IEEFA Note Billionaire Adani Being Subsidised for Carmichael …ieefa.org/wp-content/uploads/2019/08/IEEFA-Note... · 2019. 8. 29. · Billionaire Adani Being Subsidised for Carmichael

Tim Buckley, Director Energy Finance Studies 29 August 2019

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Billionaire Adani Being Subsidised for Carmichael Thermal Coal Mine Adani’s Thermal Coal Mine in Queensland Will Never Stand on Its Own Two Feet

Executive Summary • AlthoughAdaniAustraliaclaimsits

Carmichaelthermalcoalmineis100%self-funded,IndianbillionaireGautamAdaniisrelyingonAustraliantaxpayerdollarsintheformofsubsidestobothconstructandoperateitsrecentlyapprovedmineintheGalileeBasininQueensland,Australia.

• TheAdaniGroupisbeingsupportedbysubsidiesfromtheAustralianandQueenslandgovernmentsexceeding$4.4billionintotaloverthe30-yearprojectlifeoftheCarmichaelthermalcoalmine.

• TheprojectisalsoreliantonanumberofsubsidiesbeingprovidedtoAdaniPowerLtdinIndia,includingdecadelong,dedicatedspecialeconomiczonetaxconcessions,governmentcapitalfinancesubsidisesandspecialtreatmentoncoal-pricepass-through,lockinginenergypovertyforthepoorintheIndianstateofGujarat,andthecountryofBangladesh.

• AustraliangovernmentsubsidieswillincreasefurtherifAdanimovestheCarmichaelcoalminebeyondthe27milliontonneperannum(Mtpa)stageIIproposal.WhileAdanireferencestheirregulardownsizingsofthisproposaloverthelasteightyearsto“just”10Mtpanow,thisstageIisespeciallysub-economicforthededicated200kilometreraillink,aswellasleavingsurplusportcapacity.Allgovernmentapprovalsareforto60Mtpa,sothisisaforeignmega-mineproposal,despitethepretenceofbeinga‘littleAussiebattler’.

• ThesubsidieshavebeenprovidedinanefforttogetAdani’sthermalcoalmineupandoperatingforthesakeofahandfulofjobsandabagofroyalties,payableinadecadeorso.

• AdaniMiningPtyLtdhascurrentliabilitiesofmorethan$1.8bnversuscurrentassetsoflessthan$30masof31March2019.

Billionaire Adani Being Subsidised for Carmichael Thermal Coal Mine

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• InIEEFA’sview,theAdaniCarmichaelthermalcoalmineprojectwouldnotopennorsurvivewithoutbillionsofdollarsinsubsidies.

• Thermalcoal(usedforelectricity)providesonly13%ofroyaltiestoQueensland’sbudgetcomparedtocokingcoal(usedforsteelmanufacturing)whichprovides87%inroyalties.

• Thermalcoal,whichpeakedbackin2014,isbeingprogressivelyreplacedbyalternativetechnologiesandisforecastforterminaldeclineby2050.

• TheCoordinatorGeneralwillbecallingontheQueenslandTreasurertosignoffonAdani’sroyaltyagreementby30September2019.IEEFArecommendsthe7-yearroyaltysubsidynotgoahead.

• Adani’sCarmichaelthermalcoalmineisalreadywellsubsidisedbytaxpayersdespitethecompany’sclaimofself-funding.

• StageIdoesnotfacilitateothercoalminesintheGalileeBasin,arequirementofthesubsidy.

• IEEFArecommendsthatboththeQueenslandandAustraliangovernmentswithdrawtheirspecialsubsidedsupportoftheAdanithermalcoalmine.

• IEEFAconsiderstheprecedentoftheAdaniAbbotPointPortreportinggrossprofitsofupto$200mannuallybutbeingstructuredfinanciallysoastopaynexttonocorporatetaxoverthelast8yearsasjustificationforourviewthatAdaniAustraliaisunlikelytopayanymaterialAustraliancorporatetaxinthecomingdecadeorbeyond.

• AustraliaisbetterplacedimplementingajusttransitionforexistingcoalmineworkersandcommunitiesinregionalAustralia.

