Home > Ten dodgy fossil fuel deals hurting the banks

Ten dodgy fossil fuel deals hurting the banks

9 August 2016

[cs_content][cs_section parallax=”false” separator_top_type=”none” separator_top_height=”50px” separator_top_inset=”0px” separator_top_angle_point=”50″ separator_bottom_type=”none” separator_bottom_height=”50px” separator_bottom_inset=”0px” separator_bottom_angle_point=”50″ _label=”Publication date” style=”margin: 0px;padding: 0px;”][cs_row inner_container=”true” marginless_columns=”false” style=”margin: 0px auto;padding: 0px;”][cs_column fade=”false” fade_animation=”in” fade_animation_offset=”45px” fade_duration=”750″ type=”1/1″ style=”padding: 0px;”][cs_text]Published: 9 August 2016[/cs_text][cs_element_gap _id=”5″ ][/cs_column][/cs_row][/cs_section][cs_section parallax=”false” separator_top_type=”none” separator_top_height=”50px” separator_top_inset=”0px” separator_top_angle_point=”50″ separator_bottom_type=”none” separator_bottom_height=”50px” separator_bottom_inset=”0px” separator_bottom_angle_point=”50″ _label=”Contents” style=”margin: 0px;padding: 0px;”][cs_row inner_container=”true” marginless_columns=”false” style=”margin: 0px auto;padding: 0px;”][cs_column fade=”false” fade_animation=”in” fade_animation_offset=”45px” fade_duration=”750″ type=”1/4″ style=”padding: 0px;”][cs_text]

[/cs_text][/cs_column][cs_column fade=”false” fade_animation=”in” fade_animation_offset=”45px” fade_duration=”750″ type=”1/4″ style=”padding: 0px;”][cs_text]#5 Newcastle Coal Port
#6 Dalrymple Bay Coal Port
#7 Origin – APLNG
#8 Santos – GLNG[/cs_text][/cs_column][cs_column fade=”false” fade_animation=”in” fade_animation_offset=”45px” fade_duration=”750″ type=”1/4″ style=”padding: 0px;”][cs_text]#9 Aurizon
#10 Dodgy deal in the pipeline?
And one that’s already gone bad…[/cs_text][/cs_column][/cs_row][/cs_section][cs_section parallax=”false” separator_top_type=”none” separator_top_height=”50px” separator_top_inset=”0px” separator_top_angle_point=”50″ separator_bottom_type=”none” separator_bottom_height=”50px” separator_bottom_inset=”0px” separator_bottom_angle_point=”50″ _label=”Intro” style=”margin: 0px;padding: 0px;”][cs_row inner_container=”true” marginless_columns=”false” style=”margin: 0px auto;padding: 0px;”][cs_column fade=”false” fade_animation=”in” fade_animation_offset=”45px” fade_duration=”750″ type=”2/3″ style=”padding: 0px;”][x_share title=”Share this story” share_title=”Ten dodgy fossil fuel deals hurting the banks” facebook=”true” twitter=”true” google_plus=”true” linkedin=”true” pinterest=”true” reddit=”true” email=”true” email_subject=”Check out this story on ten dodgy fossil fuel deals that are hurting the banks! “][cs_text]

The demise of the fossil fuel industry is a major headache for Australia’s big banks. Having provided the debt that fueled the last big fossil fuel boom, the likes of ANZ, CommBank, NAB and Westpac now find themselves exposed to projects that are both environmentally and financially toxic, as markets for fossil fuels decline and the world implements the Paris climate change agreement.

[/cs_text][/cs_column][cs_column fade=”false” fade_animation=”in” fade_animation_offset=”45px” fade_duration=”750″ type=”1/3″ style=”padding: 0px;”][x_image type=”none” src=”https://www.marketforces.org.au/wp-content/uploads/2016/06/MF-Bank-on-Notice-SM-Graphic-450×450.jpg” alt=”Put your bank on notice” link=”true” href=”https://www.marketforces.org.au/banksonnotice” title=”” target=”blank” info=”none” info_place=”top” info_trigger=”hover” info_content=””][/cs_column][/cs_row][cs_row inner_container=”true” marginless_columns=”false” style=”margin: 0px auto;padding: 0px;”][cs_column fade=”false” fade_animation=”in” fade_animation_offset=”45px” fade_duration=”750″ type=”1/1″ style=”padding: 0px;”][x_accordion][x_accordion_item title=”Bank profits impacted” open=”false” class=”accordionSunsetPurple”]

Each of Australia’s big four banks are being dragged down by loans to fossil fuel companies and projects.

In May 2016, Westpac revealed lower than expected cash profits of $3.9 billion, having added $252 million to its bad debt charge for the quarter. According to CEO Brian Hartzer, these “higher impairment charges related principally to four large exposures,”; commentators pointed to Peabody Energy and Wiggins Island Coal Export Terminal (WICET) as likely offenders.

That same month ANZ announced a 24% drop in profits in the six months to March, with its cash profit coming in at $2.8 billion – some $800m less than expected. The bank provisioned a massive $918m for bad debts, citing “weakness associated with low commodity prices in the resources sector and in related industries.” Fairfax reported ANZ faced particular problems from its big business lending, pointing to Peabody as a “major ANZ client culprit.”

Bad debt charges cost NAB $341m for the quarter, although this was slightly less than the same time in 2015, when they were forced to add an overlay for bad mining and agriculture debts.

CommBank’s bad debts also increased to $6.3 billion in May 2016, the highest reported since December 2014. Loan impairments cost the bank $427m during the third quarter of the 2015-16 financial year, including “a single relatively large domestic exposure with a syndicate of lenders including other Australian major banks.” Wondering what that deal could be? See if you can spot it in these ten dodgy deals!

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The resources boom has turned to spectacular bust for fossil fuel industries, with the thermal coal industry in structural decline and gas oversupply tipped to keep prices down for the foreseeable future, undermining the hundreds of billions of dollars invested in massive LNG plants.

At the same time, the collective public ambition to transition to a low carbon economy has never been stronger, as we begin to see some of the terrifying effects of climate change that will only worsen as the world continues warming to unprecedented levels. Politicians are slowly catching up with the rest of the world, highlighted by the Paris agreement to keep global warming well below 2°C. The carbon budget imposed by this limit means around 80% of global fossil fuel reserves must remain in the ground.

Below are ten of the worst coal and gas deals hanging over the Australia’s banks, threatening to leave them billions of dollars out of pocket.

[/x_accordion_item][/x_accordion][/cs_column][/cs_row][/cs_section][cs_section id=”WICET” parallax=”false” separator_top_type=”none” separator_top_height=”50px” separator_top_inset=”0px” separator_top_angle_point=”50″ separator_bottom_type=”none” separator_bottom_height=”50px” separator_bottom_inset=”0px” separator_bottom_angle_point=”50″ _label=”WICET” style=”margin: 0px;padding: 0px;”][cs_row inner_container=”true” marginless_columns=”false” style=”margin: 0px auto;padding: 0px;”][cs_column fade=”false” fade_animation=”in” fade_animation_offset=”45px” fade_duration=”750″ type=”1/1″ style=”padding: 0px;”][x_line style=”border-top-width: 1px;width: 100%;”][x_custom_headline level=”h3″ looks_like=”h4″ accent=”false”]#1 Wiggins Island Coal Export Terminal[/x_custom_headline][/cs_column][/cs_row][cs_row inner_container=”true” marginless_columns=”false” style=”margin: 0px auto;padding: 0px;”][cs_column fade=”false” fade_animation=”in” fade_animation_offset=”45px” fade_duration=”750″ type=”2/3″ style=”padding: 0px;”][cs_text]

Described as “arguably the last great boom-time bugger-up” the Wiggins Island Coal Export Terminal (WICET) at Gladstone in Queensland has over the past decade bankrupted four Australian coal miners and cost banks and investors billions in losses.

