IEEFA Australia: Adani Group to receive up to $900m in early Christmas present from Queenslanders
29 November 2019 (IEEFA Australia) – Queensland Treasury are expected to sign off on a massive early Christmas present worth up to $900m packaged as a seven-year royalty deferral – another term for a capital subsidy – for the Adani Group on 30 November 2019 (likely to be announced on 29 November), ironically on the one-year anniversary of Adani declaring it will self-fund its Carmichael thermal coal mine in the Galilee Basin, Queensland.
Adani Australia – part of the Adani Group of India – announced the Carmichael thermal coal mine would ‘stand on its own two feet’, without any subsidies, in November 2018.
One year later and the Adani Group is not only expected to receive a $900m royalty present from the Queensland government, but the Adani Group is also set to receive over $4.4 billion in total tax exemptions, deferrals and capital subsidies from taxpayers for the life of the Carmichael mine.
“If you give enough subsidies, anything becomes viable.”
“If you give enough subsidies, anything becomes viable,” says Tim Buckley, director of energy finance studies at the Institute for Energy Economics and Financial Analysis (IEEFA).
“Global and domestic banks and insurers have turned their back on financing the Adani Group, joining the massive global financial exit away from thermal coal. To-date, 111 globally significant banks and insurers have implemented formal thermal coal restriction policies, including the latest just this week, being UniCredit, the largest bank in Italy.
“Yet the Queensland government still wants to give an early $900m Christmas present to the Adani Group for a product that faces technological obsolescence, is reliant on ongoing subsidies, and is only viable absent a price on carbon emissions.”
Under existing arrangements, Adani will effectively receive 17% of their coal for free compared to the royalty regime applying in NSW, according to The Australia Institute.
IEEFA notes the Queensland government’s royalty subsidy to Adani is due to be delivered this week.
Any deal should be publicly transparent given rising stranded asset risks
“Queensland’s generosity in providing such a lavish gift to India’s richest man means local Queenslanders will NOT see royalties from Adani’s Carmichael thermal coal mine for a decade,” says Buckley. “Any deal should be made transparent to the public, and credible financial assurance needs to be put in place as a minimum to ensure eventual payment, given rising stranded asset risks.
“The Queensland government would better provide for local communities by putting the $900 million into regional renewable energy projects that create sustainable jobs and permanently lower electricity prices, which in turn could reinvigorate Queensland’s industry.
“Thermal coal volumes peaked globally back in 2014 and it’s on the way out, while renewables are one of the fastest growing industry in the world.”
IEEFA notes that in addition to not paying royalties for the next decade, Adani Mining will also not pay company tax for many years in Australia due to the company’s already current accumulated losses on its balance sheet, huge financial leverage, and all the associated tax avoidance tools available to tax-haven based entities.
“Another Adani asset – the Abbot Point Coal Terminal in Queensland has paid little or no company tax to date,” says Buckley. “Likewise Australia’s two largest listed thermal coal companies – Yancoal Australia and Whitehaven Coal Ltd, have paid minimal cash tax in the last five years, according to IEEFA’s analysis of their public accounts. If history is any guide, we can infer that Adani may never pay any material tax for its Carmichael thermal coal mine.”
The Carmichael mine will not survive without billions of dollars in ongoing subsidies
IEEFA concludes that the Adani Carmichael thermal coal mine will not survive without the billions of dollars in ongoing subsidies being provided by the Queensland and Australian governments over the coming three decades.
“The Queensland government should give Queenslanders the $900m early Christmas present for their up and coming low emissions job creating renewable energy industry of the future, not gift it to the Adani Group for an obsolete thermal coal mine that may never be built,” says Buckley.
Tim Buckley is IEEFA’s director of energy finance studies for Australia/South Asia.
Media Contact: Kate Finlayson ([email protected]) +61 418 254 237
Further reading from IEEFA:
- Battery storage, renewables, hydrogen and rare earths – investment and transition planning can create jobs now and into the future, October 2019.
- The Adani juggernaut is expanding on all fronts, Australian coal needs not be one of them, October 2019.
- Australian taxpayers funding subsidies worth billions for Adani’s Carmichael thermal coal mine, August 2019.
- Contracting with Adani Australia entails counterparty risks, August 2019.
- Queensland government about to make poor economic decision on Adani mine, June 2019.
- Time to differentiate – thermal coal delivers royalty crumbs compared to Queensland’s coking coal, June 2019.
- Renewable energy could be Australia’s next big export industry, May 2019.
- Why renewables are the solution for Australia, April 2019.
- Key thermal coal off-takers continue to abandon coal-fired power projects, April 2019.
- Government forecasts declining economic contribution from thermal coal, March 2019.
- Even as forecasts signal decline in global thermal coal markets, Australia courts new mines, February 2019.
