The Deutsche Bank of Germany announced it will not lend money to the Indian mining firm Adani Group to finance the development of Abbot Point Terminal I. The decision came after an AGM held on Thrusday.
We stress that we take the future of the Great Barrier Reef very seriously. We observe that there is no consensus between UNESCO and the Australian government regarding the expansion of Abbot Point. Since our guidance requires such a consensus as a minimum, we would not consider a financing request. – Deutsche Bank Group
Adani is one of the last remaining investors standing for the port terminal, along with another Indian firm, GVK Group.
Other investors have long abandoned their stakes, including mining giants Rio Tinto, BHP Billiton, Lend Lease and Anglo American. Market and financial analysts said the multi-billion dollar investment is unfeasible due to the end of the mining boom, with the downward spiraling of coal market prices worldwide. Galilee Basin in northern Queensland, where coal will be extracted,is also extremely remote and without basic infrastructure.
Australian mining goddess Gina Rinehart, herself, sold most of her coal assets in 2011. GVK bought them.
But despite Indian interests, the project has been stalled for two years. Adani is required to complete all environmental approvals and then raise AU $8 billion of additional debt and equity financing, and hence allow construction to commence on the Carmichael coal, rail and port proposal. Read the scale and magnitude of funding HERE.
There are speculations that the two companies tried to sell their equity holdings. GVK allegedly offered Coal India Ltd, but was rebuffed due to its uncommercial value. Adani is also rumoured to have approached several Chinese firms, including China Railway Corp.
Early this month, the Institute for Energy Economics and Financial Analysis (IEEFA) warned investors it is too risky to invest in the project. Local banks which were appointed to finance the project include National Australia Bank, Commonwealth Bank, and Westpac Banking Corp — on top of a few other international banks.
Tim Buckley , director of Energy Finance Studies, Australasia for the Institute for Energy Economics and Financial Analysis said that India cannot afford the price of imported coal:
India’s perilous economic and financial situation creates further uncertainty for companies relying on its ability and willingness to import coal, with its associated implications for inflation, current account deficits, economic instability and energy security’.
He also said that “imported coal would require double the current price of India’s wholesale electricity, which categorically discredits the nonsense argument that it might alleviate India’s energy poverty.” Buckley has produced detailed reports on Adani and GVK.
Various environmental and civic groups have written the Deutsche Bank not to lend Adani. Australian-base civic groups also linked with their European counterparts to “pressure” the bank. Some travel operators in Queensland further travelled to Germany to join the rally.
At the end of the AGM on Thrusday, the bank released the Deutsche Bank’s Environmental and Social Reputational Risk Framework (ES Framework), which stipulates the bank’s environmental and social due diligence as an integral part of the approval process for doing business.
One of the specific guidelines recently adopted addresses activities in the close proximity to World Heritage Sites. It precludes transactions within or in close proximity to World Heritage Site unless there is a prior consensus between the relevant Government and UNESCO that such operations will not adversely affect the Outstanding Universal Value of the Site. This implies that we would not consider a request to finance an expansion unless we had the assurance of both the government and UNESCO that it would not adversely affect the Value of the Site.