Adani Australia Submission to the Joint Standing Committee on Trade and Investment Growth Inquiry into the Prudential Regulation of Investment in ...
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Adani Australia
Submission to the Joint Standing Committee on Trade and Investment Growth
Inquiry into the Prudential Regulation of Investment in Australia’s Export Industries
April 2021
Adani Australia
Adani Australia (Adani) is a multi-dimensional resources and infrastructure group
dedicated to delivering energy solutions for an advancing world. Since 2010 the company
has invested over AU$5 billion in Australia and represents the most significant Indian
investment in Australia. Such investment has created and will continue to produce strong
employment growth and considerable value for the Australian economy.
Our operations in Australia include the North Queensland Export Terminal located at
Abbot Point North Queensland, the Bowen Rail Company, Bravus Mining and Resources,
which will operate the Carmichael Mine (currently under construction), and the Rugby Run
Solar Farm.
North Queensland Export Terminal (NQXT)
In 2011, Adani was granted a 99-year lease over the Abbot Point Port by the Queensland
Government. The Abbot Point Port is a deep-water facility that has been operational for
more than 35 years. It has the capacity to export up to 50 million tonnes of coal a year and
is a critical infrastructure asset supporting the nation's globally significant coal industry.
The Terminal exports large volumes of metallurgical and thermal coal to different parts of
the world, boosting Australia’s export performance. Major destinations include China,
Japan, South Korea, and India. In the 2019-20 financial year, the Port achieved a record
output of near 32 million tonnes (the highest since its inception).
The Port is a multi-user export facility that provides strategic access to currently ten major
coal producers. A critical requirement of NQXT's lease conditions with the Queensland
Government is to provide access to all Queensland coal producers where capacity is
available.
In 2008 the Queensland Coordinator-General declared the 16,885 hectare precinct that
encompasses the Port a State Development Area (SDA). The SDA was established by the
Adani Australia Pty Ltd
Level 9 Tel +61 7 3223 4800
120 Edward Street, Brisbane QLD 4000 www.adaniaustralia.com
GPO Box 2569, Brisbane QLD 4001
Australia
ABN: 79 625 679 852State to facilitate “large-scale industrial and port-related development of regional, state and
national significance.”
The Sustainable Ports Development Act was passed by the Queensland parliament in 2015.
The Act established a legislative framework to balance the protection of the Great Barrier
Reef World Heritage Area with the development of the state’s major bulk commodity ports
in that region. The Act designated Abbot Point as one of four priority ports and that the
State “will optimise the use of existing infrastructure and address operational, economic,
environment relationships, as well as surrounding land, uses, through port master plans and
port overlays.” The Act is the Queensland Government’s response to UNESCO
recommendations on the Great Barrier Reef World Heritage Area.
In 2016 the Queensland Government declared Abbot Point a ‘strategic port’ under its State
Planning regime - a strategic port “is considered by the State to be an essential component
of the national and state transport network and supply chain…”
Bravus Mining and Resources (Bravus)
Bravus will operate the Carmichael Mine, a 10 million tonne per annum coal mine located
in the North Galilee Basin, more than 300kms from the Queensland coastline and
approximately 160kms northwest of Clermont in regional Queensland. Construction on the
Carmichael Mine commenced in June 2019. The mine has received all required approvals
from the Australian and Queensland Governments.
Once construction is complete, high-quality thermal coal will be railed more than 300km to
Abbot Point via a 200km rail line (currently under construction). It will connect to the
existing Goonyella rail network.
Coal is designated for export and not to the Australian domestic market. Bravus’ coal will
displace other international coal producing jurisdictions (e.g. Indonesia, South Africa,
Russia) and is of a higher quality than those coals, meaning that the use of Bravus’ coal will
see global emissions reduced. India will be a foundation customer for the Carmichael
Project and is the fourth largest global user of electricity as well as the source of the
biggest growth in global energy demand.
Bravus is committed to supporting Australian companies, particularly regional businesses.