Australia’s big four banks are all tied to the misfortunes of this dodgy coal port. ANZ is the most heavily exposed, having provided $417m worth of project finance back in 2011. That deal also saw CommBank, Westpac and NAB chip in $164m each.

Originally planned by coal giant Glencore and seven partners, including New Hope Corporation and Yancoal, WICET was approved in 2008 as an 84-million-tonne-a-year export facility. Only one of the three planned stages of the project has eventuated – at twice the initial cost – with a 27 million tonne capacity. Since then, several partners – Caledon Coal, Bandanna Energy and Cockatoo Coal – have all gone belly up. Caledon was liquidated in July 2017, leaving the five remaining owners to repay the debt. In April 2018, Nomura bought $81 million of Caledon’s preferred shares in WICET for less than 60 cents in the dollar, showing just how little the market thinks of the asset.

Export charges at WICET are up to $25 a tonne – five times more expensive than a nearby port – and its partners must pay for any unused capacity. So while the port is operating well below capacity, these tough contract terms are keeping it afloat for now. But with mounting pressures on the remaining counterparties, the project looks shaky at best.

Lloyds Bank sold its $148 million worth of WICET debt in October 2016 at a reported loss of 21%. The AFR called it the “the first crack in WICET’s lending group, who are sitting on steep paper losses about five years after committing to the project.”

Negotiations for several refinancing proposals collapsed, with banks unwilling to accept worse terms than the original deal. In March 2018, the 20 original lenders – owed a combined $3.5 billion on WICET – agreed to provide a ‘financial lifeline’. Finally in September, WICET obtained court approval for a $3.2 debt refinancing plan, with the maturity of $2.6 billion in senior debt extended until 2026.

While obviously offering welcome respite, this doesn’t deal with WICET’s core problem: the port’s high costs and low export volumes. On top of this Glencore, which owns 40% of WICET, announced in February 2019 plans to cap its own coal production globally in response to climate change, sending shockwaves across both the financial and coal sector.

WICET is also beset by internal legal wrangling. It faces possible legal action from some junior lenders who provided A$550m of the Wiggins Island Preferential Shares (WIPS) in the original project deal and claim they are owed A$40m in unpaid dividends. Four WICET partners also started legal proceedings in late 2018 against co-owner New Hope over its failure to deliver a 500,000 tonne coal export contract from its undeveloped Colton Coal mine, which New Hope has put into voluntary administration.

Bad loans with Wiggins Island #Coal Export Terminal & Peabody drag down @Westpac profits #divest via @BIAUS https://t.co/Y0HQV5XsEz

— Market Forces (@market_forces) May 2, 2016

[/cs_text][/cs_column][/cs_row][/cs_section][cs_section id=”Peabody” parallax=”false” separator_top_type=”none” separator_top_height=”50px” separator_top_inset=”0px” separator_top_angle_point=”50″ separator_bottom_type=”none” separator_bottom_height=”50px” separator_bottom_inset=”0px” separator_bottom_angle_point=”50″ _label=”Peabody” style=”margin: 0px;padding: 0px;”][cs_row inner_container=”true” marginless_columns=”false” style=”margin: 0px auto;padding: 0px;”][cs_column fade=”false” fade_animation=”in” fade_animation_offset=”45px” fade_duration=”750″ type=”1/1″ style=”padding: 0px;”][x_line style=”border-top-width: 1px;width: 100%;”][x_custom_headline level=”h3″ looks_like=”h4″ accent=”false” class=”cs-ta-right”]#2 Peabody Energy[/x_custom_headline][/cs_column][/cs_row][cs_row inner_container=”true” marginless_columns=”false” style=”margin: 0px auto;padding: 0px;”][cs_column fade=”false” fade_animation=”in” fade_animation_offset=”45px” fade_duration=”750″ type=”1/3″ style=”padding: 0px;”][x_image type=”none” src=”https://www.marketforces.org.au/wp-content/uploads/2016/03/downerCampaignImage.png” alt=”” link=”false” href=”#” title=”” target=”” info=”none” info_place=”top” info_trigger=”hover” info_content=””][cs_text class=”cs-ta-left”]

Coal mining in Queensland’s Bowen Basin, where Peabody operates five mines.
Credit: Greenpeace/Tom Jefferson

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In April 2015, the world’s biggest privately-owned coal producer Peabody Energy filed for Chapter 11 bankruptcy protection under US law, unable to service its $8billion debt. Key reasons cited for filing included “industry pressures in recent years including a dramatic drop in the price of metallurgical coal, weakness in the Chinese economy, overproduction of domestic shale gas and ongoing regulatory challenges.” Throughout 2015, Peabody lost over $2.5b and its share price plummeted 97%. The future of its Australian arm looked precarious, with 10 of Peabody’s 28 mines located here, although its opaque corporate structure made it hard to work out exactly how much.

By 2017, however, the coal miner had come out of Chapter 11 bankruptcy, having reduced debt by $5billion.

Australia’s big banks CommBank, NAB and Westpac have all been exposed to Peabody’s rollercoaster fortunes. Each contributed $49m to facilitate Peabody’s purchase of Macarthur Coal in October 2011 – debt that was downgraded by both major ratings agencies – Moody’s and Standard & Poor’s – to “very high” and “substantial” risk ratings respectively.

Westpac, ANZ and NAB also reportedly loaned $25m each to Peabody’s US headquarters, and it’s unclear just how much of that debt was recoverable. The AFR reported “ANZ is believed to have written off its exposure to Peabody’s North American headstock, while Westpac has on-sold its debt.” Reports in August 2016 also highlighted that CommBank expected to lose $72 million from its Peabody exposure. For an industry driven by massive profit motives, even skimming this loss from the bank’s margin will have hurt.

Despite Peabody’s losses, NAB was happy to back the coal miner in its plans to expand the Wambo Coal mine in NSW’s Hunter Valley, facilitating a $250million inter-company loan between Peabody and its Australian subsidiary in 2016. Peabody claimed this put it in a strong enough fiscal position to proceed with Wambo’s expansion, which was finally approved by the Independent Planning Commission in August 2019. The expansion will allow extraction of an extra 150 million tonnes of run-of-mine coal over 23 years. Such support is wholly at odds with NAB’s Paris climate commitments.

See how the big banks are doing on their commitments on global warming.

[/cs_text][x_image type=”none” src=”https://www.marketforces.org.au/wp-content/uploads/2014/07/MF-Compare-Banks-SM-v03-p1.jpg” alt=”” link=”true” href=”https://www.marketforces.org.au/banks/compare” title=”” target=”blank” info=”none” info_place=”top” info_trigger=”hover” info_content=””][/cs_column][/cs_row][/cs_section][cs_section id=”Abbot Point” parallax=”false” separator_top_type=”none” separator_top_height=”50px” separator_top_inset=”0px” separator_top_angle_point=”50″ separator_bottom_type=”none” separator_bottom_height=”50px” separator_bottom_inset=”0px” separator_bottom_angle_point=”50″ _label=”Abbot Point” style=”margin: 0px;padding: 0px;”][cs_row inner_container=”true” marginless_columns=”false” style=”margin: 0px auto;padding: 0px;”][cs_column fade=”false” fade_animation=”in” fade_animation_offset=”45px” fade_duration=”750″ type=”1/1″ style=”padding: 0px;”][x_line style=”border-top-width: 1px;width: 100%;”][x_custom_headline level=”h3″ looks_like=”h4″ accent=”false”]#3 Adani Abbot Point Coal Port[/x_custom_headline][/cs_column][/cs_row][cs_row inner_container=”true” marginless_columns=”false” style=”margin: 0px auto;padding: 0px;”][cs_column fade=”false” fade_animation=”in” fade_animation_offset=”45px” fade_duration=”750″ type=”2/3″ style=”padding: 0px;”][cs_text]

Indian coal miner Adani bought the Abbot Point Terminal on a 99-year lease in 2011 for $1.83 billion when thermal coal was at a peak US$132.48 per tonne. By January 2016 coal was down to US$49.20, and the terminal was hit with a credit rating downgrade that left it just one notch above ‘junk’ status. Despite destructive plans to expand the port to accommodate coal from the Galilee Basin, the economic outlook for Abbot Point port is gloomy, with the amount of coal contracted to be shipped via take-or-pay contracts predicted to fall rapidly from 2020.