• Withglobalwarmingputtingtheworldonatrajectoryofwellabove2 °C,openingamassivenewthermalcoalminewillincreaseglobalemissionsandensureAustraliadoesnotmeetitsParisAgreementcommitments.

Figure 1: Capital and Operating Subsidies for the Carmichael Coal Mine Timeframe Subsidy offered to Adani Value 7 years A 7-year Royalty Holiday $900,000,000 30 years Fuel Tax Credit Scheme $2,400,000,000 30 years 22 Billion Litres of Water Annually $19,000,000 Upfront A 90km Private Road $100,000,000 End of mine life Rehabilitation $1,000,000,000 30 years Corporate Tax Shields (open-ended) unquantifiable TOTAL $4,419,000,000


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Adani Announces Self-funding AdaniAustralia’sCarmichaelthermalcoalmineisproposedbyAdaniMiningLtd,awhollyowned,indirectsubsidiaryofIndia'sAdaniEnterprisesLtd,whichinturnismajorityownedandfoundedbyGautamAdani,nowoneofIndia’srichestmen.

InNovember2018,AdaniAustralia–partoftheAdaniGroup-announceditsproposedCarmichaelthermalcoalmineinQueenslandwillstandonitsowntwofeet-withoutanysubsidies:1

AdaniMiningchiefexecutiveLucasDowsaidthescaled-backprojectwouldbe"100percentfinanced"fromwithintheAdaniconglomerate…"Today'sannouncementremovesanydoubtastotheprojectstackingupfinancially...WewillnowdeliverthejobsandbusinessopportunitieswehavepromisedfornorthQueenslandandcentralQueensland,allwithoutrequiringacentofAustraliantaxpayerdollars."2

IEEFAnotesthisstatementthattheCarmichaelprojectis100%financedbyAdaniwithoutanysubsidiesisnotevenremotelytrue.

Indian Subsidies Provided to Adani Group HeadquarteredintheIndianstateofGujarat,theAdaniGroupreceivesmanycoalandcoal-firedpowersubsidiesinIndia,including:

• aproposedgovernmentcapitalsubsidisedUS$1.5bnloanforitsexpensive,otherwiseunbankable,newimportcoal-firedpowerplantproposalatGoddaintheeasternstateofJharkhand,India;

• 30%tariffupliftsfor30yearson(previously)legallybindingpowerpurchaseagreement(PPA)contractsfortheotherwisestranded4.6gigawatt(GW)AdaniMundraimportcoal-firedpowerplantinGujarat;

• thegiftingofunique,singlebeneficiarycorporatetax/cess/importduties-freeentitythankstoanewfreespecialeconomiczone(againforGodda);and,

• theabilitytogarnishancestralproperty,withfaircompensationrarelydeliveredaspromised.

1AdaniMining,MediaRelease:Adani:wehavefinanceandwearereadytostart,29November2018.2SydneyMorningHerald,Adaniannouncescoalmineconstructionwillbegin,29November2018.


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Australian Subsidies Offered to Adani Group "I’mvery,verysurprisedthattheAustraliangovernment,forwhateverreason,hasseenitfit,toallalonghandholdMrAdani.”JairamRamesh,India’sformerEnvironmentMinister.3

TheQueenslandandAustraliangovernmentshaveofferedtheAdaniGroupanumberofsubsidiessinceAdaniacquiredtheprojectproposalin2010.ThisisdespiteAdaniGroup’sinarguablewealthandsuccessinIndia,andthecompanyexecutives’ongoingassertionsthattheminedoesnotneedataxpayerbailout.

TheAdaniGrouphavebeenofferedvarioussubsidiesexceeding$4.4billionintotaloverthe30-yearprojectlifeoftheCarmichaelthermalcoalmine,withthisfigurerisingshouldAdanimovebeyondthe27MtpastageIIproposaltothefull60Mtpaapproval.4

IEEFAnotesthesetaxpayerfundedsubsidieshavebeenprovidedinanefforttogetthethermalcoalexportmineupandoperatingforthesakeofahandfulofjobsandabagofroyalties–yetthesearejustafractionofwhatcokingcoalbringstotheQueenslandcoffers–inadecadefromnow.

