Adani To Press Ahead With Australia Coal Plans
As global mining giants scale back their ambitions in Australia's coal sector, billionaire Gautam Adani is showing no such caution and plans to push full-steam ahead with a $4.5 billion project in a bet on rising Indian demand.
- (1888PressRelease) September 27, 2012 - Adani expressed confidence in being able to secure funding for the Carmichael coal mine in Queensland, Australia, by the end of the year. The group aims to start production in 2014 and build up to annual output of 60 million tonnes by 2020.
However, he also said his Adani Group could reduce its debt-to-equity ratio to below one by 2015 if its power firm, Adani Power Ltd (ADAN.NS), is allowed by Indian authorities to pass on more of the increasing cost of imported fuel to end users.
Concerns about the group's debt, currently 2.3 times equity, have contributed to a near 18 percent fall in Adani Power shares this year.
"Our Australia plan is completely on the dot, as per schedule," Adani told Reuters in an interview.
"We have our ready market, our own consumption, our own trading, country's need, country's need will improve, as well our aspiration of also entering the global trading market," he said.
Global miners, including BHP Billiton (BHP.AX), Rio Tinto (RIO.AX) and Xstrata (XTA.L), have put investments on hold and cut workers in Australia, after a sharp fall in iron ore and coal prices as China's demand growth cools.
A $246 billion pipeline of planned mining investments in Australia is on increasingly shaky ground as a fall in prices tightens operating margins and puts a spotlight on cost cutting.
Adani acquired the Carmichael tenement in Galilee basin and the Abbott Point coal terminal at the top of the Australian resources boom in the past two years.
The Adani Group imports most of India's coal, operates power stations in India and the country's biggest private-sector port, an integrated structure that Adani said will help offset risks in developing the Carmichael coal mine.
He said a fall of as much as 20 percent in labour and equipment costs in Australia's mining sector since the sector slowdown began was also offsetting some of the risks.
"Our focus is not on short term. We are not looking at today's price and deciding," said the soft-spoken 50-year old in his modest-looking office in Ahmedabad.
His India-centric business made him different from global miners, he said.
"The project will last for generations. For that $100 million of pain here and there doesn't make any difference," he said.
The group is in talks with export credit agencies, including the U.S. Export-Import Bank, Australian lenders, as well as State Bank of India and Standard Chartered (STAN.L), and expects to tie up funds for the project by the end of 2012.
He said there is "no negativity" in the talks with lenders to suggest financing may be a problem.
Adani said the group could sell a stake in the Abbott Point Port in one to two years' time. He had no plan to sell a stake in the mine, but would consider listing it on a stock market at a later date.
Shares of Adani group companies have plunged over the past year, partly due to uncertainties in India's power sector, including unreliable coal supplies from domestic producers.
Adani is locked into long-term power purchase agreements with some state electricity boards that do not allow him to pass on increases in the cost of imported fuel and is in adjudication proceedings to change the tariff agreements.
If the adjudication is in favour of the company, Adani said he was confident of reducing the current group level debt-equity ratio to less than one by 2015.
However, if the tariff issue is not settled, Indian power projects risked becoming financially unviable, he said.
India approved a plan on Monday for a $35 billion debt restructuring of cash-strapped power distributors to improve their financial health.
Adani said he is also keen to build on the success of the group's Mundra port, India's biggest private-sector port, which is located on the west coast.
He is eyeing opportunities to expand his operations into Odisha and Chennai on the east coast. He said he was very interested in buying a majority stake in Dhamra port in Odisha, whose current owners -- Larsen & Toubro Ltd (LART.NS) and Tata Steel Ltd (TISC.NS) are keen to sell.
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