Analysis from IEEFA suggests the terminal “runs the risk of becoming a stranded asset” if Adani’s Carmichael project doesn’t go ahead. The port needed to refinance $1.5 billion of debt in 2018, and over $2 billion by 2020. Without the promise of extra capacity being filled by Carmichael coal, and given the big four Australian banks’ aversion to the project, securing this refinancing has proven difficult.

Reports from 2014 and 2016 show Adani has been unsuccessfully trying to sell a stake in the port for years. In 2018 they appointed investment bank Rothschild & Co to advise on the sale, but in May 2019 Rothschild said it was no longer working with Adani.

While Adani hasn’t yet found anyone foolish enough to buy a stake in Abbot Point, it was successful in refinancing part of the debt linked to its purchase. After a desperate year-long search, Korean asset manager Mirae Asset Daewoo bought $330 million worth of Adani’s $2billion debt in July 2018, with the aim of on-selling it to Korean insurance companies and other investors.

More recently, IJC Global reports that the terminal was refinanced by the South Korean government-owned Industrial Bank of Korea in a AUD$300million new debt five-year deal that reached financial close in 2019.

[/cs_text][/cs_column][cs_column fade=”false” fade_animation=”in” fade_animation_offset=”45px” fade_duration=”750″ type=”1/3″ style=”padding: 0px;”][x_button size=”global” block=”true” circle=”false” icon_only=”false” href=”https://www.marketforces.org.au/info/key-issues/theadanilist/” title=”” target=”” info=”none” info_place=”top” info_trigger=”hover” info_content=””]Find out which companies could make or break Adani’s Carmichael plans.[/x_button][x_image type=”none” src=”https://www.marketforces.org.au/wp-content/uploads/2015/12/abbot-point-square-1.jpg” alt=”” link=”false” href=”#” title=”” target=”” info=”none” info_place=”top” info_trigger=”hover” info_content=””][cs_text class=”cs-ta-left”]

Abbot Point coal terminal in the Great Barrier Reef World Heritage Area (Greenpeace/Tom Jefferson)

[/cs_text][x_image type=”none” src=”https://www.marketforces.org.au/wp-content/uploads/2019/02/The-adani-list-banner.png” alt=”The Adani List” link=”true” href=”https://www.marketforces.org.au/info/key-issues/theadanilist/” title=”” target=”” info=”none” info_place=”top” info_trigger=”hover” info_content=””][/cs_column][/cs_row][/cs_section][cs_section id=”Whitehaven” parallax=”false” separator_top_type=”none” separator_top_height=”50px” separator_top_inset=”0px” separator_top_angle_point=”50″ separator_bottom_type=”none” separator_bottom_height=”50px” separator_bottom_inset=”0px” separator_bottom_angle_point=”50″ _label=”Whitehaven” style=”margin: 0px;padding: 0px;”][cs_row inner_container=”true” marginless_columns=”false” style=”margin: 0px auto;padding: 0px;”][cs_column fade=”false” fade_animation=”in” fade_animation_offset=”45px” fade_duration=”750″ type=”1/1″ style=”padding: 0px;”][x_line style=”border-top-width: 1px;width: 100%;”][x_custom_headline level=”h3″ looks_like=”h4″ accent=”false” class=”cs-ta-right”]#4 Whitehaven Coal[/x_custom_headline][/cs_column][/cs_row][cs_row inner_container=”true” marginless_columns=”false” style=”margin: 0px auto;padding: 0px;”][cs_column fade=”false” fade_animation=”in” fade_animation_offset=”45px” fade_duration=”750″ type=”1/3″ style=”padding: 0px;”][x_image type=”none” src=”https://www.marketforces.org.au/wp-content/uploads/2014/04/Maules-Creek-december-2013.jpg” alt=”” link=”false” href=”#” title=”” target=”” info=”none” info_place=”top” info_trigger=”hover” info_content=””][cs_text class=”cs-ta-left”]

Maules Creek project blockade
Leard State Forest, NSW

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Record high vote for a climate risk disclosure resolution in Australia! 40% of shareholders call on Whitehaven #coal to reveal its climate related financial risks at today's AGM. #Ausbiz #Finance #Investment #climatechange

— Market Forces (@market_forces) October 25, 2018

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As a pure-play coal company, Whitehaven’s fortunes have no insulation against the long-term structural decline of the industry, which saw the company’s market value drop more than 90% from its April 2011 peak to 2016. Rescued by strong Asian demand and a surge in world thermal coal prices in 2018, Whitehaven continues to doggedly operate as if the Paris climate agreement to limit global warming to 1.5°C – signed by 197 countries – doesn’t exist. At its 2017 AGM it projected a 10% increase in coal power globally by 2040, a scenario consistent with up to 6°C global warming! A year later, Whitehaven told shareholders at its 2018 AGM it was working to the IEA New Policies Scenario, which is consistent with 3°C by 2100.

Not content with doubling production between 2013-18, Whitehaven intends to ramp up by massively extending the Vickery coal mine – destroying prime farming land in the process.

Despite Whitehaven’s appalling environmental record, shaky finances and lack of social license to operate, the miner attracted a $1.4b refinancing loan in March 2015, with ANZ, NAB and WBC contributing $100 million apiece. Just a few months later, nervous lenders were already looking to exit the deal, with the huge risks associated with coal exposure finally beginning to sink in for at least one bank.

These jitters were sadly short-lived though, with ANZ, NAB and Westpac deciding to arrange a $1 billion, two-year extension to a corporate financing deal for Whitehaven in August 2017.

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Is your super fund invested in Whitehaven? Find out more here.

[/cs_text][/cs_column][/cs_row][/cs_section][cs_section id=”Newcastle” parallax=”false” separator_top_type=”none” separator_top_height=”50px” separator_top_inset=”0px” separator_top_angle_point=”50″ separator_bottom_type=”none” separator_bottom_height=”50px” separator_bottom_inset=”0px” separator_bottom_angle_point=”50″ _label=”Newcastle” style=”margin: 0px;padding: 0px;”][cs_row inner_container=”true” marginless_columns=”false” style=”margin: 0px auto;padding: 0px;”][cs_column fade=”false” fade_animation=”in” fade_animation_offset=”45px” fade_duration=”750″ type=”1/1″ style=”padding: 0px;”][x_line style=”border-top-width: 1px;width: 100%;”][x_custom_headline level=”h3″ looks_like=”h4″ accent=”false”]#5 Newcastle Coal Export Port[/x_custom_headline][/cs_column][/cs_row][cs_row inner_container=”true” marginless_columns=”false” style=”margin: 0px auto;padding: 0px;”][cs_column fade=”false” fade_animation=”in” fade_animation_offset=”45px” fade_duration=”750″ type=”2/3″ style=”padding: 0px;”][cs_text]

As the world’s biggest coal export port, Newcastle’s fortunes are dangerously linked to the fortunes of the coal sector.

The Newcastle Coal Export Terminal (NCET) is one of three terminals at Newcastle, and is owned and operated by the Newcastle Coal Infrastructure Group (NCIG), which is in turn owned by a group of coal producers including BHP, Yancoal, Whitehaven and Peabody.

NCIG was placed on review for downgrade in December 2015, with Moody’s stating that “the sustained weakness in coal prices and the uncertain duration of the downturn is increasing the likelihood of counterparty failure and consequent volatility in NCIG’s cash flows”. In June 2016, the group’s debt was downgraded to “junk”, following a failed attempt by NCIG to refinance $500 million of its debt. BHP Billiton also failed to refinance $500 million of its debt, with banks apparently less willing to lend to the sector because of its poor outlook.