Australia’s Coal Billionaire Largesse IEEFAnotesAustraliahasbeenextremelygeneroustotheownersofmineswhichuseAustralianpublicresourcesforprivategain,knowingtheyaremostlyoverseas,tax-havenbasedcoalbillionaires.(IEEFAnotesmanyoftheAdaniCarmichaelsubsidiesarealsoavailabletoothercoalbillionairese.g.AMCIandGlencore).

Coallobbyistsarewellpaidtoarguedefinitionalissuestodismemberanddistract,butthefactsareclear.TheAustralianbasedcoalindustryisgivena$1bndieselfuelsubsidyeveryyearforthepastfivedecades,despitemanyoftheforeigncoalmajorspayinglittletonocorporatetaxinAustralia.

OnbehalfofAustraliantaxpayers,ourpoliticianscollectivelyareprovidingaverysubstantiallevelofongoinggenerositytogenerallyoverseastax-havenbasedbillionaires,indirectcontradictionofourlegallybindingcommitmenttothecriticallyimportantParisAgreement.

3TheConversation,WhyarewestillpursuingtheAdaniCarmichaelmine?4October2017.4QueenslandGovernment,CarmichaelCoalMineandRailProject

The Queensland and Australian governments have

offered the Adani Group a number of subsidies since Adani acquired the project.


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WedetailsomeofthefinancialsubsidiesavailabletotheAdaniCarmichaelproposalbelow,including:

• A7-yearRoyaltyHoliday($900million),

• FuelTaxCreditScheme($2.4billion),

• 22BillionLitresofWaterAnnually($19million+),

• A90kmPrivateRoad($100million),

• AnAirport($30million)–withdrawnfornowduetoAdani’songoingdelays,

• Rehabilitation($1,000million++),and

• CorporateTaxShields(open-ended).

A 7-year Royalty Holiday ($900 million) QueenslandPremierAnnastaciaPalaszczukhasofferedAdania7-yearroyalty‘holiday’.Thisroyaltyholidayequatestoahugecapitalsubsidy-withtaxpayersfootingthebill.AtsomeA$5/tonneon27Mtpa,thisisestimatedat$135mannuallythattheQueenslandgovernmentandcommunitywillnotseeforanotherdecade,lessanyminorconcessionalpayment.Despitethegovernment’scommitmenttofulltransparency,thisdealhasbeenshroudedinsecrecy.

Intotal,theroyaltyholidaywouldreduceAdani’scapitalemployedbysome$900mbyyear7.Thisisamassivefinancialsubsidy.Giventhethree-yearconstructiontimeline,itwouldmeanzeroroyaltiesarelikelytobepaidbytheAdaniGroupinthecomingdecade.

WeunderstandtheQueenslandgovernmenthasprovidedsomeconditionstothisgift:

• Itwouldbepayableatsomestageinthefuturewithanotional2-3%painterest;

• Further,theroyaltyholidaymaynotbetriggeredbythe10MtpastageI(itwasreportedthattherequirementwasthatthefirstmoverintheGalileeBasinwouldbuildtheenablinginfrastructureforothernewcoalprojects).Instead,theroyaltyholidaymayhavetowaituntilAdanistartsthestageIIof27Mtpaand/orupgradestherailandportcapacitytomeetthiscondition;and

• Additionally,weunderstandAdanimustoffersecurityforthedeferredroyaltypayments.However,AdaniMininghasnomaterialAustraliantangibleassetsandowesabout$1.6bntoitsIndianparent,amongstothers.GiventheQueenslandhasyetagaindeferredsigningofthisproposaluntil30September2019withoutexplanation,wewouldsurmisethatitlikelythatAdanihasstillbeenunabletoprovidetherequiredfinancialassuranceforthissubsidy.


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Fuel Tax Credit Scheme ($2.4 billion)WhilethevastmajorityofAustralianshaveformanydecadespaidageneraldutiesfueltax,theAustraliangovernmentunderstandablyprovidesabillion-dollarannualsubsidytoAustralia’sstrugglingagriculturalcommunity.Thissubsidyhasalsobeengarneredbythebooming,oftentax-havenbased,largelybillionaire-ownedminingindustry.ThissubsidyistitledtheFuelTaxCreditScheme.

