ACIL Allen: $1 billion Adani loan a dud

By Leith van Onselen

ACIL Allen has produced a report confirming what many of us already know: that the proposed $1 billion concessional loan to Adani to build the Carmichael coal project is a dud that poses great risks to Australian taxpayers. From The Canberra Times:

The economic assessment of the troubled project’s outlook found the collapsing coal price, the uncertain global picture for thermal coal, and the $21.7 billion project’s heavy reliance on external financing contributed to a high risk for taxpayers.

The assessment was done by the business consulting firm, ACIL Allen, and commissioned by the Australian Conservation Foundation…

ACIL Allen found there were multiple reasons why a public loan from the Northern Australia Infrastructure Facility appeared risky.

“The task of securing debt and equity finance for a $21.7 billion project comprising thermal coal mines and supporting infrastructure, including a new 388 kilometre standard gauge rail link and a new coal export terminal, would be very demanding at any time. It would be particularly difficult in the context of the current widespread perception of a negative thermal coal market outlook,” its final report states.

“Both the failure to obtain sufficient financial support from commercial sources, and provision of concessional terms mean provision of a loan or other financial mechanism to Adani for the rail project must be regarded as a high risk financing arrangement for the financier. Northern Australia Infrastructure Facility’s risk management framework has stated that the Northern Australia Infrastructure Facility has a high financing risk tolerance, but they will be imposing the high risk on Australian taxpayers”…

ACIL Allen said amid the uncertainties, “one thing is clear” about the project. “The substantial decline of thermal coal prices since 2011 has stripped in excess of $A40 per tonne from profit (after adjusting much larger US$ price declines for depreciation of the $A). This has raised doubts about the likelihood of any significant surplus of revenue over full costs (including a reasonable risk-adjusted rate of return on investment) in medium- and long-term timeframes.”

MB has vigorously opposed extending a taxpayer-backed loan to Adani from the outset on the ground that:

  1. Adani’s own hand-picked economic expert, Jerome Fahrer from ACIL Allen consulting, told the Queensland Land Court that only 1,464 full-time equivalent jobs would be created by the project;
  2. The project will create all manner of environmental externalities and degredation; and
  3. The mine will flood the world with more cheap coal, thus depressing its price and putting non-subsidised mines in NSW and QLD out of business, resulting in job losses.

Indeed, Adani’s CEO has continuously boasted that the Carmichael Project will be the most autonomous in the world:

India’s Minister for State Power has also acknowledged that the cost of solar power is now cheaper than coal, creating the risk that the Carmichael Project could become an unviable stranded asset:

In short, there are far better ways to use scarce taxpayer funds than on this white elephant.

The Guardian has also created a good explainer video assessing the claims made about the Adani Project, which is well worth watching:

[email protected]

Unconventional Economist
Latest posts by Unconventional Economist (see all)


  1. it’s amazing what a few mates in high places can do for ya.
    … the expense of everyday tax payers.

  2. Kickbacks. Massive, massive kickbacks.


    There is no other explanation for such diverse and bipartisan support in the face of public outrage.

    • A dash of political opportunism too. The rest of Australia may be outraged, but it is a popular item in Queensland, specifically in Mackay and Co.

  3. ACIL Allen tend to conform,as most consultancies do, to what the vested interests want. This adds more confirmation as to the degree of corruption in Straya.

    • “Noting that a number of unknown commercial factors made definitive third-party assessment problematic, ACIL Allen found there were multiple reasons why a public loan from the Northern Australia Infrastructure Facility appeared risky.”

      This is the essential message. ACIL Allen’s “Claytons” moment: We don’t have all required data but it’s always safe to append element of risk to any loan. ACF paid handsomely for this revelation.

    • I’m not convinced this new commission bends to the whims of the vested interest as the conclusion is innocuous (a generic finance/risk statement) however the Canberra Times and ACF have ran with it. Following is Dr Jerome Fehrer’s conclusions following economic assessment of the Project.

      ACIL Allen, Jerome Fahrer: Carmichael Coal and Rail Economic Assessment, January 2015

      8 Conclusions

      218 The analysis in this report shows that the economic benefit of the Carmichael Project is very large.

      219 The CGE analysis shows a highly positive economic impact on incomes in the MIW region, Queensland and Australia. In Queensland, real incomes will rise between $18.6 billion and $22.8 billion, in real present value terms.

      220 This estimated impact is conservative in that it assumes labour that is employed in the Project is drawn from other industries, apart from small labour supply effects. This assumption necessarily places a limit on the extent to which the Project can increase output and incomes in the economy.

      221 The Cost Benefit Analysis (CBA) shows that net benefits, in real present value terms, range between $12.3 billion and $16.6 billion, if estimates of consumer surplus are excluded from the analysis. If they are included, the net benefits range from $34.5 billion and $44.3 billion. The costs included in the CBA include the cost of GHGs from the mine and from the electicity that is used to power the mine, at an average carbon price of $126 per tonne.

      222 The conclusion that the benefits of the Project well exceed its costs does not change even if much lower coal prices, much lower coal volumes and much higher environmental costs are assumed.

      These conclusions suggest to me Dr Fehrer takes his professional responsibilities very seriously.