ANZ, Commbank, and NAB part of syndicate refinance deal in 2018

The terminal project (NCET) was reportedly seeking in 2016 a refinancing deal for its $3.5b worth of loans. Finally, in August 2018 it announced a syndicate of 10 lenders who included ANZ and Commbank had refinanced the port’s debt. A newcomer to this syndicate was NAB.

Over the years, NCIG has attracted over $2 billion of finance from Australia’s big four banks. Back in January 2008, ANZ provided $388 million to enable the initial construction of the NCIG terminal, along with a further $138 million loan for the post-construction phase.

Through 2010 and 2011 the terminal was expanded over two stages, attracting a total of $569m from ANZ, $461m from CommBank and $241m from NAB. Some of the debt for the terminal’s expansion was refinanced in March 2014, with ANZ chipping in $294m and NAB providing $102m.

Coal reclaimer at Port of Newcastle
Photo: Max Phillips (Jeremy Buckingham MLC)

[/cs_text][/cs_column][/cs_row][cs_row inner_container=”true” marginless_columns=”false” _label=”New Item 3″ style=”margin: 0px auto;padding: 0px;”][cs_column fade=”false” fade_animation=”in” fade_animation_offset=”45px” fade_duration=”750″ type=”1/1″ style=”padding: 0px;”][x_image type=”none” src=”https://www.marketforces.org.au/wp-content/uploads/2014/07/MF-Compare-Banks-SM-v03-p1.jpg” alt=”” link=”true” href=”https://www.marketforces.org.au/banks/compare” title=”” target=”blank” info=”none” info_place=”top” info_trigger=”hover” info_content=””][/cs_column][/cs_row][/cs_section][cs_section id=”Dalrymple” parallax=”false” separator_top_type=”none” separator_top_height=”50px” separator_top_inset=”0px” separator_top_angle_point=”50″ separator_bottom_type=”none” separator_bottom_height=”50px” separator_bottom_inset=”0px” separator_bottom_angle_point=”50″ _label=”Dalrymple Bay” style=”margin: 0px;padding: 0px;”][cs_row inner_container=”true” marginless_columns=”false” style=”margin: 0px auto;padding: 0px;”][cs_column fade=”false” fade_animation=”in” fade_animation_offset=”45px” fade_duration=”750″ type=”1/1″ style=”padding: 0px;”][x_line style=”border-top-width: 1px;width: 100%;”][x_custom_headline level=”h3″ looks_like=”h4″ accent=”false” class=”cs-ta-right”]#6 Dalrymple Bay Coal Terminal[/x_custom_headline][/cs_column][/cs_row][cs_row inner_container=”true” marginless_columns=”false” style=”margin: 0px auto;padding: 0px;”][cs_column fade=”false” fade_animation=”in” fade_animation_offset=”45px” fade_duration=”750″ type=”1/3″ style=”padding: 0px;”][x_image type=”none” src=”https://www.marketforces.org.au/wp-content/uploads/2016/05/Hay-Point-Dalrymple-Bay.jpg” alt=”” link=”false” href=”#” title=”” target=”” info=”none” info_place=”top” info_trigger=”hover” info_content=””][cs_text class=”cs-ta-left”]Dalrymple Bay Coal Terminal
Hay Point, Qld
Credit: Greenpeace/Tom Jefferson[/cs_text][/cs_column][cs_column fade=”false” fade_animation=”in” fade_animation_offset=”45px” fade_duration=”750″ type=”2/3″ style=”padding: 0px;”][cs_text]

Dalrymple Bay near Mackay in the Great Barrier Reef Heritage Area Queensland is yet another example of an Australian coal port under pressure. Moody’s in March 2016 downgraded Dalrymple’s credit rating to non-investment grade. That was before Peabody’s bankruptcy announcement, which would have sent further shivers through Dalrymple – Peabody produced a quarter of all coal shipped from the port!

With Peabody’s future Australian operations uncertain, and fellow Dalrymple user Anglo American selling its Australian coal mines at the time, you’d think the coal port’s creditors would’ve been worried, right? Apparently not.

Having each loaned $50m to Dalrymple Bay in September 2014, ANZ and Westpac had a chance to cut ties in July 2016. But instead, the two banks ignored the ratings downgrade and Peabody’s massive debt, and became lead arrangers for a $350m refinancing deal, with reports they would underwrite the debt themselves.

[/cs_text][/cs_column][/cs_row][/cs_section][cs_section id=”APLNG” parallax=”false” separator_top_type=”none” separator_top_height=”50px” separator_top_inset=”0px” separator_top_angle_point=”50″ separator_bottom_type=”none” separator_bottom_height=”50px” separator_bottom_inset=”0px” separator_bottom_angle_point=”50″ _label=”APLNG” style=”margin: 0px;padding: 0px;”][cs_row inner_container=”true” marginless_columns=”false” style=”margin: 0px auto;padding: 0px;”][cs_column fade=”false” fade_animation=”in” fade_animation_offset=”45px” fade_duration=”750″ type=”1/1″ style=”padding: 0px;”][x_line style=”border-top-width: 1px;width: 100%;”][x_custom_headline level=”h3″ looks_like=”h4″ accent=”false”]#7 Origin – APLNG[/x_custom_headline][/cs_column][/cs_row][cs_row inner_container=”true” marginless_columns=”false” _label=”New Item 2″ style=”margin: 0px auto;padding: 0px;”][cs_column fade=”false” fade_animation=”in” fade_animation_offset=”45px” fade_duration=”750″ type=”2/3″ style=”padding: 0px;”][cs_text]

Origin’s Australia Pacific LNG project (APLNG) is one of three massive, high-cost LNG facilities built on Queensland’s Curtis Island. With a whopping price tag of $24.7 billion, APLNG was a bullish bet on huge future LNG demand from the likes of Japan, Korea and China. This didn’t eventuate, with China’s demand remaining steady and Japan and Korea’s actually declining in 2015-16. With an extra 100 million tonnes of LNG due to flow from new projects into the global market, prices in 2016 slumped to less than 25% of those in early 2014. The spot price of around US$4.50 per unit was so low that APLNG exports couldn’t cover its operational and financing costs.

After downgrades in 2015, both major ratings houses – Moody’s and Standard & Poor’s – listed Origin at just above junk status in 2016. Reports suggested Origin was looking to separate its oil and gas production arm from its domestic power business in a bid to prevent further downgrades. In August 2017, the company wrote down $1.2 billion from APLNG’s value.

Australia’s big banks are heavily exposed to Origin. ANZ, NAB and Westpac were all involved in the $3.15 billion refinancing of APLNG, which reached financial close in March 2019.

Previously ANZ and NAB each contributed $250m to a corporate financing deal in September 2011, while all big four banks participated in the APLNG project’s original $8.6 billion financing in May 2012. That deal saw ANZ stump up $359m, Westpac $307m, and NAB and CommBank $256m each. As if these numbers weren’t big enough, NAB, ANZ and CommBank each contributed a further $200m in a December 2014 refinancing.

[/cs_text][/cs_column][cs_column fade=”false” fade_animation=”in” fade_animation_offset=”45px” fade_duration=”750″ type=”1/3″ style=”padding: 0px;”][x_image type=”none” src=”https://www.marketforces.org.au/wp-content/uploads/2016/02/Ichthys.jpg” alt=”” link=”false” href=”#” title=”” target=”” info=”none” info_place=”top” info_trigger=”hover” info_content=””][cs_element_text _id=”114″ ][x_gap size=”30px”][x_image type=”none” src=”https://www.marketforces.org.au/wp-content/uploads/2016/02/Super-Switch-square-image.jpg” alt=”” link=”true” href=”https://www.marketforces.org.au/superfunds/” title=”” target=”blank” info=”none” info_place=”top” info_trigger=”hover” info_content=””][cs_text]

Does your super fund invest in these climate destroying fossil fuel companies?

