Friday, April 28, 2017

New Westpac climate policy rules out financing Adani Carmichael coal mine

Westpac have released their climate change Position statement and 2020 action Plan. This effectively rules out any funding of Adani for the Carmichael coal project.

Westpac becomes the 4th and last of the big 4 Australian banks to rule out financing the Adani project, and makes it the 19th bank globally to have either ruled out funding Galilee Basin coal export projects directly, or through the introduction of a new policy.

Westpac came under intense pressure from community organisations to rule out funding for Adani, with numerous protests outside bank branches, questions at AGMs, and a campaign urging customers to divest. Without this community social pressure Westpac's climate change position may have been much less rigorous.

An except from the Policy (PDF) section on coal mining:

"However, for new thermal coal proposals we will: Limit lending to any new thermal coal mines or projects (including those of existing customers) to only existing coal producing basins and where the calorific value for that mine ranks in at least the top 15% globally. We define the top 15% as having a specific energy content of at least 6,300 kCal/kg Gross As Received. This value is referred to as the Newcastle high energy coal benchmark."

The Galilee basin is a new coal basin still to be developed, and Adani Carmichael Coal has an energy content of ~5,200kcal Gross as Received (4,950kcal NAR), as Referenced by Adani Mining Pty Ltd in Queensland Land Court in 2014. This is well under the Newcastle high energy benchmark test. On both grounds the mine should fail if they seek loan financing from Westpac.

In 2016 Westpac had loans for Fossil Fuel projects estimated at $1451 million, but only $425 million for renewables projects, according to Market Forces. Globally the bank had financed $13 billion in fossil fuel projects since 2008. It will continue to support metallurgical coal, and other fossil fuel projects with a lower energy intensity, which is still problematic, but the new policy shows they are now moving in the right direction.

The other big 4 banks, while ruling out financing Adani, still have huge fossil fuel loan portfolios like Westpac. Pressure needs to continue on all banks to reduce investment in fossil fuel companies and expand investment in renewables and low emissions technology businesses. Finance is an important economic driver and banks need to exercise their financial acumen to assist the economic and social transition to a zero carbon economy.

Other important directions by Westpac include:
  • Pledge to increase funding to climate solutions by $10bn by 2020 and $25bn by 2030.
  • commitment to actively reduce the emissions intensity of the power generation sector, targeting 0.30 tCO2e/MWh by 2020. This effectively rules out any new coal fired power station, plus open cycle and combined cycle gas power stations after 2020.
  • endorses the need for a broad market-based price on carbon as the most efficient way to encourage emissions reductions at the lowest cost to the economy.
  • sets internal targets for direct footprint emission reduction of 9 per cent by 2020, and 34 per cent by 2030.
  • commitment to helping households become more climate-resilient, improving energy efficiency, and reducing environmental impact.

Westpac CEO Brian Hartzer said in a statement:

“Westpac recognises that climate change is an economic issue as well as an environmental issue, and banks have an important role to play in assisting the Australian economy to transition to a net zero emissions economy.

“Limiting global warming will require a collaborative effort as we transition to lower emissions sectors, while also taking steps to help the economy and our communities become more resilient.

“As a major lender Westpac is committed to supporting climate change solutions that will drive the transition to a more sustainable economic model, and we have increased our lending target for this sector from $6.2 billion to $10 billion by 2020 and to $25 billion by 2030.

“At the same time we recognise that energy security is essential for the long term economic health of Australia. That is why Westpac is committing to actively reducing the emissions intensity of our exposure to the power generation sector over time, and we have a target to reduce this portfolio to 0.30 tCO2e/MWh by 2020.

“In addition, we will limit lending to new thermal coal projects to existing coal producing basins only, and where the energy content of the coal ranks in the top 15% globally,” he said.


Federal resources minister Matt Canavan was obviously upset with the announcement. He called for Queenslanders to boycott Westpac Bank.

"Corporations are wimps these days in standing up up these (environmental) activists," Senator Canavan told a press conference shortly after Westpac released its policy, according to the ABC.

"It is disappointing Westpac has made this decision without consultation with the people of northern Queensland," said Senator Canavan, who is Minister for Northern Australia.

Carnavan was pushing hard in favour of the Adani Carmichael coal mine development, and $1 billion subsidy from the Northern Australia Infrastructure Fund to build a rail line by either Adani or Aurizon to the coal export terminal at Abbot Point.

Adani seemed unaware that they weren't mentioned by name, but with the policy aimed at excluding new coal basins and coal that was under the Newcastle benchmark. According to a 2014 Court deposition Adani coal fails the Newcastle benchmark, as well as being a new coal basin development.

Similarly, they continue to peddle the 10,000 jobs argument when in court they admitted only 1464 jobs would be created. In fact, they hope to fully automate much of the mining and transport, so jobs could be even less than stated in court. They are not the great jobs bonanza that the Queensland Premier and Federal Government Ministers have been spruiking.

The Minerals Council of Australia put out a statement, with so much spin, most of it wrong.

The fact is that Australian coal exports from the Galilee Basin will support the provision of low emissions energy to hundreds of millions of people in Asia, including tens of millions in India who will have access to electricity for the first time. This coal will displace lower quality local coal in new high efficiency low emissions power generation. The opening up of the Basin will also provide opportunities for thousands of Australians in well-paid jobs, with consequent flow on benefits for regional areas between Rockhampton and Townsville.

I'm not sure where to start:

So where does this leave Adani?

Increasingly struggling to find finance for their Carmichael coal mine project, railway line and port. With coal imports progressively tightening in India to save on balance of payments, and a company with high debt to capital assets ratio.

Any loan given to Adani or Aurizon for building a railway line by the Northern Australian Infrastructure Fund (NAIF) has substantial financial risk attached as well as a high risk of the asset becoming stranded.

As an IEEFA report found earlier this week, Adani’s Carmichael Idea Is More Unbankable Than Ever.

“Gautam Adani is an ambitious businessman with a broad range of proposals on the table at any one time. Since the purchase of Carmichael in 2010, the forward market value of its coal has declined 50% and thermal coal imports in India are down double digits in line with the government’s stated policy to nearly cease imports entirely by the end of this decade,” said IEEFA financial analyst Tim Buckley. “Adani took a calculated business risk on this speculative project in 2010 but the world has changed since then. No longer strategically aligned nor financially robust, today it is less a gamble, more a shot in the dark.”

Auctions in India for solar PV farms and new wind farms continue to set record new prices. Both are now cheaper than new coal in India. In April 2016 India's energy minister Piyush Goyal said that Solar is now cheaper than coal. Auction prices for solar continue to fall, with a February 2017 auction for the Rewa 750MW solar park receiving the lowest bid of INR 3.59/kWh. New coal plants are estimated to cost INR 3-5/kWh.

Coal imports to India have continued a falling trend, dropping 22-25 percent year on year over the past two months according to IEEFA.

While Adani's Carmichael coal project is in trouble, IEEFA asserts that Adani’s Indian renewables and transmission businesses are well aligned with Indian government plans for rapid cost-competitive renewable energy expansion and the provision of electricity to its population.

“Private capital has already vacated the playing field,” Buckley said. “Australian and Indian taxpayers have become the only potential sources of funding, but it should be clear that Carmichael has never looked like more of a stranded asset than it does today.”

This project should never have been approved at a Queensland state level or the Federal Level. It lacks the social licence to be developed. The Paris climate change agreement in 2015 was a tipping point that neither state or Federal government has been willing to act upon in regards to this mine and it's climate implications as a huge carbon bomb.

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