July 24, 2019 Read More →

Forensic accountant: Australia’s Adani Mining is in ‘perilous financial condition’

Australian Broadcasting Corporation:

Professor Sandra van der Laan casts her eyes over the complex corporate structure for Adani’s Australian operations. “It looks to me like a corporate collapse waiting to happen,” she says. “It has all the hallmarks of the big corporate failures we’ve seen over the last 20 to 30 years.”

Professor van der Laan, a forensic accounting specialist who heads the discipline of finance at the University of Sydney, has a reputation for picking “corporate collapses waiting to happen”.

The more immediate concern is Adani Mining Pty Ltd, the Australian-registered company which is the proponent of the Carmichael coal mine in the Galilee Basin. As a private company, the subsidiary is only required to release reduced financial statements with limited detail — but enough to raise red flags for Professor van der Laan and other critics. The accounts show the owners have contributed less than $9 million in equity to the business and total liabilities exceed total assets by more than half a billion dollars. Current assets of less than $30 million are swamped by current liabilities, due over the next 12 months, of more than $1.8 billion.

“Adani Mining is in a very fragile, even perilous, financial position,” Professor van der Laan observes. “The gap between the current assets and liabilities is what’s really concerning. Effectively on paper they are insolvent. I wouldn’t be trading with them, as simple as that. I wouldn’t have anything to do with them.”

The coal is likely destined for power stations in India owned by Adani Power Ltd, listed on the Bombay Stock Exchange but controlled by the Adani family. It released its latest accounts this month. Adani Power is highly leveraged with daunting debt — on current exchange rates, about $US7 billion net, or $10 billion — and thin earnings by comparison.

The poor financial position of Adani Power may be one reason why Adani has failed to find a bank anywhere that is willing to finance the Carmichael coal mine, argues Tim Buckley, research director of the Institute for Energy Economics and Financial Analysis, a philanthropically-funded body which promotes a transition to sustainable energy. “One of the key things an external investor or financial institution would require is that you have an off-taker [for the coal] that is solvent,” says Mr Buckley, a former investment banker who has been analysing company accounts for more than 30 years. “Adani Power hasn’t made money for a decade. On any reasonable interpretation it is not solvent.”

More: Adani’s Carmichael coal mine surviving on lifeline from Indian parent company

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