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Adani losses hit $794m as insurers signal retreat

Leaked invoices obtained by The Age and The Sydney Morning Herald this week revealed Aspen Re was one of four global insurance companies paid for underwriting works on Adani’s Carmichael coal mine and rail project. The other three, Liberty, HDI and AXL all have said they will not provide insurance on the project after their current residual policies come to an end.

Moves by insurers to rule out covering fossil fuel projects may further limit the options for Adani to insure the mine and could add to the doubts over the project’s financial viability.

Adani won approval last year to produce 60 million tonnes of thermal coal annually from the Carmichael mine. The project has been a lightning rod for climate activists who fear it will severely damage the environment and pave the way for further coal mining in the Galilee Basin. But it is supported by some politicians who argue it will create jobs in central Queensland.

Tim Buckley, senior energy economist at the Institute for Energy Economics and Financial Analysis, said Adani’s parent company would have to shuffle funds from other projects – like its ports or green businesses – to keep the Carmichael mine funded.

“Adani Power has zero financial capacity to borrow more money,” Mr Buckley said. “Global investors have no problem investing in one of the biggest port players in Asia so he [chairman Gautam Adani] just has to redirect the money back to Carmichael.”

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Adani’s latest local accounts show the main factor that could impact the viability of the project is the thermal coal price which has continued to slump as worldwide lockdowns reduce demand for power.

The Carmichael mine is expected to produce thermal coal for export to Adani Power’s coal-fired generators in India. According to the accounts, a 10 per cent reduction in the coal price would decrease the fair value of the project by $882 million.

The project is expected to ramp up this year with the financial accounts reporting that the company has $314 million worth of capital expenditure which is “contracted for at balance date but not provided for”.

But the accounts also highlight just how much Adani Mining is reliant on its Indian parent for survival.

“The ability of the group to continue as a going concern is dependent upon the ongoing support of its shareholders,” the company said. The report said Adani’s parent company had agreed to provide financial support at least until March 31 next year.

An Adani spokeswoman said there was “no doubt” about the viability of the project as strong demand for thermal coal in south and south-east Asia would drive productivity. “The construction of the Carmichael project is now well progressed with more than $1 billion in contracts awarded,” she said.

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