Adani Cancels A$2 Billion Mine-Building Deal After Funding Woes

  • Carmichael construction contract canceled with Downer EDI
  • Funding for project faces pressure after state government veto

Adani Enterprises Ltd. will build Australia’s largest coal mine by itself after canceling a planned A$2 billion ($1.5 billion) deal with Australia’s Downer EDI Ltd. to help construct the Carmichael project in Queensland state.

Adani and Downer mutually agreed to cancel all letters of award for work on the mine first made three years ago, Adani’s Australian unit said in a statement Monday. The decision was partly triggered by the state government’s veto of A$900 million in potential federal funding for a new rail link, which is needed to carry coal from Carmichael to the coast for export, Adani said. The mine will be developed on a owner-operator basis now.

Given uncertainty over the funding and timing of the first phase of the project, it made more sense to keep tight control on costs and development within Adani, according to Fat Prophets resources analyst David Lennox. “Once the funding and timetable is securely in place, they may return to the market for specific construction services,” he said.

In addition to the state government opposing a federal loan for the project, major lenders from Goldman Sachs Group Inc. to Australia’s big four banks have preemptively excluded themselves from financing the Carmichael development because of their opposition to polluting fossil-fuel projects. Adani’s plan in the Galilee basin is opposed by environmentalists who say it will increase carbon pollution and endanger the health of the Great Barrier Reef marine park in the state’s north. Three of China’s largest banks also ruled out any involvement in funding the mine earlier in December.

Downer’s original 5-year contract included the management of mine operations, drilling and blasting, and the loading and hauling of waste and coal, the company said in a December 2014 release.

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