Financial closure for GVK’s coal project in Australia deferred

Diversified infrastructure company, GVK Power & Infrastructure Ltd, on Sunday said financial closure for its $10-billion Alpha Coal and Rail project in Queensland, Australia is deferred due to delays in receiving necessary environmental clearances from local authorities.

The company, after the board meeting here on Sunday, said it was now targeting to achieve financial closure sometime during the first three to six months of 2013 as opposed to the original deadline of December, 2012.

Last month, the Federal Minister for Environment, Australia halted environment clearances within a week after the Queensland government granted the approval.

Besides, UNESCO too raised concerns on the likely adverse impact on environment, particularly, to the Great Barrier Reef, adjoining the project.

“Initially, we had targeted to achieve the financial closure by December, 2012. But now, we are hoping to do so in the first or second quarter of the calendar year 2013,” said G V Sanjay Reddy, Vice Chairman, GVK Power adding that once the project achieves financial closure, it will take about three years to finish phase one of the project. “We hope to commission the first phase by early 2016,” he said.

Georgina Hope Rinehart, Chairman, Hancock Prospecting Pty Ltd, who was here for the board meeting said, “We are confident of getting the environmental clearances by this month or early August since we have already received the state government’s approval which is more important.”

GVK has appointed financial advisors, who are currently in dialogue with the lenders. The first phase involves capital expenditure of about $1.2-1.3 billion to develop and extract 30 million tonnes of coal and about $2.8-3 bn for laying the rail line. And of the $10 bn total investment, approximately 70% ($7.5 billion) includes debt and 30 % equity.

Reddy said utilities have expressed interest to invest in the project.

“Typically, utilities would like to invest in the form of equity in projects such as these and we do not see any difficulty in raising funds. We are anticipating that more than 70% of our debt will come from export credit agencies,” he  said. GVK is in talks with companies to sign long-term coal supply agreements from countries such as China, Korea and Japan.

The project in which 79 per cent is owned by GVK and 21 per cent by Rinehart, the world’s richest woman, is expected to generate 4,000 jobs at its peak.