As of April 2021, more than $2.2 billion in contracts associated with the Carmichael Mine
and Railway construction have been awarded to Australian companies.
P a g e |2As at April 2021, our construction workforce has seen more than2,600 people directly
employed on our Project with thousands more indirectly engaged. The Bravus Mining and
Resources Carmichael Project is supporting a further 11,700 indirect jobs* in the
community. (*Economic modelling, such as that used by the Queensland Resources Council
in its annual resources industry economic impact report, shows that each direct job in the
industry in Queensland supports another four and a half jobs in related industries and
businesses, therefore we can expect that more than 11,700 indirect jobs have been created
as a result of construction on the Carmichael Project.)
We are dedicated to Indigenous employment, and in particular, for our Traditional Owners.
Through our Indigenous Participation Plan we will ensure that Traditional Owners and the
broader Indigenous community are well positioned to benefit significantly from the project,
either through jobs or contracting. Our plan comprises the following commitments:
• A minimum $7.5 million spend on Indigenous education bursaries and pre-
employment programs
• A minimum 10% Indigenous traineeships
• A minimum 7.5% Indigenous employment target
• A minimum spend of $250 million in Indigenous contracting and business
development.
We are on track to deliver on these targets.
Bowen Rail Company
The Bowen Rail Company is Queensland’s next-generation rail business, created to transport
Queensland’s high- quality resources for export to the world.
As the name suggests, the business is head-quartered in Bowen, North Queensland, drawing
on the highly skilled rail and resources sector expertise that resides in the region. Bowen
Rail Company is guided by a senior leadership team with more than 150 years combined
experience in the rail and resources industry, as well as new-to-rail industry recruits.
The business combines world-leading technology with clever solutions to advance the
safety, environmental, and economic standards of the rail industry. The next-generation
locomotives are the most technologically advanced rail fleet in Australia, meaning the local
workforce is able to work more efficiently, safely, and with a smaller environmental
footprint. Despite this cutting-edge technology all the trains will have drivers.
2021 will see Bowen Rail Company set up for successful operations, with the arrival of new
high-tech locomotives, the recruitment and training of enthusiastic locals and the delivery
of a safe operating model.
P a g e |3Rugby Run Solar Farm
In October 2019, Adani's first renewables project in Australia, a 65 MW Rugby Run solar
farm near Moranbah in central Queensland, was fully connected to the grid and is
powering the equivalent of more than 23,000 regional Queensland homes and businesses.
Phase 1 of Rugby Run currently utilises more than 247,000 solar panels across 600
hectares of land in central Queensland.
The Adani Group
Adani Australia is part of the Adani Group, which is an integrated energy and infrastructure
conglomerate headquartered in India. The Group's diverse businesses encompass energy,
resources, logistics, agribusiness, real estate, financial services, defence and aerospace.
The group’s market capitalisation in April 2021 was US$100 billion.
The company’s burgeoning energy portfolio comprises businesses involved in - gas and
electricity distribution, thermal power generation, solar generation, wind generation, and
solar photovoltaic (PV) manufacturing. Further, the company is actively pursuing new
energy sources with two wind-solar hybrid projects currently under construction, which will
produce 1,300 MW. In March 2021, Adani announced that it had signed an MOU with
leading Italian company Mare Tecnimont to develop green hydrogen projects in India.
Adani Group is taking in the transition to a low carbon economy seriously - while many
businesses are talking about transitioning, Adani is delivering. Many in Australia do not
appreciate that the Adani Group has moved quickly into a position to lead clean energy
transformation in India and on the global stage.
US Special Presidential Envoy for Climate John Kerry stated this month that India was
“getting the job done on climate, pushing the curve”.
India will require a mix of energy sources and technologies (including coal generation) to
meet the nation’s extraordinary economic and social aspirations and challenges.
Adani Power Limited (APL) is India’s largest thermal private power company with an
installed capacity of 12,450 MW with an additional 7,000 MW in the planning and approvals
stage. APL’s power stations utilise high efficiency, low emission (HELE) technology which
reduces greenhouse gas emissions. APL was the first power company in India to use
‘supercritical’ technology to reduce CO2 emissions.
