Carmichael mine ‘makes perfect sense’

REPORTS forecasting a sustained dependence on coal into the future have some believing the Carmichael coal mine "makes perfect sense".

One report, from global management consulting company McKinsey and Company, released in January this year, predicts that in 2040 coal will still make up 31% of all power generation.

Renewable power plants would make up 17%, 33% if hydro power was included, it said.

That's why, as others rule out Carmichael due to the current dwindling price of thermal coal, G&S Engineering Services founding shareholder Mick Crowe has full confidence in the mines' viability.

"It makes sense to me on a strategic level. The real big picture," Mr Crowe said.

"There's a lot of value in owning your own mine, own rail, own port, own boat. Because no matter what happens, strategically it makes sense if you're looking at a 20-year horizon."

He believes this long-term strategy is compelling enough even to satisfy questions around where the $16 billion required to get the mine off the ground would come from.

At a press conference in Mackay earlier this year, Adani Enterprises Australia chief executive officer Jeyakumar Janakaraj said the demand for their coal would be guaranteed, as it would predominately go to sister company Adani Power.

Critics of the project, like energy analyst Tim Buckley, have said Adani Power directors would breach their fiduciary duty if they guaranteed an above-market, long-time coal price from Adani Enterprises.

But Mr Crowe said the guarantee could easily be in the former company's interest, and therefore not a breach of this fiduciary duty.

He explained a guarantee of an above-market price now could end up averaging out better for the company in the future, if thermal coal prices recovered.

And with India committed to bringing electricity to its entire population by 2020, the long-term guarantee would be critical, Mr Crowe believes.

"The financial viability in the course of almost anything that's ever been built has been challenged in the course of its approval," he said. "And when you do try and get finance, the only thing that will matter is the viability of the Adani Group. Because the only way that mine could go broke would be if Adani stopped paying it. You'd get parent company guarantees. That's what will make it work, it's risk mitigation."

But Mr Crowe did concede there were factors that would destroy the project - further delays or market forces of a different variety.

"I would tell you the risk to Carmichael is the same risk to any business, and that's the business itself chooses where to spend its capital," he said.

By the numbers

 4.6%: Annual growth of renewables in OECD countries

 7.4%: Annual growth of renewables in non-OECD countries.

 17%: Global electricity generation by renewable plants in 2040.

 16%: Global electricity generation by hydro (2040).

 31%: Global electricity generation by coal (2040).

 24%: Global electricity generation by natural gas (2040)

 12%: Global electricity generation by nuclear power (2040)

 1%: Global electricity generation by oil (2040).

Source: McKinsey and Company

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