difficulties such as closure orders or tightening of regulations to extents that may turn the projects unviable because of an emission reduction agreement at the upcoming climate negotiations in Paris this December.

Political issue

Reacting to the report (and agreeing with it), The Australia Institute, an influential, apolitical think tank based in Canberra, has said that the Carmichael mine project “is not financially viable at this point and is highly uncertain that it ever will be.”

Roderick Campbell, Research Director at the Institute, who has been involved in the Queensland Land Court case on the mine as an expert witness on economics, pointed out that the Queensland government was proposing to subsidise the mine’s infrastructure by $326 million and “the project was still struggling to attract finance.”

The project has always been highly political and now more so than ever, with the Prime Minister himself going in to support the project public, Campbell said, in an email to Business Line.

“In my view, the PM is supporting the project not because it could go ahead, he is supporting it because it is sure to fail. When it fails, this will provide the PM and the mining industry with an opportunity to paint environmentalists as the enemies of the economy and to try to reform planning and environmental laws,” he said.

Published on August 24, 2015
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