November 2, 2017 Read More →

China Contractors and Finance May Help Adani’s Mega Coal Mine

Renew Economy:

Having reportedly been struggling to secure finance for the project, the possibility of Chinese state-owned enterprises (SOE) becoming involved changes the picture.

According to various sources, the Chinese SOE China Machinery Engineering Corporation (CMEC) appears to be the leading contender for the engineering, procurement and construction (EPC) contracts for key parts of the Carmichael mine and/or rail projects.

CMEC sometimes takes minority equity stakes in the projects it is contracted to engineer. This could be a desperately needed boost for Adani which has recently stated it is seeking to sell a minority stake in the project.

Importantly, CMEC can bring with them access to the Export Import Bank of China and the China Construction Bank, amongst others, both also state-owned enterprises.

News broke last week that the former Australian Deputy Prime Minister, and the Trade Minister, wrote a letter to the Chinese government informing them that the projects have received all the necessary environmental approvals. This appears to fall squarely into the context of CMEC involvement.

Chinese SOEs won’t become involved if there is no benefit for them. As a result, this raises the question of where Carmichael coal will actually be exported to.

CMEC itself has interests in coal-fired power projects within the Belt and Road Initiative with Pakistan as a key priority.

If this potential involvement of Chinese SOEs plays out, the project starts to look very different from the one that was stated for so long by Adani, including a promise to ‘light up 100 million Indian homes’. With landed cost of US$129/t in the case of Pakistan, imported coal is not in a position to solve energy poverty. As well as a potential reputational risk for Adani, there is also risk for the Chinese government.

China contractors and finance may help Adani’s mega coal mine

Posted in: IEEFA In the News

Comments are closed.