Westpac rules out lending Adani Group's Carmichael mine

Indian billionaire Gautam Adani speaks during an interview with Reuters at his office in the western Indian city of Ahmedabad. Reuters/Amit Dave

Westpac has come up with a new climate change position statement and action plan that ruled out the funding of projects using highest quality coal in advanced power generation technologies. Under the new policy, Carmichael mine in Queensland would not be eligible to be financed by the bank.

According to the bank, its lending policy to its thermal coal customers would be limited to those that have calorific value with highest ranks in the global quartile. It also restricted new mines to receive financing especially those who used resources in the top 15 percent of coal quality worldwide. The bank said that the top 15 percent should have a specific energy content of at least 6,300 kilocalories per kilogram. The value being specified referred as the Newcastle high energy coal benchmark.

The announcement did not directly mention that the Carmichael project of Adani would be affected. However, it appeared that both standards would rule out the project. The thermal coal lending of Westpac would be limited to the highest quality coals that could be found in the New South Wales' region Hunter Valley as the new energy content limit suggested.

Carmichael project intended to develop a mine in the Galilee Basin located in Queensland. The mine was expected to produce coal that has a calorific value lower than the new limit proposed by Westpac which is 6,300 kilocalories per kilogram. Previously, the bank lends new thermal coal mines that have a calorific value of 5,700 kilocalories.

Australian chief economist David Thurtell said that he was expecting Carmichael to produce coal with a calorific value between 5,500 and 5,800 kilocalories. He noted that the new mines calorific value was lower than the typical New Castle coals but higher than Indonesia's coal.

Wood Mackenzie stated its evaluation of Carmichael mine's coal. The commercial intelligence firm said that the products of the mine would depend on Adani's extent in washing its coal. According to the firm, the average product that the mine would produce have a calorific value of around 4.820 kilocalories with ash content around 21.7 percent.

However, Adani disagreed with the estimated data saying that Carmichael's mine would still have a higher energy content and higher quality when compared from the coals from India and Indonesia. Coals should have a higher calorific value, low ash levels and low impurity levels before it could be considered to be better for the environment.

Federal Resources Minister Matt Canavan was disappointed about Westpac's decision addressing it as a pack of wimps. He said that he was disappointed because the bank made its decision without consulting the northern Queensland people.