Australia’sfederalbudget2017/18coststheFuelTaxCreditSchemeat$6.8bnannually.Halfofthis,or$3bnperannum,goestotheminingindustry,andwithinthis,coalminingreceivesthebiggestshare,at$1.01bnannually.

IEEFAwouldsuggestthatthe$1.01bnannualcoalminingsubsidyisprimarilygarneredbytheopencutthermalcoalminingsub-sector.Ourlogic?Thestripratio-representingtheamountofwastematerialthatmustbemovedinopencutmininginordertoextractagivenamountofcoal–foropencutcoalminingishuge,andmovingbillionsoftonnesofoverburdenannuallyisbothunprecedentedandrelativelyuniquetotheAustralianthermalcoalminingsector,anditisextremelyenergyintensive.Beingaremoteoperation,miningislargelyfuelledbyimporteddiesel.Perversely,lowerdomesticcostsolarpoweriscrowdedoutbyimporteddieselsubsidies.

Figure 2: Fuel Tax Credits Scheme 2017–18

Source:AustralianTaxOffice,Fueltaxcredits–businessandExcise–Table4,TheAustraliaInstitute.

InAustralia,theaverageopencutcoalminestripratioof15tonnes(t)pertonneofcoalcomparestoironorewhichoperatesatastripratiooftenbelow1t:1/t(andwenoteFortescueuses600mlitresp.a.ofdiesel,asubsidyof$240mp.a.).Cokingcoalbycomparisonisprimarilysourcedfromundergroundminesthatavoidmassivestrip-miningefforts,withalltheadditional,associatedrehabilitationproblemsthisinvolves–referbelow.Sointhiscontext,IEEFAestimatestheAustralianopencutthermalcoalminingsectorreceivesthemajorityofthe$1bnannualcoalsector


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subsidy,orA$750mperannum.5Onopencutcoalminingproductionof250MtpainAustralia,that40c/litresubsidyequatestoA$3/t.Therefore,ona10Mtpamine,itequatestoa$30mannualsubsidy,risingto$80mpaon27Mtpa.

Insum,thatisanAustraliantaxpayerfundedsubsidyforAdaniCarmichaelof$2.4billionovertheinitial30-yearlife.

22 Billion Litres of Water Annually ($19 million+) Adanimaypayaone-off$18-20mforaccesstoupto12.5bnlitresperannumoffloodwaterharvestedfromriversbutwillalsobeabletoaccessupto9.5bnlitresperannumofgroundwater,forthelifeoftheproject.6Suchaccessisinvaluable,especiallyinharshperiodsofdroughtwhichQueenslandiscurrentlyexperiencing.

Cityresidentspay$2/1000litres.Atthisprice22bnlitresisworth~A$45mpa($1,350moverthefirst30yearsofthis90-yearprojectlife).

Usingthecoalindustryconsultants’benchmarkofA$2,000/megalitre(Ml),the9,500Mlisworth$19m.7

A 90km Private Road ($100 million) CouncilrecordsofmeetingshowthattheQueenslandgovernmenthadofferedtobuildaspecialpurpose,soleusetarred90kmroadforAdanitoaccesstheirMorayDownspropertyatareportedcosttoratepayersof$100m.GivenAdani’smultipledownsizingsanddelays,thissubsidyoffermayhavelapsed.AdanistatesthatourunderstandingthisgovernmentfundingoftheirMorayDownsentranceisincorrect.8

An Airport ($30 million) Bydefinitionacapitalsubsidy,twoQueenslandcouncilshaveofferedtobuildaspecialpurpose,soleuseairportforAdanitousefly-in,fly-outworkersatacosttoratepayersof$30mormore.

ThissubsidyisreportedtohavebeencancelledasAdanihasfailedtodeliverontheirstaffingcommitmentsinanytimeframeacceptabletothecouncilsinvolved,andalsoinrepeatedlydownsizingthemine,theassociatedworkforcehaslikewisebeendiminished.

