Adani ends tie-up with Downer, to go it alone on Australian project

Adani Australia on Monday said it has cancelled an $2.6-billion (A$2 billion) contract with Australian mining services company Downer EDI as part of a cost-cutting drive. The move comes soon after the Indian energy firm failed to get a concessional loan for its controversy-hit Carmichael coal mine project in Queensland.

The split with Downer, an engineering and infrastructure services provider, comes after the Australian firm was the target of a nationwide activist campaign pressuring it to quit the A$16.5 billion Carmichael project in central Queensland on fears that it will harm the iconic Great Barrier Reef.

In a setback to Adani, the newly-elected Queensland government led by Premier Annastacia Palaszczuk last week vetoed a plan to give a A$900 million concessional loan for the construction of a rail line for the Carmichael coal mine project.

With the loan veto, she fulfilled a major promise she had made during the election campaign to put a stop to the NAIF loan on her first day.

The Adani group had applied for the Northern Australia Infrastructure Facility (NAIF) loan worth for building the 388 km rail line to connect the major coal mine to a sea port.

The move to cancel the contract raises further questions about the fate of the massive project, with Downer one of only two mine contractors - along with Thiess - considered capable of handling an operation producing up to 60 million tonnes of coal a year, the Australian Broadcasting Coropration reported.

''Adani and Downer have mutually agreed to cancel all Letter of Awards and Downer will provide transitional assistance until 31 March 2018,'' Adani Group said in a press release, adding that to achieve the lowest quartile cost of production, it has decided to develop and operate the mine on an owner-operator basis as opposed to the previous arrangement with Downer EDI.

Adani added that the move was ''simply a change in management structure'' and that it is committed to developing the Carmichael project.

Adani and Downer have been the target of an Australia-wide campaign by environmentalists, which could have been a key underlying reason for the companies to call it quits.

Adani Australia currently employs over 800 people and has invested over $3.3 billion in Queensland, the company said.

The Adani Group entered Australia in 2010 with the purchase of the Carmichael coal mine for $500 million. The mine lies in the Galilee Basin, holding one of the world's largest untapped coal reserves.

The group also holds the Abbot Point port which too is facing opposition from environmentalists who believe it will cut into the Great Barrier Reef World Heritage area. The group had plans to build a 388-km railway line to transport coal from the Carmichael mine to Abbot Point coal terminal, from where it could have been shipped to India to fuel its power plants.

Adani said both parties had cancelled a conditional A$2.6-billion dollar contract as part of its cost-cutting drive spurred on by the Queensland Government's veto of its 1 billion dollar Commonwealth loan bid.

Earlier this month, China's two major state-run banks said they have no plans to finance the Carmichael coal mine project (See: Adani's Queensland coal project gets more iffy as China's top banks deny funding).

The Adani Group has for over five years battled the opposition to any expansion of the Abbot Point port.