[/cs_text][/cs_column][/cs_row][/cs_section][cs_section id=”GLNG” parallax=”false” separator_top_type=”none” separator_top_height=”50px” separator_top_inset=”0px” separator_top_angle_point=”50″ separator_bottom_type=”none” separator_bottom_height=”50px” separator_bottom_inset=”0px” separator_bottom_angle_point=”50″ _label=”GLNG” style=”margin: 0px;padding: 0px;”][cs_row inner_container=”true” marginless_columns=”false” style=”margin: 0px auto;padding: 0px;”][cs_column fade=”false” fade_animation=”in” fade_animation_offset=”45px” fade_duration=”750″ type=”1/1″ style=”padding: 0px;”][x_line style=”border-top-width: 1px;width: 100%;”][x_custom_headline level=”h3″ looks_like=”h4″ accent=”false”]#8 Santos – GLNG[/x_custom_headline][/cs_column][/cs_row][cs_row inner_container=”true” marginless_columns=”false” style=”margin: 0px auto;padding: 0px;”][cs_column fade=”false” fade_animation=”in” fade_animation_offset=”45px” fade_duration=”750″ type=”2/3″ style=”padding: 0px;”][cs_text]

Santos’ GLNG project, also residing on Curtis Island in the Great Barrier Reef World Heritage Area, is worth a great deal less today than the $10 billion it was valued at in 2015, when Santos embarked on the first of three write downs. The first $565m impairment charge contributed to Santos’ massive total $2.7b loss in 2015. The project’s fortunes slid further in 2016, with a bigger write down of $1.5 billion announced in August, and another $1.1 billion in August 2017.

Environmental concerns over coal seam gas (CSG) drilling in Queensland and NSW has put future supplies at risk and led to a moratorium in some states. GLNG is supplied by Santos’ highly controversial CSG projects in the Bowen and Surat Basins. When GLNG was originally financed in 2011, ANZ contributed $305m and NAB and CommBank each chipped in $132m. In December 2014, ANZ also provided a $1billion bilateral bank facility to Santos to help restructure the crippling debt obligations imposed by GLNG, Narrabri and other struggling projects.

Santos’ proposed Narrabri CSG project also hit various stumbling blocks including furious community opposition from local farming communities, with its plans to drill 850 CSG wells in NSW’s Piliga forest sparking over 22,000 objections. The project was originally written down by $800m to $500m in 2015, before Santos announced in early 2016 it had written down the total value of its NSW assets to $0. Despite this, it continued to push ahead with the project and in early 2019 signed an offtake agreement to supply gas from Narrabri. It is yet to make a final investment decision – access to finance will be critical, especially as a new pipeline is needed to get the gas to market. The big four banks could be exposed through any deal to enable the pipeline, as well as through corporate exposure to Santos or APA, the company planning to build the pipeline.

Community opposition to CSG in NSW. Credit: Lock the Gate

[/cs_text][cs_text][/cs_column][/cs_row][/cs_section][cs_section id=”Aurizon” parallax=”false” separator_top_type=”none” separator_top_height=”50px” separator_top_inset=”0px” separator_top_angle_point=”50″ separator_bottom_type=”none” separator_bottom_height=”50px” separator_bottom_inset=”0px” separator_bottom_angle_point=”50″ _label=”Aurizon” style=”margin: 0px;padding: 0px;”][cs_row inner_container=”true” marginless_columns=”false” style=”margin: 0px auto;padding: 0px;”][cs_column fade=”false” fade_animation=”in” fade_animation_offset=”45px” fade_duration=”750″ type=”1/1″ style=”padding: 0px;”][x_line style=”border-top-width: 1px;width: 100%;”][x_custom_headline level=”h3″ looks_like=”h4″ accent=”false” class=”cs-ta-right”]#9 Aurizon[/x_custom_headline][/cs_column][/cs_row][cs_row inner_container=”true” marginless_columns=”false” style=”margin: 0px auto;padding: 0px;”][cs_column fade=”false” fade_animation=”in” fade_animation_offset=”45px” fade_duration=”750″ type=”1/3″ style=”padding: 0px;”][x_image type=”none” src=”https://www.marketforces.org.au/wp-content/uploads/2016/05/Coal-train-Hunter-Valley.jpg” alt=”” link=”false” href=”#” title=”” target=”” info=”none” info_place=”top” info_trigger=”hover” info_content=””][cs_text class=”cs-ta-left”]

Coal wagons in the Hunter Valley, NSW
Credit: Bob Burton

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As the owner and operator of coal and iron ore rail systems, Aurizon is inextricably linked to the fortunes of those industries. In fact, the company has been described “as close as you can be to a coal miner without digging the stuff up.” Almost 70% of the company’s revenue back in 2015 was derived from coal-related business. With many of Aurizon’s coal-producing clients – including Peabody and Whitehaven – struggling amid the industry’s decline, the flow-on effect to Aurizon’s bottom line saw the company’s net profit in June 2016 drop by a massive 88% to $72m.

These days, Aurizon has become more reliant on coal as its haulage of iron ore has declined. In 2019 Aurizon’s coal-related business accounted for 83% of revenue. It recorded a statutory net profit of $473 million in June 2019, this was down by 13%.

Australia’s big four banks have all helped Aurizon with its refinancing over the years. In 2013, NAB and CommBank each contributed $236m, while ANZ and Westpac loaned $143m apiece to a loan that matured in 2018.

More recently they all pitched in smaller sums for an AUD$500 million refinancing of the Aurizon Network that reached financial close in October 2017 for repayment by October 2022. ANZ gave $65 million, Commonwealth $45 million, NAB $50 million, and Westpac $45 million.

[/cs_text][/cs_column][/cs_row][/cs_section][cs_section id=”NEGI” parallax=”false” separator_top_type=”none” separator_top_height=”50px” separator_top_inset=”0px” separator_top_angle_point=”50″ separator_bottom_type=”none” separator_bottom_height=”50px” separator_bottom_inset=”0px” separator_bottom_angle_point=”50″ _label=”NEGI” style=”margin: 0px;padding: 0px;”][cs_row inner_container=”true” marginless_columns=”false” style=”margin: 0px auto;padding: 0px;”][cs_column fade=”false” fade_animation=”in” fade_animation_offset=”45px” fade_duration=”750″ type=”1/1″ style=”padding: 0px;”][x_line style=”border-top-width: 1px;width: 100%;”][x_custom_headline level=”h3″ looks_like=”h4″ accent=”false”]#10 Dodgy pipeline deal[/x_custom_headline][/cs_column][/cs_row][cs_row inner_container=”true” marginless_columns=”false” style=”margin: 0px auto;padding: 0px;”][cs_column fade=”false” fade_animation=”in” fade_animation_offset=”45px” fade_duration=”750″ type=”2/3″ style=”padding: 0px;”][cs_text]

The North East Gas Interconnector proposes to link Tennant Creek in NT to Mt Isa in Queensland, effectively hooking NT gas reserves into the eastern gas market. The contract to construct and operate the pipeline was controversially awarded to Chinese- and Singaporean-owned Jemena, giving the company an unregulated monopoly over the project. Construction of the $800m pipeline began in July 2017 and was completed in December 2018.

In 2016 the ATO was asked to investigate Jemena over a potential tax avoidance system that could cost Australia $500 billion over 35 years.

Doubts over just how much gas will actually be supplied from NT reserves forced the company to reduce the size of the proposed pipe. Growing wariness over unconventional gas extraction and lower than expected demand led many to question the necessity of the pipeline, but politicians kept pushing it as a ‘nation-building’ project.