In January 2020, Adani Group's Chairman Gautam Adani profiled the company's vision to
become the world's largest solar power company by 2025 and the largest renewable
company by 2030, which was followed in May 2020 by the Chairman’s strategy for green
P a g e |4energy acceleration in a post COVID world, where he envisages hydrogen could be a “game-
changer.”
These ambitions were both exceeded and substantially enhanced with the announcement
in June 2020 that Adani Green Energy Limited (AGEL) had been awarded the world’s largest
solar energy contract by the Solar Energy Corporation of India. AGEL is a fully integrated
solar player directly involved in manufacturing solar cells and modules, undertaking project
development, construction, financial structuring and owning and operating its assets.
AGEL will build 8 GW of solar projects along with a commitment that will see Adani’s solar
cell and module manufacturing business establish 2 GW of additional manufacturing
capacity. This contract, the largest of its type ever, will entail a single investment of US$6
billion and will create 400,000 direct and indirect jobs. It will also displace 900 million tonnes
of carbon dioxide over its lifetime.
AGEL now has a total capacity of 15 GW under operation, construction or under contract,
which will help to displace 1.4 billion tonnes of carbon dioxide over the life of its assets. The
company has publicly announced a target of reaching 25 GW of renewable power by 2025.
In September 2020, Mercom Capital Group named AGEL as the world’s largest solar power
generation owner based on operational, under construction and awarded projects.
Australia’s Thermal Coal Export Market
Coal cannot simply be wished out of the energy mix. All fuels and technologies are needed
to meet the challenges we face and to provide opportunities for those countries looking to
develop… Coal will continue to be a critical party of the global energy mix. With countries
around the world having to make energy choices - looking at security, reliability
affordability supporting growth and being clean. 1
Between 75-80 per cent of Australian thermal coal is exported. Australia is the world’s
second-largest exporter of thermal coal, after Indonesia. In 2019-20, Australia exported an
estimated 213 Mt of thermal coal, worth an estimated $20 billion; forecasts suggest that in
2020-21 exports will slow to $15 billion, before a partial recovery to $17 billion in 2021-22
driven by a strong recovery in volumes. 2
Australia’s major competitors in the export of thermal coal are Indonesia, Russia,
Columbia, South Africa and the United States.
1
World Coal Association
2
Office of the Chief Economist, Department of Industry, Science, Energy and Resources, Resources and
Energy Quarterly, September 2020
P a g e |5Commodity Insights 3 highlight that the global seaborne thermal coal market (where coal is
mined and exported) has doubled since 2006 and is now slightly more than a billion
tonnes, with all growth coming from Asia. They suggest that several fundamental factors
are driving this growth in demand:
• High electricity demand growth across developing Asia, driven by strong economic
growth, increasing industrialisation and higher electrification rates.
• High population growth across developing Asia, particularly India and South East
Asia.
• Significant coal-fired generation capacity commissioned in many countries.
• In some regions, domestic coal production cannot keep pace with demand growth,
amplified by increasing demand for high-quality thermal coal (i.e., high energy, low
impurity).
While Asian demand has been strong for lower quality coal until now…Australia’s higher
quality steaming coals are likely to be favoured by a new generation of higher efficiency
power stations under construction and planned in the Asian region. 4
Commodity Insights further assert that much of the Asian demand growth will rely entirely
on higher-quality coals, which will drive an increase in seaborne thermal coal volumes
stating that:
• The forecast growth is not only robust but broadly spread across the region.
• Australian thermal coal is widely considered the benchmark coal in Asian import
markets (higher energy and therefore lower CO2 emissions per kWh than lower-
rank alternatives).
• If more Asian demand is met from Australia, it will not only contribute substantially
to national wealth, but it will also provide power to developing Asian neighbours,
with a lower CO2 emissions profile than if produced from alternative coal sources. 5
Adani’s Investment in Queensland’s Galilee Basin
Although India has a sizeable domestic coal industry, it is the world’s second-largest
importer of thermal coal. Historically Indonesia has supplied most of India’s coal demand.