5IEEFAnotesthattheMineralsCouncilofAustralialobbygrouphaslonglobbiedtheAustraliangovernmenttoexemptfueltaxrebatesfromtheAustraliandefinitionofwhatconstitutesasubsidy.LikeIEEFA,theOECDtakestheoppositeview.6InQueensland,mostgroundwaterusersdonotcurrentlypayforextraction,whereasinNewSouthWales,bothfarmersandminersnowpayforgroundwater.7TheAustraliaInstitute,Likewaterforcho-coal-ate,October2016.8AdaniMining,FACTCHECK:AdanirespondstoIEEFApaperonsubsidies,28August2019


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Rehabilitation ($1,000 million ++) Australiaislitteredwithover50,000unrehabilitated,abandonedmines,includingmanythatwillbereleasingpollutingtoxicchemicalsintothedownstreamwater-supplyfordecadestocome.Finalvoids-thehugeminepitsremainingafterthecoalhasbeenextracted–createwatercatchmentsthatbecometoxicovertimeduetoacidminedrainage.Theyareregularlyconsideredtooexpensivetofillinbycoalminingfirms.

Forinstance,RioTintotestifiedintheNSWLandCourtthatthefinalvoidinitsMountThorleyWarkworthminewouldcost$2bntofill.Morerecently,GlencoreclaimedthefinalvoidsattheirUnitedWambomineinNSW’sHunterValleywouldcouldcost$777monadiscountednetpresentvaluebasis.LikeRioTinto,Glencoretestifiedthatthethermalmineproposalwasnotviableabsentthissubsidyofbeingabletoextractthecoalwithoutbeingrequiredtoback-fillthefinalvoid.

Adanihasapprovaltoleavesixfinalvoids–itdoesnotintendtofullybackfillevenasingleoneofitssixopencutfinalpitstoreturnittoanaturallandform,andthelargestofthevoidsthatitplanstoleavewillbe200mdeep.9

HistoricalprecedentsuggestsAdani’srehabilitationeffortsareunlikelytobeanymoresuccessfulthanothersintheAustralianminingindustryoverthelasttwocenturies.

IEEFAconservativelyestimatesthissubsidyisworthA$1-2bntoAdanidependinguponhowlargetheprojecteventuallygets.

Corporate Tax Shields (Open-ended) Australianotionallyhasthin-capitalisationrulesforforeigninvestors,butthesearesetsolooselythatoverseastax-haven-basedmultinationalsoperatinginAustraliacanfreelyexploitAustralia’spublicresourceswithonlyamodicumofcorporatetaxeverrequired.

OverseasminingfirmsarerequiredtoinvestsomeequityintotheirAustraliansubsidiaries.However,thedefinitionof‘equity’includesintangibleassetrevaluationsbydirectors,andthedebttoequityallowanceissetatmultiplesoftherateusedbyAustralianbusinessesgenerally.Alongwithtransferpricing,offshoretax-havenbasedmarketinghubsetal,thisisaclearloophole,allattheAustraliantaxpayers’expense.

WenotethattheAdaniGrouphasownedandoperatedthe$2.4bnAbbotPointCoalTerminalfor8years,earninggrossprofitsofupto$200mannually.However,asper

9EMGAMitchellMcLennan,CarmichaelCoalMineClosureandRehabilitationStrategy,March2014.

The Adani Group is yet to pay any material corporate

tax in Australia.


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ouranalysisofthepartiallyavailableASICrecords,theAdaniGroupisyettopayanymaterialcorporatetaxinAustralia.

Similarly,GlencoreisthelargestminingfirminAustralia,yettheAustralianTaxOfficerecordssuggestitpaid(almost)zerocorporatetaxinthelast4years.

Adani’s Current Financial Position PoorArecentreportassertsthecompanyresponsiblefortheCarmichaelminehas‘allthehallmarksofabigcorporatefailure’withmorethan$1.8billioninliabilitiesdueoverthenext12months,comparedwithlessthan$30minassets.1011

AdaniunsuccessfullyspentyearsandyearstryingtosecurefinancialbackingfortheCarmichaelmineprojectbeforetheextraordinarymoveofannouncingself-fundinglastyear,althoughwenotethishasstillnotmaterialised.IEEFAwouldalsospeculatethatsignificantvendorfinanceofequipmentand/ormulti-yearpre-purchasesofcoalaheadofdeliveryarelikelytobeinvolved.