The $800m project was backed by Chinese and Singaporean state-owned power companies, and did not seek any debt finance from Australia’s banks. But it’s yet another example of a dodgy fossil fuel project could lock in oversupply and slow down the transition to clean energy sources – all without providing any financial benefit to Australia.

Land clearing for coal seam gas pipeline, Qld. Credit: Max Phillips (Jeremy Buckingham MLC)

[/cs_text][/cs_column][/cs_row][/cs_section][cs_section id=”Callide” parallax=”false” separator_top_type=”none” separator_top_height=”50px” separator_top_inset=”0px” separator_top_angle_point=”50″ separator_bottom_type=”none” separator_bottom_height=”50px” separator_bottom_inset=”0px” separator_bottom_angle_point=”50″ _label=”Callide” style=”margin: 0px;padding: 0px;”][cs_row inner_container=”true” marginless_columns=”false” style=”margin: 0px auto;padding: 0px;”][cs_column fade=”false” fade_animation=”in” fade_animation_offset=”45px” fade_duration=”750″ type=”1/1″ style=”padding: 0px;”][x_line style=”border-top-width: 1px;width: 100%;”][x_custom_headline level=”h3″ looks_like=”h4″ accent=”false” class=”cs-ta-right”]…And one that’s already gone bad[/x_custom_headline][/cs_column][/cs_row][cs_row inner_container=”true” marginless_columns=”false” style=”margin: 0px auto;padding: 0px;”][cs_column fade=”false” fade_animation=”in” fade_animation_offset=”45px” fade_duration=”750″ type=”1/3″ style=”padding: 0px;”][x_image type=”none” src=”https://www.marketforces.org.au/wp-content/uploads/2016/07/stranded-callide-c.jpg” alt=”” link=”false” href=”#” title=”” target=”” info=”none” info_place=”top” info_trigger=”hover” info_content=””][cs_text class=”cs-ta-left”]Callide C coal-fired power station, QLD[/cs_text][cs_text][/cs_column][cs_column fade=”false” fade_animation=”in” fade_animation_offset=”45px” fade_duration=”750″ type=”2/3″ style=”padding: 0px;”][cs_text]

Callide C, the fourth largest coal-fired power station in Queensland, went into receivership in July 2016 after failing to meet a $50m debt repayment deadline. The debt stemmed from a package worth around $350m provided in June 2012.

Having loaned $125m, NAB was by far the biggest player in the deal, which also involved four international banks. US private equity firm KKR took over the Bank of Scotland’s debt share, while some redistribution amongst the other lenders may have occurred.

While this financial distress didn’t stop the power station from running, it should have served as a lesson for any bank considering backing Australia’s dirty coal-fired power sector.

However media reports in January 2019 revealed the owners of the nearby Callide coal mine were seeking $100 million from banks to double production at the mine. The fundraising represents 2019’s first test of whether Australia’s big four will refuse to finance more coal industry expansion.

[/cs_text][/cs_column][/cs_row][/cs_section][/cs_content][cs_content_seo]Published: 9 August 2016

Jump to:
#1 Wiggins Island (WICET)
#2 Peabody Energy
#3 Adani Abbot Point
#4 Whitehaven Coal
#5 Newcastle Coal Port
#6 Dalrymple Bay Coal Port
#7 Origin – APLNG
#8 Santos – GLNG
#9 Aurizon
#10 Dodgy deal in the pipeline?
And one that’s already gone bad…
Share this storyThe demise of the fossil fuel industry is a major headache for Australia’s big banks. Having provided the debt that fueled the last big fossil fuel boom, the likes of ANZ, CommBank, NAB and Westpac now find themselves exposed to projects that are both environmentally and financially toxic, as markets for fossil fuels decline and the world implements the Paris climate change agreement.
Bank profits impactedEach of Australia’s big four banks are being dragged down by loans to fossil fuel companies and projects.
In May 2016, Westpac revealed lower than expected cash profits of $3.9 billion, having added $252 million to its bad debt charge for the quarter. According to CEO Brian Hartzer, these “higher impairment charges related principally to four large exposures,”; commentators pointed to Peabody Energy and Wiggins Island Coal Export Terminal (WICET) as likely offenders.
That same month ANZ announced a 24% drop in profits in the six months to March, with its cash profit coming in at $2.8 billion – some $800m less than expected. The bank provisioned a massive $918m for bad debts, citing “weakness associated with low commodity prices in the resources sector and in related industries.” Fairfax reported ANZ faced particular problems from its big business lending, pointing to Peabody as a “major ANZ client culprit.”
Bad debt charges cost NAB $341m for the quarter, although this was slightly less than the same time in 2015, when they were forced to add an overlay for bad mining and agriculture debts.
CommBank’s bad debts also increased to $6.3 billion in May 2016, the highest reported since December 2014. Loan impairments cost the bank $427m during the third quarter of the 2015-16 financial year, including “a single relatively large domestic exposure with a syndicate of lenders including other Australian major banks.” Wondering what that deal could be? See if you can spot it in these ten dodgy deals!Fossil fuel loans weighing heavyThe resources boom has turned to spectacular bust for fossil fuel industries, with the thermal coal industry in structural decline and gas oversupply tipped to keep prices down for the foreseeable future, undermining the hundreds of billions of dollars invested in massive LNG plants.
At the same time, the collective public ambition to transition to a low carbon economy has never been stronger, as we begin to see some of the terrifying effects of climate change that will only worsen as the world continues warming to unprecedented levels. Politicians are slowly catching up with the rest of the world, highlighted by the Paris agreement to keep global warming well below 2°C. The carbon budget imposed by this limit means around 80% of global fossil fuel reserves must remain in the ground.
Below are ten of the worst coal and gas deals hanging over the Australia’s banks, threatening to leave them billions of dollars out of pocket.#1 Wiggins Island Coal Export TerminalDescribed as “arguably the last great boom-time bugger-up” the Wiggins Island Coal Export Terminal (WICET) at Gladstone in Queensland has over the past decade bankrupted four Australian coal miners and cost banks and investors billions in losses.
Australia’s big four banks are all tied to the misfortunes of this dodgy coal port. ANZ is the most heavily exposed, having provided $417m worth of project finance back in 2011. That deal also saw CommBank, Westpac and NAB chip in $164m each.
Originally planned by coal giant Glencore and seven partners, including New Hope Corporation and Yancoal, WICET was approved in 2008 as an 84-million-tonne-a-year export facility. Only one of the three planned stages of the project has eventuated – at twice the initial cost – with a 27 million tonne capacity. Since then, several partners – Caledon Coal, Bandanna Energy and Cockatoo Coal – have all gone belly up. Caledon was liquidated in July 2017, leaving the five remaining owners to repay the debt. In April 2018, Nomura bought $81 million of Caledon’s preferred shares in WICET for less than 60 cents in the dollar, showing just how little the market thinks of the asset.
Export charges at WICET are up to $25 a tonne – five times more expensive than a nearby port – and its partners must pay for any unused capacity. So while the port is operating well below capacity, these tough contract terms are keeping it afloat for now. But with mounting pressures on the remaining counterparties, the project looks shaky at best.
Lloyds Bank sold its $148 million worth of WICET debt in October 2016 at a reported loss of 21%. The AFR called it the “the first crack in WICET’s lending group, who are sitting on steep paper losses about five years after committing to the project.”
Negotiations for several refinancing proposals collapsed, with banks unwilling to accept worse terms than the original deal. In March 2018, the 20 original lenders – owed a combined $3.5 billion on WICET – agreed to provide a ‘financial lifeline’. Finally in September, WICET obtained court approval for a $3.2 debt refinancing plan, with the maturity of $2.6 billion in senior debt extended until 2026.
While obviously offering welcome respite, this doesn’t deal with WICET’s core problem: the port’s high costs and low export volumes. On top of this Glencore, which owns 40% of WICET, announced in February 2019 plans to cap its own coal production globally in response to climate change, sending shockwaves across both the financial and coal sector.
WICET is also beset by internal legal wrangling. It faces possible legal action from some junior lenders who provided A$550m of the Wiggins Island Preferential Shares (WIPS) in the original project deal and claim they are owed A$40m in unpaid dividends. Four WICET partners also started legal proceedings in late 2018 against co-owner New Hope over its failure to deliver a 500,000 tonne coal export contract from its undeveloped Colton Coal mine, which New Hope has put into voluntary administration.

