10 September 2020
Under the veil of the newly created Bowen Rail Company, Adani will be self-transporting Carmichael coal from pit to port. It appears that Adani tried to hide this development, with the new company’s website and media communications not mentioning “Adani” or “Carmichael”. The news highlights two major issues for Adani’s controversial coal project;
- The project is getting more expensive, as Adani is not contracting an established haulage provider, instead being forced to start its own haulage company and purchase its own trains to transport coal to Abbot Point
- Adani could be funneling finance from other Adani companies, specifically Adani Ports and Special Economic Zone (the owner of Bowen Rail Company) into its Australian coal project, which has been refused direct investor support. It is clear now that investors in Adani Ports are at increasing risk of unknowingly funding Carmichael coal.
Self-haulage increases up-front costs
The cheapest and simplest option to transport Carmichael coal would be to contract one of Australia’s three established rail haulage companies, which have the infrastructure, resources and expertise to haul coal. Genesee and Wyoming ruled out working with Adani in 2019, leaving Aurizon and Pacific National in the firing line of community and investor pressure that saw two of Aurizon’s major investors, UniSuper and Perpetual, sell off their holding in the company. However, it seems Adani has been forced to set up its own haulage company, which the Institute of Energy Economics and Financial Analysis says will add some $200 million in upfront capital costs for phase one of operations for the purchase of locomotives and coal wagons, and rise to $500 million for phase two.
Take Action: Contact the banks that have ruled out funding Carmichael coal, but still arrange debt for Adani Ports. Let them know that with the Bowen Rail Company connection, funding Adani Ports IS funding Carmichael.
How Adani quietly set up its own haulage company
At the end of 2019, Adani Ports and Special Economic Zone (Adani Ports), the company which owns 10 ports in India including the world’s biggest coal terminal, created a company called Bowen Rail Operation in Singapore, the owner of the now Australian registered private company, the Bowen Rail Company (BRC). Without a website or public profile, the Bowen Rail Company advertised for senior staff in February 2020, having already brought on the expertise of former Pacific National and Aurizon senior manager David Wassell.
When BRC launched its website and plans in August, it avoided any mention of its ownership by Adani or the Carmichael mine, or that Adani Australia’s CEO is a Director of the company. Adani seems to be moving away from using its own name for its Australian coal operations, applying to change the name of Adani Abbot Point to “North Queensland Export Terminal”.
The company claims BRC will bring jobs to the region, but fails to acknowledge that those jobs are likely reliant on the construction of the Carmichael coal mine and the opening up of the Galilee basin, a project delayed for eight years and continuing to face community opposition and a shrinking pool of investors and insurers due to its devastating climate impacts.
While Adani is outlaying upfront costs to haul its own coal rather than utilising existing contractors, Aurizon still has a part to play. Just two weeks before BRC went public, reports confirmed that Adani was yet to reach an agreement for access to the section of Aurizon’s rail line it needs to reach its port. Aurizon is required by law to reach an access agreement with Adani but there is uncertainty around who is required to pay for the upgrades to accommodate the increased number of trains. With Adani’s additional trains, the existing rail line which is already nearing capacity will require additional crossing loops, and potentially duplication of some of the existing infrastructure. Aurizon has already experienced the reputational damage that comes with associating with Adani’s proposed coal mine and its reluctance to reach an agreement is possibly a sign that it doesn’t want to incur extra costs for a controversial and much-delayed project that may never go ahead.
Bowen Rail Company’s Adani Ports ownership exposes investors to Carmichael risk
Adani Ports is a large Adani Group company that has previously had limited connection to the Carmichael coal project via its stake in Abbot Point coal port. Adani Ports is responsible for the operation of Adani’s coal port network in India, and is a company that continues to attract investment from major international banks, insurance companies and other investors. The Bowen Rail Company (BRC) is wholly owned by Adani Ports, and BRC’s role of hauling coal from the Carmichael mine to Adani’s Abbot Point port demonstrates that any investment in Adani Ports could now directly fund Adani’s Carmichael coal project. In fact, BRC’s purchase of locomotives and wagons could have already utilised Adani Ports funds.
You can read our full investor briefing here.
This connection between BRC and Adani Ports should be enough to deter investors and banks from financing Adani Ports any further. This is especially relevant for the banks that have arranged bond issues for Adani Ports and which have ruled out funding Carmichael coal and Abbot Point port. These banks are DBS, JP Morgan, Standard Chartered, Deutsche Bank, Barclays, Citi and Credit Suisse. Market Forces and our supporters have been raising concerns with these banks for over a year. The Bowen Rail Company connection to Adani Ports is the smoking gun, which should leave no doubt these banks must immediately cut all ties with the company.
Additionally, Adani Ports’ biggest bondholders should be very concerned about this development. Insurance company Allianz (via subsidiary PIMCO), TIAA and Lord Abbett and Co. all spruik their responsible business credentials and yet own a significant proportion of Adani Ports corporate bonds between them.
As recently as July, Adani Ports issued bonds to raise a massive AU$2.15billion, with a number of major global banks arranging the deal. While over 80 of the world’s banks, insurers and contractors have ruled out supporting the Carmichael coal project, if they do not rule out investment in all Adani companies, especially Adani Ports, they are at risk of funding Adani’s destructive coal mine anyway.