Itisunclearwhetherthegrouphavesecuredthenecessaryinsurancebeyond2020.

Adani’scurrentaccumulatedlossesmeanthat,whenthemineisbuilt,AdaniMiningwillnotpaycompanytaxformanyyearsinAustralia.Infact,theymayneverdosoifoneistolookattheexampleofanotherAdaniasset–theAbbotPointCoalTerminal,whichhaspaidlittleornocompanytaxtodate.

AdaniMiningalsoalreadyhasaccesstocarryforwarditslossesto-date,meaningthefirst$1.3billionofpre-taxprofitwillbecorporatetaxfree.

Thermal Coal Adds Little to Queensland’s Budget Adani’sCarmichaelthermalcoalminewillprovidehighash,lowenergy(HALE)thermalcoalforlittlereturntotheState.

CokingcoalexportroyaltiescontributeseventimesmorethanthermalcoalroyaltiestotheQueenslandbudget,estimatedat$3,626mversusjust$538mfromexportthermalcoal.Inotherwords,exportedcokingcoalprovidesasignificant87%ofQueensland’sroyaltiesfromcoal,withjust13%providedbythermalcoal.12

Existingandnewcokingcoalmines,liketheOliveDownscokingcoalminenearMoranbahapprovedinApril2019,willboostQueensland’scofferswithanextra$600mannually–morethanthetotalcontributionofthermalcoal.TheOliveDownscokingcoalmineleveragesexistinginfrastructureandwillprovidejobsandroyaltieswithoutanyroyaltyholidayperiod.

10ABC,Adani'sCarmichaelcoalminesurvivingonlifelinefromIndianparentcompany,24July2019.11IEEFAAustralia:ContractingwithAdaniAustraliaentailscounterpartyrisks,16August201912IEEFA,ConflatingQueensland’sCokingandThermalCoalIndustries,June2019.


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Incontrast,theproposedAdaniCarmichaelminewilldigupHALEthermalcoalatonequarteroftheroyaltiesandprovideannualrevenuesofsomeA$725m,afifthofthatcreatedbyOliveDowns.13Then,takingintoaccountthethree-yearconstructionperiodandthe7-yearroyaltyholidaybeingofferedbytheQueenslandgovernment,itislikelytobetenyearsbeforethecommunityofQueenslandseeanyroyaltiesfromtheCarmichaelthermalcoalmine.

The Future is Renewables AnyclaimthatAdani’sCarmichaelprojecthaslongtermviabilityinafreemarketabsenceongoingfossilfuelrelatedsubsidiesisentirelydebatable,particularlyiftheworldcollectivelydeliversontheParisAgreement.

Evenwithsubsidies,IEEFAestimatestheCarmichaelthermalcoalminewillhaveatbestmarginalviabilityagainstevercheaperrenewableenergyinIndia.Andovertime,AsiawillfollowIndia,China,andAmerica’sleadtodeflationary,zeroemissionenergyalternatives.

AdanicanobviouslyignorethisrealityandusethermalcoalfromtheCarmichaelminetosupplyexpensivefueltoitsin-houseMundra,UdupiandpotentiallyGoddaimportcoal-firedpowerplantsinIndia,leveragingtheiruniquepositionofbeingabletonegotiateandthenre-negotiatefuelpricepassthroughtermsintheirvariousimportcoal-firedpowerplants’electricitysupplycontractswiththeIndianandBangladeshgovernments.

IEEFAhaslongarguedtheAdaniCarmichaelthermalcoalmineproposalisunbankableandunviablewithoutsubsidies,entirelyatoddswiththeParisClimateAgreementandisstrategicallychallengedevenbeforethefirstcoalisproduced.Despitethis,upwardsof$4.4billioninsubsidiesisbeinggiftedtoAdaniforitsCarmichaelthermalcoalminebytheAustralianandQueenslandgovernments.

ForahandfulofjobsandonlyafractionoftheroyaltiesthancokingcoalprovidestotheQueenslandbudget,Adani’sthermalcoalmineprovidesthestatewithsomuchlessthanalternativeregionalrenewableenergyinvestmentswoulddo.