In 2018-19 Australia provided only 4.8 per cent of the coal imported to India, although
Australia’s market share in India increased substantially over recent months and is most
likely a reflection of changing market dynamics driven by China’s sanctions on Australian
coal.
3
Commodity Insights, Seaborne Thermal Coal: Asian Demand Forecast to 2030, October 2020 p 4
4
Porter D, Coal The Australian Story 1970-2020, Connor Court Publishing, 2020, p 439
5
Commodity Insights p 5
P a g e |6Adani’s vision to develop the Carmichael Mine is founded on two dominant influences -
the rapid transformation of the Indian economy and India’s enormous future demand for
quality higher energy coal that is superior to coal currently being used and more
compatible with the requirements of Indian high energy, low emissions (HELE) power
plants.
Our journey in Australia is now a decade old. If I were to identify a single point the
experience in Australia has taught me - it is the power of a purpose and the need to be able
to stand resolute behind what one believes in.
India needs to get electricity to 300 million people that even today struggled to turn on a
light, and I fundamentally believe that the Adani group has a role to play to help address
this challenge.
Australia has the resources, the human talent, and the strict regulatory frameworks to
ensure supply of cleaner burning coal. We will use this to replace poorer quality coal.
(Gautam Adani Founder and Chairman Adani Group).
India is the fastest-growing large economy globally and has the second-largest population
globally, with more than 1.3 billion people. 6 It will have the world’s largest population well
before 2035. 7 India’s population is growing by approximately 14 million people per year.
This means India adds the equivalent of Australia’s entire population roughly every 20
months.
By 2025, one-fifth of the world’s working-age population will be Indian. By 2030 there will
be over 850 million internet users in India. By 2035 India’s five largest cities will have
economies of comparable size to middle-income countries today. 8
Its people are young (800 million people are under 35-years-old) and its middle class is
growing.
The International Energy Agency’s India Energy Outlook 2021 has identified that:
• India will become globally the third-largest energy consumer by 2030 and make up
the most significant share of energy demand growth at 25%.
6
Varghese P. An India Economic Strategy to 2035 Navigating from Potential to Delivery. Department of
Foreign Affairs and Trade April 2018 p 25
7
Varghese p 3
8
Varghese p 3
P a g e |7• India will make up the most significant share of energy demand growth at 25% over
the next two decades, as it overtakes the European Union as the world's third-
biggest energy consumer by 2030.
• Presently, India is the fourth-largest global energy consumer behind
China, the United States and the European Union.
• Prior to the global pandemic, India’s energy demand was projected to increase by
almost 50% between 2019 and 2030, but growth over this period is now closer to
35%.
• Coal currently dominates India's electricity sector, accounting for over 70% of
overall generation.
• As a result of new government requirements, around 80% of the coal capacity
under construction is in the form of supercritical plants with higher efficiencies,
operating within with an efficiency of approximately 36 to 40%, together with a
small number of ultra-supercritical plants. 9
Adani’s Experience with Banking and Insurance Companies
At a time when Australia’s major political parties have acknowledged the critical
contribution the thermal coal industry (and the broader coal industry) will play in our
national recovery post the COVID 19 pandemic, there is a substantial misalignment
between this recognition at a political and governmental level and the conduct of
Australia’s major banks and insurance companies who are actively pursuing a divestment
agenda that will lead to a complete withdrawal of banking relationships and insurance
coverage with the sector from 2030.
It is our submission that these decisions by the banks and insurance companies, when
aggregated, will create a dramatic and adverse impact on one of the nation’s significant
export industries, will erode the industry's competitive position, curtail investment, and
limit the industry’s ability to capitalise on the market gains and efficiencies that has been
achieved over past decades.
