Adani scraps contract with mine operator Downer after cheap loans

MUMBAI: Adani Group has received another blow when it had to cancel the contract with mining services company Downer EDI for developing and running operating its Carmichael coal mine in Australia after the Gautam Adani-led conglomerate failed to get financiers to approve loans for the $13- billion project.

In 2014, the Adani group had decided to outsource the operations of its Carmichael mine to the Australian company Downer in a deal valued at about $2 billion at the time of its announcement. Now, Adani has decided to run the project itself.

"Following on from the NAIF veto last week and In line with its vision to achieve the lowest quartile cost of production by ensuring flexibility and efficiencies in the supply chain, Adani has decided to develop and operate the mine on an owner operator basis," a statement from Adani said.

The projects which has been mired in controversies received a big setback last week when the newly-elected Queensland government vetoed a plan to extend a $900-million loan at cheaper rates for the construction of a rail line linked to the project. This loan, which was to come from Northern Australia Infrastructure Facility (NAIF), was crucial for the project as the Adani group has been struggling to tie up funds as several banks have decided to stay away from the venture due to the protests related to environmental concerns.

Adani said that the group and Downer have mutually agreed to cancel all letters of award and Downer will provide transitional assistance till March 31, 2018.

"Adani remains committed to developing the Carmichael project and will ensure the highest level of standards and governance. This will not affect our commitment or the number of local jobs across Queensland," the statement said.

"This is simply a change in management structure and ensures that the mine will ultimately be run out of our Adani Australia offices in Townsville," the statement read.

The project has been at the centre of a raging controversy since the beginning with environmentalists warning of severe damage to the Great Barrier Reef. While it received the approvals and has already employed 800 people at the project, the company is still facing hurdles. The chief executive of Adani's Australia operations had told ET in October that the group is confident that the mine project will start production by 2020 despite the challenges as it had support from the Indian as well as Australian government.