IFTHESESUBSIDIESWERENOTBEINGPROVIDED,ADANI’SCARMICHAELTHERMALCOALMINEWOULDBEUNBANKABLEANDUNVIABLE.

13Ibid.

Upwards of $4.4 billion in subsidies is being gifted to Adani for its Carmichael

thermal coal mine.


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InJune2019Brazilcompletedatenderfor200MWofsolarwithastaggering26GWofproposalstendered.TheaveragepriceawardedwasarecordlowUS1.75c/kWhfor20years.

InJuly2019,Californiaannouncedaproposedpowerpurchaseagreement(PPA)for8minuteSolarEnergy’s400MWElandsolarprojectatUS1.997c/kWh(zeroescalatorfor25years)and200MW/800MWhofenergystorageat1.3¢/kWh.Thisisamassivenewrecordlow-15%belowthepreviousUSrecordsignedayearagobyWarrenBuffett’sNVPoweratUS2.3c/kWh(againwithnoescalator).TheLosAngelesDepartmentofWaterandPower(LADWP)isthecounterpartytothis25yearPPA,furtheradvancingCalifornia’sunstoppabletransitiontoreach60%renewableenergyby2030,orbetter.

AndIndiaisconsistentlyawardingrenewablesatalevelizedcostofelectricityof~US3.0c/kWh(withouttheUS30%ITCsubsidybenefit),withyearonetariffsofUS3.5-4.0c/kWh.India’ssolarandwindis20%belowthecostofdomesticcoal-firedpowergeneration,andhalfthecostofnewimportthermalpower(LNGorimportedcoal).

Conclusion Burningcoalisstillthenumberonehuman-madecauseofglobalwarming,andrenewablealternativesarefastreplacingthermalcoal.

LargelyunsubsidisedrenewableenergyisthedominantleastcostsourceofnewpowergenerationinvestmentacrossIndia.TheIndiangovernment’sCentralElectricityAuthority(CEA)energyplanmodelsaone-thirdreductioninIndiancoalimportsby2024,14shiftingtoamorebalancedrelianceondomesticrenewablesanddomesticsourcedcoalpowergeneration.

GiventheParisAgreementrequirestheworldtophaseoutcoaluseentirelyby2050,thelastthingtheworldneedsisyetanotherhugenewlow-qualitythermalcoalbasin.Evenifthisproposalgoesahead,thereisarisingprobabilitythatthiswouldonlyservetoover-supplytheseabornethermalcoalmarket,drivingthemarketequilibriumpricedownevenasimportdemandprogressivelydissipatesinfavourofloweremissionsliquidnaturalgas,wind,solar,hydroelectricityandnuclearpoweracrossAsia.TheresultinalllikelihoodisyetanotherAustralianstrandedfossilfuelasset.

14Bloomberg,India,World'sNo.2CoalBuyer,PlanstoCutImportsbyaThird,1August2019.


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About IEEFA TheInstituteforEnergyEconomicsandFinancialAnalysisconductsresearchandanalysesonfinancialandeconomicissuesrelatedtoenergyandtheenvironment.TheInstitute’smissionistoacceleratethetransitiontoadiverse,sustainableandprofitableenergyeconomy.www.ieefa.org

About the Author Tim Buckley TimBuckley,IEEFA’sdirectorofenergyfinanceresearch,Australasia,hasover30yearsoffinancialmarketexperiencecoveringtheAustralian,Asianandglobalequitymarketsfrombothabuyandsellperspective.Timwasatop-ratedEquityResearchAnalystandhascoveredmostsectorsoftheAustralianeconomy.TimwasaManagingDirector,HeadofEquityResearchatCitigroupformanyyears,aswellasco-ManagingDirectorofArkxInvestmentManagementP/L,agloballistedcleanenergyinvestmentcompanythatwasjointlyownedbymanagementandWestpacBankingGroup.

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IEEFA Note Billionaire Adani Being Subsidised for Carmichael …ieefa.org/wp-content/uploads/2019/08/IEEFA-Note... · 2019. 8. 29. · Billionaire Adani Being Subsidised for Carmichael