Bad loans with Wiggins Island #Coal Export Terminal & Peabody drag down @Westpac profits #divest via @BIAUS https://t.co/Y0HQV5XsEz
— Market Forces (@market_forces) May 2, 2016

#2 Peabody EnergyCoal mining in Queensland’s Bowen Basin, where Peabody operates five mines.
Credit: Greenpeace/Tom Jefferson
In April 2015, the world’s biggest privately-owned coal producer Peabody Energy filed for Chapter 11 bankruptcy protection under US law, unable to service its $8billion debt. Key reasons cited for filing included “industry pressures in recent years including a dramatic drop in the price of metallurgical coal, weakness in the Chinese economy, overproduction of domestic shale gas and ongoing regulatory challenges.” Throughout 2015, Peabody lost over $2.5b and its share price plummeted 97%. The future of its Australian arm looked precarious, with 10 of Peabody’s 28 mines located here, although its opaque corporate structure made it hard to work out exactly how much.
By 2017, however, the coal miner had come out of Chapter 11 bankruptcy, having reduced debt by $5billion.
Australia’s big banks CommBank, NAB and Westpac have all been exposed to Peabody’s rollercoaster fortunes. Each contributed $49m to facilitate Peabody’s purchase of Macarthur Coal in October 2011 – debt that was downgraded by both major ratings agencies – Moody’s and Standard & Poor’s – to “very high” and “substantial” risk ratings respectively.
Westpac, ANZ and NAB also reportedly loaned $25m each to Peabody’s US headquarters, and it’s unclear just how much of that debt was recoverable. The AFR reported “ANZ is believed to have written off its exposure to Peabody’s North American headstock, while Westpac has on-sold its debt.” Reports in August 2016 also highlighted that CommBank expected to lose $72 million from its Peabody exposure. For an industry driven by massive profit motives, even skimming this loss from the bank’s margin will have hurt.
Despite Peabody’s losses, NAB was happy to back the coal miner in its plans to expand the Wambo Coal mine in NSW’s Hunter Valley, facilitating a $250million inter-company loan between Peabody and its Australian subsidiary in 2016. Peabody claimed this put it in a strong enough fiscal position to proceed with Wambo’s expansion, which was finally approved by the Independent Planning Commission in August 2019. The expansion will allow extraction of an extra 150 million tonnes of run-of-mine coal over 23 years. Such support is wholly at odds with NAB’s Paris climate commitments.
See how the big banks are doing on their commitments on global warming.
#3 Adani Abbot Point Coal PortIndian coal miner Adani bought the Abbot Point Terminal on a 99-year lease in 2011 for $1.83 billion when thermal coal was at a peak US$132.48 per tonne. By January 2016 coal was down to US$49.20, and the terminal was hit with a credit rating downgrade that left it just one notch above ‘junk’ status. Despite destructive plans to expand the port to accommodate coal from the Galilee Basin, the economic outlook for Abbot Point port is gloomy, with the amount of coal contracted to be shipped via take-or-pay contracts predicted to fall rapidly from 2020.
Analysis from IEEFA suggests the terminal “runs the risk of becoming a stranded asset” if Adani’s Carmichael project doesn’t go ahead. The port needed to refinance $1.5 billion of debt in 2018, and over $2 billion by 2020. Without the promise of extra capacity being filled by Carmichael coal, and given the big four Australian banks’ aversion to the project, securing this refinancing has proven difficult.
Reports from 2014 and 2016 show Adani has been unsuccessfully trying to sell a stake in the port for years. In 2018 they appointed investment bank Rothschild & Co to advise on the sale, but in May 2019 Rothschild said it was no longer working with Adani.
While Adani hasn’t yet found anyone foolish enough to buy a stake in Abbot Point, it was successful in refinancing part of the debt linked to its purchase. After a desperate year-long search, Korean asset manager Mirae Asset Daewoo bought $330 million worth of Adani’s $2billion debt in July 2018, with the aim of on-selling it to Korean insurance companies and other investors.
More recently, IJC Global reports that the terminal was refinanced by the South Korean government-owned Industrial Bank of Korea in a AUD$300million new debt five-year deal that reached financial close in 2019.
Find out which companies could make or break Adani’s Carmichael plans.Abbot Point coal terminal in the Great Barrier Reef World Heritage Area (Greenpeace/Tom Jefferson)
#4 Whitehaven CoalMaules Creek project blockadeLeard State Forest, NSW

Record high vote for a climate risk disclosure resolution in Australia! 40% of shareholders call on Whitehaven #coal to reveal its climate related financial risks at today's AGM. #Ausbiz #Finance #Investment #climatechange
— Market Forces (@market_forces) October 25, 2018

Whitehaven owns and operates one underground and four open-cut coal mines, including Maules Creek. Having destroyed part of NSW’s Leard Forest, the Maules Creek project has faced strong and sustained community opposition. All four coal mines breached their licence conditions most years between 2010 and 2016 by exceeding coal dust pollution levels and polluting waterways. In 2017 the EPA upgraded Maules Creek to its highest risk category.
Not content with doubling production between 2013-18, Whitehaven intends to ramp up by massively extending the Vickery coal mine – destroying prime farming land in the process.
Despite Whitehaven’s appalling environmental record, shaky finances and lack of social license to operate, the miner attracted a $1.4b refinancing loan in March 2015, with ANZ, NAB and WBC contributing $100 million apiece. Just a few months later, nervous lenders were already looking to exit the deal, with the huge risks associated with coal exposure finally beginning to sink in for at least one bank.
These jitters were sadly short-lived though, with ANZ, NAB and Westpac deciding to arrange a $1 billion, two-year extension to a corporate financing deal for Whitehaven in August 2017.