      • Don’t try to use facts or logic her Simone, these guys are BIG on rhetoric and small on facts. look at “Bubbley”‘s comment – “When the mine destroys the reef” Seriously and the 86 million tonnes of shit brown coal mined and exported from Vic poses no harm to the reef? or the plethora of other proposed mines and expansions, they pose no risk.
        Despite what the ill-informed Bolstrood says, the coal from Carmichael is much cleaner than the coal currently being burnt by Adani.
        “The Queensland Supreme Court itself also made the point that the Adani Carmichael coal mine itself won’t increase greenhouse gas emissions, if it displaces coal from other sources,”
        So HOW EXACTLY is Carmichael going to singularly destroy the reef? Rhetoric.
        I’d be surprised if some of these clowns can tie their own shoelaces
        I think after reading earlier posts re Adani on MB you will notice a bit of a NSW over QLD bias, don’t jeopardise our existing mines!

  4. We just gotta get some of them younger developing nations to take up (coal) smoking. Maybe by producing a menthol version or something?

  5. “The assessment was done by the business consulting firm, ACIL Allen, and COMMISSIONED BY THE AUSTRALIAN CONSERVATION FOUNDATION – it must be true then, no bias or hidden agenda there!!

    You guys are funny.
    Adani will be using the vast majority of the coal mined (and it will be mined) to replace and supplement the dirty low grade coal they currently mine from their existing mines, little will be sent to market therefore the price of coal is of little relevance.
    AND – If the future of coal is so bleak why are there sooo- many new coal mines being planned and approved including.
    • KEPCO’s new open cut coal mine proposal at Bylong,
    • the $800 million Wallarah 2 coal mine on the NSW central coast ,
    • Aclands $900M expansion,
    • POSCO’s $498 million “Hume Coal” project near Berrim
    • proposed mines in Gympie, Kingaroy etc etc,
    “the proposed $1 billion concessional loan to Adani to build the Carmichael coal project is a dud that poses great risks to Australian taxpayers” Im not sure how unless you don’t think the pollies have enough sense to secure the loan against the company’s assets

    • The company’s assets at the moment are a piece of paper saying they have permission to build a mine.
      Adani has many sub divisions, some in the Cayman Is.. Which entity will the loan go to?
      As for replacing poor quality Inian coal, Carmichael coal is also of poor to intermediate quality.
      The reason for Qld and Federal is( as Brenton and Dennis say above) to head off One Nation vote in Qld and Federal elections.

    • The South Korean government has now said, in effect, that KEPCO is not to mine the Bylong Valley. I quote the following, verbatim, from a South Korean government press release issued in June 2015: “KEPCO to stop overseas power generation resources development and gradually sell shares it holds in 9 mine fields.”

      • The point is the NSW Planning Department recommended the project be approved and not a word of protest on the MB site about the mine impacting the reef.
        Rest assured someone will develop the project, they’re not going to buy the shares and sit on them
        There is also a deafening silence about the plethora of other proposed new mines and expansions, no objections, reef friendly coal?.
        And the one that really smacks of hypocrisy, No word about the 86 million tons of really shit brown coal exported from Vic every year.
        I guess the emissions from the Carmichael coal must specifically target the Reef somehow!

  6. You guys are all just being racists. How dare you call into question the credentials and integrity of this fine company, Adani.

    • …and just for fun – a google search on “Adani india… comes up with “adani india pollution” as one of the most searched for questions with 195,000 results.

      adani environmental disasters has 31.200 results

      and “adani corruption indian courts” has 177,000 results.

      just incase you want to do a little light reading.

      • or this one “Adani was ranked India’s most trusted infrastructure brand by The Brand Trust Report 2015”” guess you find what ever you want on the net!!

    • Its started, They have been hiring for 3 months or maore, there are 80 staff moving to Townsville within the next few weeks. They have their name plastered in huge leters on the River Quays building

  7. The mine is only going to create 1464 jobs.

    When the mine destroys the reef, it will also destroy the Queensland tourism industry. Hotels, cafe’s, tour operators, mom and pop stores, local arts and crafts, car hire companies and many other businesses will go.
    This mine will also destroy many borderline profitable mines in Australia and the jobs that go with them.

    Thousands of jobs will go for the creation of one financially unviable mine.

    If there was ever a need for a royal inquiry into corruption, this is it.

    • From Dr Fahrer’s analysis regarding environmental impact: negligible vis a vis project benefits:

      216 In other words, to undo the net benefits of the Carmichael Project, an environmental catastrophe of the same order of magnitude as the Deepwater Horizon event would have to occur during the life of the mine. This would seem unlikely.

      Employment figure is life of project; factor in additional thousands FTE planning and construction, mine port rail.

      • Hi astroturfer,

        A few interesting sections, keeping in mind that this is Adani’s expert witness, but let’s start with jobs.

        68 Over the life of the Project it is projected that on average around 1,464 employee
        years of full time equivalent direct and indirect jobs will be created.

        A big step down from the oft repeated lie of 10k jobs, plus the lie you just told of thousands of extra jobs. It’s 1464. Total. Yes, Adani has more, but that 1464 estimate then takes into account displaced jobs from other mines and similar workforces. The government investment for so little jobs without even considering the huge amount of risk, environmental and otherwise, is insane.

        This is before event getting to the author’s claim of an AUD60 break even rate for thermal coal for the mine, and estimates of USD90 – 106 per tonne of thermal coal going forward. Both figures are from the realms of dreamland.