SYDNEY (Reuters) - Indian conglomerate Adani Enterprises (ADEL.NS) is in talks with China Machinery Engineering Corp (CMEC) (1829.HK) for the financing of a controversial coal mine project in Australia, two sources with knowledge of the situation said on Thursday.
Adani is seeking A$2 billion ($1.54 billion) in outside financing for its proposed A$4 billion Carmichael coal mine in the state of Queensland. However, Australian and overseas banks have balked at granting loans for the project which environmentalists oppose because of concerns over the size of the mine and the potential for damage to the Great Barrier Reef.
CMEC is an engineering contractor that is majority-owned by Chinese state-owned enterprise (SOE) China National Machinery Industry Corp Ltd, or Sinomach.
CMEC would provide financing through the China Export Import Bank or China Construction Bank, or both, in return for winning the procurement and engineering contracts, for the project, according to a report issued earlier on Thursday by the Institute for Energy Economics and Financial Analysis, (IEEFA) an outspoken opponent of the project, citing unidentified sources.
“Chinese SOE backing raises the probability that Adani can secure a financial close for this long delayed project,” the report said.
In addition to the A$2 billion in financing, Adani has also applied for A$900 million in Australian government loans to build a railway to ship coal 400 km (250 miles) from the Carmichael site to a port on the Pacific Ocean for export.
Carmichael has been delayed by court challenges from environmentalists and indigenous groups concerned about climate change, and the impact on native land and water supply, but those challenges have been rejected.
Jeyakumar Janakaraj, chief executive of Adani Australia, told Reuters on Oct. 3, it wants to tie up financing by March 2018 and would look to sell a minority stake in the project to help raise funds.
Adani hopes to start shipping coal from Carmichael under the first stage of the project by March 2020.
Reporting by James Regan and Paulina Duran; Editing by Christian Schmollinger