In short - by withdrawing services form the Australian thermal coal sector the finance and
insurance sectors are exporting Australian livelihoods offshore. Removing Australian coal
from the global seaborne market will only see other jurisdictions with poorer quality coals
and less stringent environmental regulations fill the gap. The end result being that
Australians are disadvantaged and the world sees increased emissions on the back of poorer
quality coals replacing Australian high-quality coals.
9
International Energy Agency, India Energy Outlook 2021 p 157
P a g e |8Australian Banks
The Climate Statements of the major banks commence with a reference to climate
objectives of the Paris Climate Agreement, which came into force in 2016. The respective
statements then outline their support for a transition to net zero emissions by 2050,
followed by actions that will be pursued by each bank, under headings such as - “engaging
constructively and transparently with stakeholders”, “the need for an orderly and just
transition”, “continuing to support existing customers across the mining and energy sectors
to facilitate an orderly transition to a low carbon economy”, “engage responsibly on climate
policy”, “help customers and communities respond to climate change continue to support
our existing thermal coal mining customers”.
While the senior executives of the major banks may talk about transitioning the thermal
coal industry, it is our observation there is little evidence of transitioning occurring; if
anything, bank officials are displaying a zealot like enthusiasm to withdraw from the
industry. We submit to the Committee that our industry is confronting an acceleration of
the withdrawal from the coal industry - a withdrawal that only seeks to punish hardworking
Australian miners.
Australian banks are not only abandoning a key industry sector, they stand to also abandon
the principles of prudent risk management where banking risks are managed objectively and
quantitatively directly with the individual customer, not through ‘group think’, supposition,
pressure from anti-fossil fuel activist groups or some other qualitative evaluation.
Australian Insurance Companies
Like the banks, Australia’s major general insurance companies, which dominate the
insurance market, have, through their respective climate policies, announced a withdrawal
from underwriting the thermal coal industry. The companies representing much of the
Australian market, Insurance Australia Group (IAG), Suncorp Group, and QBE, have
announced the phasing out of coverage by 2023 and 2030. (IAG 2023, Suncorp 2025, QBE
2030).
These Australian insurance companies appear to have followed a global divestment push
led by European insurance companies with little to no regard to their national
responsibilities to the workers and companies of Australia.
The Impact on Our Nation
In recent hearings of the Australian Parliament’s Standing Committee on Economics and the
Economics Legislation Committee, senior executives from Australia’s major banks and
insurers responded to questioning about their organisation’s decision to withdraw from
P a g e |9Australia’s thermal coal industry, the senior executives provided a broad collection of
responses to questioning. Some of the main themes include:
• The banks are working with thermal coal-producing customers to assist them in
managing through a transition period.
• There will be other sources of capital for thermal coal producers.
• We are only implementing our policy on climate change.
• Our regulators (and our investors) are asking us to look at the risk here and take
into consideration that risk in managing the business.
• Investors, particularly global investors have some pretty clear views these days
around where their capital should be invested, which can drive outcomes for
business here in this country.
• ASIC and APRA require a really solid risk assessment to be done by board and
executives responsible for making investment and business decisions.
• It's not something we've committed to; the Government committed to the Paris
accord.
• We make decisions on our risk portfolios all the time; they have consequences.
• As a company we have taken action to be carbon neutral...we've also made
decisions around underwriting investment so that, hopefully, by 2030, we will
reduce our involvement in heavy carbon industries.
• We have always recognised that the enhanced extra emissions of greenhouse
gases is driving the extra severe weather that we anticipate now and into the
future.
• We look at our targets around reducing emissions both in our own footprint and
across our investment portfolios.
• In addition to coal, the banks are developing sector by sector policies for oil and gas
and other sectors, including agriculture.
Adani, with its strong knowledge of Asia and its active commitment to transitioning to a low
carbon economy is well-positioned to assert that the boycotting of Australia’s thermal coal
industry by Australian banks and insurance companies is misconceived and indifferent to
the manifest damage their decisions will have on the industry’s ability to remain globally
competitive and the consequential impact this will have on the Australian economy, regional
communities, employment and Asian economic development.
