A day after US-based body IEEFA slammed GVK's $10 billion Alpha coal project in Australia as "a quagmire, not an investment", the Indian infrastructure major on Wednesday hit back saying it is a "motivated campaign" by activist groups to discredit coal use.
The activists' "motivated focus and objective" is to deliberately "misconstrue facts" and mislead with inaccurate data, GVK said in a statement. It termed the report as part of a motivated campaign to discredit the use of coal and to curtail the growth and development in mining, transport and other sectors where infrastructure/construction is required.
The Institute for Energy Economics and Financial Analysis had raised questions over GVK's proposed $10-billion Alpha coalmine, port and rail project, warning potential investors that it was uneconomical and represented an unacceptable level of risk to them. To this, GVK said: "We are aware that activist groups have and will continue to misrepresent the way in which the Great Barrier Reef is impacted by coal companies through port development and shipping (particularly as GVK has received most of the environment environmental approvals).
"We continue to also have positive support from Queensland and Federal Government and the communities within which we would be operating – Barcaldine Region and Whitsunday Region are keen to see our projects proceed. "It added: "Underlying polling of the Queensland community also identifies that nearly 80 per cent support mining and the benefits it brings."
To ensure that there is absolute clarity around GVK's listed company (GVK PIl) and GVK's private investment, it needs to be re-enforced that the development of the Galilee Basin Coal assets in Australia are supported (with 90 per cent ownership) by the GVK private investment arm, GVK said. The report is under the name "Stranded: A financial analysis of GVK’s proposed Alpha Coal Project in Australia’s Galilee Basin"
According to IEEFA statement, the report comes amid Australian rail operator AURIZON negotiating for partnering with Indian conglomerate GVK on the construction of the rail and port components of the Alpha project at a cost of $6 billion.
Commenting on the risk profile of the project, report's co-author Tom Sanzillo, former first deputy comptroller of New York, labelled GVK "a weak investment partner" and the Alpha project "a quagmire, not an investment". GVK is seeking to raise a total of $ 10 billion capital to build Australia's largest black coal mine in Queensland's remote, untapped Galilee Basin. The report said it would also involve construction of 500 km of rail infrastructure across agricultural land and floodplains to the coast and to develop a highly controversial coal export terminal through the iconic UNESCO World Heritage listed Great Barrier Reef.
Besides, the IEEFA report charged that the Indian company is over-committed. With 16 greenfield infrastructure projects worth $ 20 billion across six asset classes, it is highly over-leveraged, carrying debt of $2.8 billion with a market capitalisation of only $243 million. It further said that the project confronts potentially insurmountable regulatory, environmental, operational, logistical and financial hurdles.
This will likely delay the project and escalate costs to the extent that the project is unviable even for a company with a healthy balance sheet, it added. GVK purchased its Galilee Basin coal deposits from Hancock Prospecting in 2011 for $1.26 billion near the peak of the coal price cycle of $ 133 a tonne, a move for which it was awarded "Asia Deal of the Year".
The coal price has since slumped to $88 a tonne with cost of production at more than $ 70 a tonne. Major coal producers are now selling, downscaling and cancelling greenfield projects in response to the weakening global coal outlook, the report said