Is your super fund invested in Whitehaven? Find out more here.
#5 Newcastle Coal Export PortAs the world’s biggest coal export port, Newcastle’s fortunes are dangerously linked to the fortunes of the coal sector.
The Newcastle Coal Export Terminal (NCET) is one of three terminals at Newcastle, and is owned and operated by the Newcastle Coal Infrastructure Group (NCIG), which is in turn owned by a group of coal producers including BHP, Yancoal, Whitehaven and Peabody.
NCIG was placed on review for downgrade in December 2015, with Moody’s stating that “the sustained weakness in coal prices and the uncertain duration of the downturn is increasing the likelihood of counterparty failure and consequent volatility in NCIG’s cash flows”. In June 2016, the group’s debt was downgraded to “junk”, following a failed attempt by NCIG to refinance $500 million of its debt. BHP Billiton also failed to refinance $500 million of its debt, with banks apparently less willing to lend to the sector because of its poor outlook.
ANZ, Commbank, and NAB part of syndicate refinance deal in 2018
The terminal project (NCET) was reportedly seeking in 2016 a refinancing deal for its $3.5b worth of loans. Finally, in August 2018 it announced a syndicate of 10 lenders who included ANZ and Commbank had refinanced the port’s debt. A newcomer to this syndicate was NAB.
Over the years, NCIG has attracted over $2 billion of finance from Australia’s big four banks. Back in January 2008, ANZ provided $388 million to enable the initial construction of the NCIG terminal, along with a further $138 million loan for the post-construction phase.
Through 2010 and 2011 the terminal was expanded over two stages, attracting a total of $569m from ANZ, $461m from CommBank and $241m from NAB. Some of the debt for the terminal’s expansion was refinanced in March 2014, with ANZ chipping in $294m and NAB providing $102m.
Coal reclaimer at Port of Newcastle
Photo: Max Phillips (Jeremy Buckingham MLC)
#6 Dalrymple Bay Coal TerminalDalrymple Bay Coal Terminal
Hay Point, Qld
Credit: Greenpeace/Tom Jefferson
Dalrymple Bay near Mackay in the Great Barrier Reef Heritage Area Queensland is yet another example of an Australian coal port under pressure. Moody’s in March 2016 downgraded Dalrymple’s credit rating to non-investment grade. That was before Peabody’s bankruptcy announcement, which would have sent further shivers through Dalrymple – Peabody produced a quarter of all coal shipped from the port!
With Peabody’s future Australian operations uncertain, and fellow Dalrymple user Anglo American selling its Australian coal mines at the time, you’d think the coal port’s creditors would’ve been worried, right? Apparently not.
Having each loaned $50m to Dalrymple Bay in September 2014, ANZ and Westpac had a chance to cut ties in July 2016. But instead, the two banks ignored the ratings downgrade and Peabody’s massive debt, and became lead arrangers for a $350m refinancing deal, with reports they would underwrite the debt themselves.
#7 Origin – APLNGOrigin’s Australia Pacific LNG project (APLNG) is one of three massive, high-cost LNG facilities built on Queensland’s Curtis Island. With a whopping price tag of $24.7 billion, APLNG was a bullish bet on huge future LNG demand from the likes of Japan, Korea and China. This didn’t eventuate, with China’s demand remaining steady and Japan and Korea’s actually declining in 2015-16. With an extra 100 million tonnes of LNG due to flow from new projects into the global market, prices in 2016 slumped to less than 25% of those in early 2014. The spot price of around US$4.50 per unit was so low that APLNG exports couldn’t cover its operational and financing costs.
After downgrades in 2015, both major ratings houses – Moody’s and Standard & Poor’s – listed Origin at just above junk status in 2016. Reports suggested Origin was looking to separate its oil and gas production arm from its domestic power business in a bid to prevent further downgrades. In August 2017, the company wrote down $1.2 billion from APLNG’s value.
Australia’s big banks are heavily exposed to Origin. ANZ, NAB and Westpac were all involved in the $3.15 billion refinancing of APLNG, which reached financial close in March 2019.
Previously ANZ and NAB each contributed $250m to a corporate financing deal in September 2011, while all big four banks participated in the APLNG project’s original $8.6 billion financing in May 2012. That deal saw ANZ stump up $359m, Westpac $307m, and NAB and CommBank $256m each. As if these numbers weren’t big enough, NAB, ANZ and CommBank each contributed a further $200m in a December 2014 refinancing.

APLNG, GLNG and QCLNG plants at Gladstone in the Great Barrier Reef World Heritage Area Credit: GreensMPs
Does your super fund invest in these climate destroying fossil fuel companies?
#8 Santos – GLNGSantos’ GLNG project, also residing on Curtis Island in the Great Barrier Reef World Heritage Area, is worth a great deal less today than the $10 billion it was valued at in 2015, when Santos embarked on the first of three write downs. The first $565m impairment charge contributed to Santos’ massive total $2.7b loss in 2015. The project’s fortunes slid further in 2016, with a bigger write down of $1.5 billion announced in August, and another $1.1 billion in August 2017.
Environmental concerns over coal seam gas (CSG) drilling in Queensland and NSW has put future supplies at risk and led to a moratorium in some states. GLNG is supplied by Santos’ highly controversial CSG projects in the Bowen and Surat Basins. When GLNG was originally financed in 2011, ANZ contributed $305m and NAB and CommBank each chipped in $132m. In December 2014, ANZ also provided a $1billion bilateral bank facility to Santos to help restructure the crippling debt obligations imposed by GLNG, Narrabri and other struggling projects.
Santos’ proposed Narrabri CSG project also hit various stumbling blocks including furious community opposition from local farming communities, with its plans to drill 850 CSG wells in NSW’s Piliga forest sparking over 22,000 objections. The project was originally written down by $800m to $500m in 2015, before Santos announced in early 2016 it had written down the total value of its NSW assets to $0. Despite this, it continued to push ahead with the project and in early 2019 signed an offtake agreement to supply gas from Narrabri. It is yet to make a final investment decision – access to finance will be critical, especially as a new pipeline is needed to get the gas to market. The big four banks could be exposed through any deal to enable the pipeline, as well as through corporate exposure to Santos or APA, the company planning to build the pipeline.
Community opposition to CSG in NSW. Credit: Lock the Gate
#9 AurizonCoal wagons in the Hunter Valley, NSW
Credit: Bob Burton
As the owner and operator of coal and iron ore rail systems, Aurizon is inextricably linked to the fortunes of those industries. In fact, the company has been described “as close as you can be to a coal miner without digging the stuff up.” Almost 70% of the company’s revenue back in 2015 was derived from coal-related business. With many of Aurizon’s coal-producing clients – including Peabody and Whitehaven – struggling amid the industry’s decline, the flow-on effect to Aurizon’s bottom line saw the company’s net profit in June 2016 drop by a massive 88% to $72m.
These days, Aurizon has become more reliant on coal as its haulage of iron ore has declined. In 2019 Aurizon’s coal-related business accounted for 83% of revenue. It recorded a statutory net profit of $473 million in June 2019, this was down by 13%.
Australia’s big four banks have all helped Aurizon with its refinancing over the years. In 2013, NAB and CommBank each contributed $236m, while ANZ and Westpac loaned $143m apiece to a loan that matured in 2018.
More recently they all pitched in smaller sums for an AUD$500 million refinancing of the Aurizon Network that reached financial close in October 2017 for repayment by October 2022. ANZ gave $65 million, Commonwealth $45 million, NAB $50 million, and Westpac $45 million.
#10 Dodgy pipeline dealThe North East Gas Interconnector proposes to link Tennant Creek in NT to Mt Isa in Queensland, effectively hooking NT gas reserves into the eastern gas market. The contract to construct and operate the pipeline was controversially awarded to Chinese- and Singaporean-owned Jemena, giving the company an unregulated monopoly over the project. Construction of the $800m pipeline began in July 2017 and was completed in December 2018.
In 2016 the ATO was asked to investigate Jemena over a potential tax avoidance system that could cost Australia $500 billion over 35 years.
Doubts over just how much gas will actually be supplied from NT reserves forced the company to reduce the size of the proposed pipe. Growing wariness over unconventional gas extraction and lower than expected demand led many to question the necessity of the pipeline, but politicians kept pushing it as a ‘nation-building’ project.
The $800m project was backed by Chinese and Singaporean state-owned power companies, and did not seek any debt finance from Australia’s banks. But it’s yet another example of a dodgy fossil fuel project could lock in oversupply and slow down the transition to clean energy sources – all without providing any financial benefit to Australia.
Land clearing for coal seam gas pipeline, Qld. Credit: Max Phillips (Jeremy Buckingham MLC)
…And one that’s already gone badCallide C coal-fired power station, QLD
Callide C, the fourth largest coal-fired power station in Queensland, went into receivership in July 2016 after failing to meet a $50m debt repayment deadline. The debt stemmed from a package worth around $350m provided in June 2012.
Having loaned $125m, NAB was by far the biggest player in the deal, which also involved four international banks. US private equity firm KKR took over the Bank of Scotland’s debt share, while some redistribution amongst the other lenders may have occurred.
While this financial distress didn’t stop the power station from running, it should have served as a lesson for any bank considering backing Australia’s dirty coal-fired power sector.
However media reports in January 2019 revealed the owners of the nearby Callide coal mine were seeking $100 million from banks to double production at the mine. The fundraising represents 2019’s first test of whether Australia’s big four will refuse to finance more coal industry expansion. Put your bank on notice [/cs_content_seo]