Adani plans to sell Australian coal terminal for $2 billion

Sale at acquisition price may have been prompted by slow coal traffic and fall in prices

The promoters of Adani Group plan to sell their Abbot Point coal terminal in Australia at close to the acquisition price of $2 billion. They had bought the terminal in May 2011, at the peak of a coal boom.

The project was transferred to the Adani family in January last year, after analysts raised objections over the high debt burden of India-listed Adani Ports, which had bought the terminal in an all-cash deal.

The change in the group's strategy is mainly due to a slowing coal traffic, apart from coal prices falling to $70 a tonne from $120 a tonne three years ago, say bankers. The group has asked bankers in Australia to come up with proposals for sale and other options, say bankers. Private equity firms or infrastructure companies might be interested, they add.

TOUR DOWN UNDER

• May 2011: Adani Ports buys Abbot Point coal terminal for $2 billion
• Jan 2013: The Adani family buys terminal from Adani Ports
• Apr 2013: Environmentalists object to Adani project citing damage to Great Barrier Reef
• Jul 2014: Australia clears Adani’s $16.5-billion investment in coal mine development
• Aug 2014: Adani family decides to sell Abbot Point, asks for options from bankers

An Adani spokesperson declined to comment. If the group manages to sell off the project, it will enable the promoters to invest the money back in India, where opportunities are opening with Prime Minister Narendra Modi promising to build world-class infrastructure.

The group is already India's biggest private-sector power producer and its port capacity across India has crossed 100 million tonnes per annum (mtpa).

In 2011, Adani Ports, through its subsidiary Mundra Port Pty Ltd (MPPL), had acquired the 50 mtpa Abbot Point terminal through bridge financing. The project was later transferred to the promoters at a book value of $212 million, which resulted in Adani Ports' consolidated debt reducing from Rs 17,600 crore as of March 2012 to Rs 11,600 crore as of March 2013.

The transaction helped Adani Ports get re-rated; the stock has moved up consistently since then. It has risen 70 per cent since January this year and almost 121 per cent over the past year, to trade at Rs 262 as on Friday.

GVK is another Indian company which had bet highly on Australia. It acquired Australian Coal Mines in Queensland (with eight billion tonnes of reserves and 80 mtpa capacity) for $1.26 billion and plans to set up a 500 km rail line and a 60 mtpa port for $10 billion in a 'pit-to-port' logistics solution, to create one of the world's largest mining operations. Both the Adani and GVK projects have moved into the slow lane due to a fall in coal prices and an intense agitation by environmentalists to stop these projects. Both companies are, however, confident they will be able to complete their projects in time.