GVK distances itself from Australian coal project and refuses to address financial risks

Press release - 12 August, 2013
Hyderabad, August 12, 2013: GVK Power & Infrastructure (GVKPIL) board chair, Dr. GVK Reddy, refused to answer questions about the company’s Australian coal proposals when asked by Greenpeace ccampaigners on the floor of today's Annual General Meeting.

GVK is proposing a US$10 billion coal export project involving three mines in Queensland’s Galilee Basin, a railway and a 60 million tonne per annum coal terminal in the Great Barrier Reef World Heritage Area.

In response to questions about the ability of GVK to deliver on its Australian projects, Dr GVK Reddy claimed the coal business was not part of the company. However, GVKPIL regularly publish statements to the National Stock Exchange in India about the progress of their Australian projects.*

“GVK is facing a backlash against their coal projects in Australia from the fishing industry, tourism operators in the Great Barrier Reef, landholders concerned about water supply and environmentalists," said Mr. Howden.

"The ‘unrelenting controversy’ is resulting in set-backs and delays, with GVK now years behind its original schedule and two recent Australian government decisions delaying mine and port projects by almost three more months," Mr. Howden continued.

GVK is relying on partnerships to help meet the huge capital expenditure required for its proposals but the only player apparently able to bankroll its rail and port project, rail company Aurizon, is the subject of a one million person petition and intense community pressure to not be involved.

The price of thermal coal in Newcastle, the Asian benchmark, has dropped dramatically since GVK acquired its coal deposits to below US$80/t - a price still too high to affordably supply power stations in India but too low to justify the cost of production of coal from the remote Galilee Basin.

“The company is shockingly over leveraged (market capitalisation of around US$150 million versus debt of US$2.4 billion) given their plan to raise and spend up to US$20 billion of capital on 16 greenfield projects - all in a context of never having built or operated a coal mine, railway or port before,” concluded Mr. Howden.

Asked about the company’s poor recent performance, including the trend of the share price, Dr. GVK Reddy could only say that the current problems were beyond their control and that the company was “helpless”. Vice Chairman, Mr. GV Sanjay Reddy, added, “[that] everybody hopes the company will be back on track as soon as possible.”

In June, an independent financial analysis of GVK's Alpha coal project by the Institute for Energy Economics and Financial Analysis was published that indicated the project faced insurmountable barriers to completion and would likely be uneconomic.

*Editor’s note GVK Coal Developers (Singapore), the majority owner of the mine, rail and port proposal is owned 10% by GVK Power & Infrastructure Ltd, a publicly listed entity in India, which has the option to go to 49% ownership. The other 90% is owned by the GVK family.

For more info please contact:

Erland Howden, Campaigner, Greenpeace Australia Pacific, +61 408255582

Arundhati Muthu, Campaigner, Greenpeace India, +91 900892500