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China may bankroll Adani's Carmichael mine, statements show

Anti Carmichael coalmine protesters hold a banner outside the AGM for the Australian diversified mining contractor Downer EDI in Sydney.
Anti-Carmichael coalmine protesters hold a banner outside the AGM for the Australian mining construction company Downer EDI. Photograph: David Gray/Reuters

Adani’s proposed Carmichael coalmine may end up being bankrolled by the Chinese-state-owned enterprise China Machinery Engineering Corporation (CMEC), according to public statements.

The statements raise questions about the role of any potential Australian government loan through the Northern Australian Infrastructure Facility (Naif) or Efic, since it could, in effect, be subsidising a Chinese government enterprise and potentially come with requirements for supporting employment in China rather than Australia.

In a press release from January 2017, CMEC announced its president, Zhang Chun, had met with a delegation from Adani, as well as David Overall, the CEO of the Australian mining construction company Downer EDI.

Downer EDI told the ASX it received letters informing it of Adani’s intent to contract the company for the construction of the mine and associated infrastructure but that no binding contract had been entered into.

Following the meeting, the press release said CEMC “hoped to cooperate with Adani and Downer to take part in financing, construction and operation of relevant coalmines and railway projects”.

Tim Buckley from the pro-renewables Institute for Energy Economics and Financial Analysis said since that time negotiations had progressed and “CMEC is still negotiating to be potentially involved as a contractor and financier for the proposed Carmichael rail project”.

Buckley said once CEMC was involved, it could get the project access to additional financing from the state-owned China Construction Bank and Export-Import Bank of China. The possibility was highlighted in October when Jeyakumar Janakaraj, the chief executive officer of Adani Australia, told Reuters the company was in talks to secure loans from export credit agencies.

Last week it was revealed that Australian federal ministers had written a formal letter to China’s government to confirm that the controversial coal project had passed all necessary environmental approvals.

Frances Adamson, the secretary of the Department of Foreign Affairs and Trade, told a Senate estimates hearing last week that Adani may have requested the letter to help it secure funding from the Chinese.

“My interpretation of what would have happened is the Adani company will have themselves been assessing how they can fund the project [and] in the course of that assessment they’ve looked at a range of different sources and I think what they did was request a statement of fact, if you like, from the Australian government which the Australian government, given its support for the project, ministers were happy to provide,” she told the Senate estimates hearing.

The attorney general, George Brandis, said the government wrote the letter, signed by the minister for trade, Steve Ciobo, “to dispel the misinformation campaign of those from the radical left”.

“The Australian government continues to welcome foreign investment that is in our national interest, including the Adani investment in the Carmichael mine project,” Brandis said.

Buckley said if the Australian government subsidised the coalmine by providing a loan for the construction of its rail link, it could effectively be subsidising the Chinese government. The role of Naif is to “de-risk” ventures so that private sector investors can fund projects – in this case the de-risking would be for the benefit of the Chinese government.

Additionally, if the Chinese Export Credit Agency or China Construction Bank were to be involved, Buckley said the loans would almost certainly come with requirements for jobs to be generated in China, since the main role of those organisations was to create economic benefit for the home country.

“A Chinese SOE investment would secure Chinese jobs for equipment and manufacturing in China and service supply in Australia,” he said. “This further weakens the justification that the Australian political support for the Carmichael coal and rail projects is based on the local Queensland jobs Adani have claimed it will create.”