Exclusive by Stephen Long From ABC Au

Federal Court challenge against Adani

Up to $3 billion from Adani’s planned Carmichael coal mine will be shifted to a subsidiary owned in the Cayman Islands if the controversial project goes ahead, an analysis of company filings shows.

Key points:

‘Royalty deed’ gives shell company rights to recieve $2-a-tonne payment beyond first 400K tonnes mined for two decades
Entitlement owned by company registered in Cayman Islands, controlled by Adani family
Carmichael coal mine’s production capacity means payment ammounts to about $120 million per year
An “overarching royalty deed” gives a shell company rights to receive a $2-a-tonne payment, rising yearly by the inflation rate, beyond the first 400,000 tonnes mined in each production year for two decades.

The company with this entitlement is ultimately owned by Atulya Resources Limited, a secretive entity registered in the Cayman Islands, and controlled by the Adani family.

“In plain English, the upshot for the Adani family is [that] if the mine goes ahead, they receive a $2-a-tonne payment, so up to $3 billion, via a Cayman Islands company, a company owned in a tax haven,” says Adam Walters, principal researcher and Energy Resource Insights.

With a production capacity of 60 million tonnes or more a year, that amounts to about $120 million per annum in payments, increasing each year in line with the CPI, potentially flowing offshore.

“I would describe it as a structure that means that the Adani family enriches themselves if the mine goes ahead but that other shareholders are impoverished,” associate professor Thomas Clarke, director of the Centre for Corporate Governance at UTS told the ABC.

“The worry is that this may be just the beginning.

“That the Adani family have the ability to shift cash and assets around at will and in the future they may well do so at the cost of shareholders and the Queensland economy.”
He said the billions flowing to the Adani private company would come at the expense of minority shareholders in the company listed on the Bombay stock exchange which ultimately owns the Carmichael mine.

Media player: “Space” to play, “M” to mute, “left” and “right” to seek.
VIDEO: Giant Indian conglomerate Adani has a complex network of companies ultimately owned in the Cayman Islands (ABC News)
How Adani acquired the right to this multi-billion-dollar revenue stream is a tale in itself.

In 2010, Adani Mining Pty Ltd bought the coal tenement that is set to become the Carmichael mine from the now defunct Linc Energy.

Part of the sale involved Adani Mining giving Linc Energy an “overriding royalty deed” which entitled it to receive $2-a-tonne for all coal mined beyond the first 400,000 tonnes in any production year.

Linc Energy informed investors at the time could be worth “over $120 million per annum” and up to $3 billion over the course of the royalty right.

But in August 2014, in dire financial straits, Linc Energy agreed to sell the royalty deed back to Adani at a fire sale price: just $150 million.

The obvious course would have been to extinguish the royalty deed, because it represented a multi-billion-dollar liability for the mine which is ultimately owned by Adani Enterprises Ltd, the Bombay-stock exchange listed company.

Instead, the royalty deed “was assigned by Linc Energy Limited to Carmichael Rail Network Pty Ltd as trustee for Carmichael Rail Network Trust,” notes in financial reports of Adani Mining Pty Ltd say.

Carmichael Rail Network is one of a group of companies behind the proposed North Galilee Basin rail line, which Adani is currently seeking a subsidised loan of up to $1 billion from the Federal Government’s Northern Australia Infrastructure Facility to build.

“What this means is that one of the companies currently seeking up to $1 billion in public subsidy is going to profit to the tune of up to $3 billion if the mine goes ahead,” Mr Walters said.

Queensland Government meet Adani Group representatives in Townsville
PHOTO: The Queensland Government insists Adani’s arrangement is perfectly legal. (AAP)
Adani Mining Pty Ltd, the proponent of the Carmichael mine and the holder of its environmental approvals, appears to have lent Carmichael Rail the funds to buy the royalty deed.

A spokesman for the Adani Group said the subsidiary assigned to the royalty right was an Australian registered and regulated company and “as such it pays all applicable Australian taxes charges”.

Last year Resources Minister Matt Canavan dismissed the ABC’s investigation into Adani’s web of companies leading to tax havens as “fake news”.

He rejected concerns about the web of companies and trusts, many owned in tax havens, that Adani had set up for its Australian operations, says resources companies such as Rio Tinto and BHP also had complex company structures.

Dr Clarke said that is nonsense.

“This is a classic third-world pyramid structure, with the Adani family having a controlling interest in all of the different companies, publicly listed, privately listed and the offshore companies which are its private properties,” he told the ABC.

“It can freely move cash or assets between the different entities to the benefit of its own family interests.”

But according to the Minister, the advice from his department is that it is all perfectly legal.

Adani’s spokesman did not respond to a series of questions.

IMAGE: The shell company’s payment rights over the Carmichael coal mine could see it receive about $120 million per annum. (ABC News)

For more on this story go to; http://www.abc.net.au/news/2017-03-14/adani-carmichael-coalmine-to-shift-millions-to-cayman-islands/8350704