We submit that Australian banking and insurance companies have fundamentally failed to
understand and recognise the following:
P a g e | 101. The Australian thermal coal industry has competitors, if Australian thermal coal is
not delivered to Asian markets where it will be in demand for many decades to come,
other countries will replace Australia as a source of coal. 10
2. Australian banks must reconcile with the fact that there is a high probability that the
coal that is substituted for Australian coal will be an inferior, higher emitting coal.
This is readily evidenced following China’s recent decision to ban Australian coal
imports.
3. The decision of Australian banks will exacerbate carbon emissions as the
governments of developing countries will continue to pursue energy policies that are
in their national interest, even if this requires coal with higher emissions.
4. The vital contribution that the thermal coal exports will make to the Australian
economy in the post COVID rebuilding of our economy, both in terms of revenue and
employment.
5. The scale and dimension of the coal industry’s supply chain and the consequential
detrimental impact on small business and communities.
6. The significant social, employment and economic interlinkages between the coal
industry and regional communities.
7. The opportunities that Australian coals afforded Asian nations where power plants
will predominantly operate with substantially higher energy efficiency and low
carbon emissions per unit of electricity.
8. Thermal coal’s importance to developing economies as coal provides affordable,
reliable energy.
9. The impact on Australia’s relationships with our trading partners, particularly in
Asia.
The Commercial and Competitive Impact on the Thermal Coal Sector
The consequence of the banking and insurance sectors removing support for the thermal
coal sector has the immediate impact of increasing financing costs associated with
developing new projects or maintaining existing operations. Ultimately this results in
increased costs of development or operations, meaning that Australian thermal coal
producers become less competitive in what is a globally competitive market. Making the
Australian thermal coal sector less commercially competitive in a global market will only
result in poorer quality coals being exported from other international jurisdictions (e.g.
Indonesia), meaning that Australia suffers.
10
https://www.spglobal.com/platts/en/market-insights/latest-news/coal/082719-russian-thermal-coal-
production-to-grow-to-550-million-mt-year-by-2035-putin
https://www.theaustralian.com.au/business/russian-coal-set-to-replace-australian-exports-to-china/news-
story/75b3bdbf841bcafc2cebe4df94629bf7
https://www.couriermail.com.au/news/queensland/qld-coal-to-counter-putin-plan-and-climate-
change/news-story/46b04c90b043553b1f672155c85b344a
P a g e | 11We have practical illustrations as to the impact on competitiveness that we will be happy to
discuss in-camera with the Committee.
Actions taken by Banking and Insurance Organisations
Below is a listing of the actions taken by Australian banks and insurance companies against
our company and its contractors. A small summary sample of examples is provided. Adani
is prepared to provide the Inquiry with detailed examples of these actions in the Inquiry’s
formal proceedings in-camera.
Summary Examples of Bank Behaviour
Refusal by one or a number of banks to provide Adani Australia and its companies:
• Business loans and finance
• Extensions to existing loan facilities
• Bank guarantees / financial assurance for (performance and financial) commercial
and government contracts
• Bank guarantees / financial assurance for (performance and financial) commercial
and government contracts where a cash back guarantee has been provided to the
bank
• Transactional banking services.
Refusal by one or a number of banks to provide Adani Australia contractors:
• Bank guarantees (performance or financial) for contracts with Adani or other
companies within the coal industry
• Business loans and finance if bidding for contracts with Adani
• Business loans and finance if there is a continuation of the relationship with Adani.
Summary Examples of Insurance Companies Behaviour
One or a number of insurance companies:
• Refusal to underwrite risk associated with coal mining or specifically Adani
• Imposition of a dramatic increase in premiums on existing policies
• Refusal to renew existing policies
• Refusal to underwrite
• Refusal to provide services as an insurance broker.
Contractors
• Refusal to provide public liability insurance on Adani contracts (and coal industry?)
• Refusal to underwrite
• Refusal to renew existing policies.
P a g e | 12You can also read
