Adani lines up $1-bn SBI loan for Australian coal asset

The loan, one of the largest by an Indian bank for a foreign project, was announced amid Adani's visit to Brisbane

Adani Enterprises on Monday won support from a state-run bank and an Australian state to help it build a $7-billion coal mine, defying a slump in coal prices to five-and-a-half-year lows that has stalled rival projects.

The infrastructure conglomerate, whose founder, Gautam Adani, has close ties to Prime Minister Narendra Modi, has signed a memorandum of understanding (MoU) for a loan of up to $1 billion from State Bank of India (SBI) for the mine, rail and port project, which it aims to build by the end of 2017.

The loan, one of the largest extended by an Indian bank for a foreign project, was announced as Adani was in Brisbane with a business delegation for the G20 summit, which Modi attended over the weekend.

“The MoU with SBI is a significant milestone in the development of our Carmichael mine,” Adani said in a statement.

In recent years, Adani, 52, has enjoyed a rapid rise in Indian business circles, a rise often associated with Modi, who until this year headed the government in Gujarat where Adani is based and where it has a huge coal-fired power plant.

Shares in Adani Enterprises have surged 85 per cent this year, helping Adani to more than double his net worth to $7.1 billion, according to Forbes, largely in the run-up to Modi’s election victory in May.

Adani also won a commitment from the Queensland state government to take short-term, minority stakes in rail and port infrastructure needed to unlock the massive coal reserves in the untapped Galilee Basin. Coal from the region must be sent 400 km by rail to Australia’s east coast.

Adani aims to reach a final investment decision on the Carmichael project in late 2015.

The Australian federal and Queensland governments are eager to see the mine built, following the loss of about 4,000 coal jobs through the past two years. But analysts and project finance experts believe Adani might have underestimated the challenge of raising funds for the project.

“People have been very sceptical about the financing of this project. As we always said, we’ll keep getting this, one by one. The pieces are falling in place,” Jeyakumar Janakaraj, chief executive officer of Adani Mining, told Reuters.

Adani, which is also facing a campaign by anti-coal campaigners, is counting on securing A$1.2-1.5 billion in funding from South Korea’s export credit agencies, as well as a loan from the US Export-Import Bank.

The company’s apparent momentum on Carmichael is in stark contrast to rival Indian firm GVK’s slow progress on another huge coal mine in the Galilee Basin, the Alpha project, co-owned by Australian billionaire Gina Rinehart.

Much bigger coal rivals, such as BHP Billiton and Glencore, have shelved developments at a time when a third of Australia’s coal output is making losses.

Janakaraj dismissed comments by Indian power and coal minister Piyush Goyal that the country might be able to stop importing thermal coal within three years.