Moody's affirms negative outlook for Adani's Australian coal mine project

Rating could degrade further if debt widens or if it defaults environment norms

Moody's Investors Service has today affirmed Adani Abbot Point Terminal Pty Ltd's (AAPT) Ba2 senior secured and senior secured bank credit facility ratings. The outlook remains negative, said the agency.

AAPT is part of an obligor group that has economic ownership of the Abbot Point Coal Terminal in North Queensland under a 99-year lease with state-owned lessor, the North Queensland Bulk Port Authority. Adani Ports and Special Economic Zone Limited (Baa3 negative) is the ultimate holding company of the AAPT obligor group.

Moody’s said the Ba2 ratings reflect AAPT's indirect exposure to coal commodity risk, although such risk has reduced over the past several months, with mining counterparties experiencing better cash margins, owing mainly to more favourable coal prices compared to a year ago.

"The negative outlook primarily reflects the challenging nature of the debt refinancing task facing the company over the next 12 to 18 months, with around AUD 977 million of debt — representing around 70% of total debt — maturing in November 2018,” said Arnon Musiker, a Moody's Senior Vice President.

On the other hand, the ratings could be downgraded if AAPT's debt will fall below 7 per cent on a consistent basis. “A downgrade is also likely if Moody's believes (i) that the company is experiencing difficulty in arranging refinancing, (ii) there is an increased risk of a covenant breach under the senior secured documents, and/or (iii) the company is not continuing its track record of compliance with environmental regulations,” said the agency’s report on AAPT.

Adani’s executives recently told Business Standard that leading global financers, export credit fund from China and Korea and international banks, which earlier refused to fund its Carmichael coal mine project are back in talks to finance it. 

“There are three streams we are now tying up debt with – export credit funds from our EPC (Engineering, Procurement & Construction) contractors of Korea and China, Northern Australia Fund and global commercial banks,” Jeyakumar Janakraj, Chief Executive and Country Head, Adani Group Australia told the paper.

Moody’s also, however, said the negative outlook also considers a degree of uncertainty associated with the outcome of tariff renegotiations with its customer counterparties, a process that is ongoing and that could take several months to conclude.