Those questions prompt some very awkward memories for the coal industry and the State Government because they lost this argument four years ago.
Awkward because back then it highlighted just how the industry and the Government was unprepared for the onslaught from green groups and showed just how fractured both really were.
But for the activists, and environmentalists generally, there is also an intriguing challenge that Olive Downs presents.
Firstly, the $175 million loan. As Greens MP Michael Berkman asked, why are taxpayers helping a private equity firm fund a coal mine when the sector is in reasonably good health?
It’s a valid question, but the State Government backed Bain Capital’s rescue of Virgin so there is a precedent. The fact that private equity would be awash with funds at the moment doesn’t seem to be a concern for governments.
The answer is that there are big benefits to having NAIF on board. It gives the project a lot of credibility that it can use to find debt elsewhere. There’s nothing quite like telling banks you have Australian Government financing. That’s one of NAIF’s purposes and no one hides that.
It also means that if taxpayer funds are in there, it’s unlikely a government will introduce any punitive measures against it in the future.
And that is the danger of NAIF. It becomes a political weapon because there’s no doubt that at the next election Coalition candidates in central Queensland will be trumpeting the NAIF funding for Olive Downs.
Just a few years ago, another coal company, Adani, was in the frame for a $1 billion NAIF loan. It was eventually vetoed by the Palaszczuk Government -using its constitutional powers – after enormous pressure from green groups forced its hand in the run up to the 2017 election.
It was a massive capitulation for Palaszczuk, who had personally backed the Adani project to the point that she stopped over in India on her way back from London to meet with chairman Gautum Adani to show the project had political support. Eight regional mayors tagged along.
The Palaszczuk Government currently backs the Olive Downs project, as well.
Now Adani will produce thermal coal for electricity generation. Olive Downs is mostly (but not all) metallurgical coal for steel production. They both produce greenhouse gases, but the argument that the industry promotes and the green groups have allowed to exist is that there is an alternative to coal-fired power, but not for steel.
That’s a pretty porous argument and suggests they are prepared to sacrifice the world for steel but not for electricity. If they applied the same pressure to met coal as they do to thermal coal the industry would be ploughing huge amounts into finding a way.
Alternatively, they say they just don’t have the manpower or the funding to fight all coal, which is probably more valid, but they have certainly benefited from focusing all their attention on Adani, rather than the broader industry.
The Olive Downs mine is owned by Pembroke Resources, a company backed by Denham Capital, a private equity firm with more than $9 billion in capital. Denham has invested about $300 million in the project so far.
According to Pembroke chief executive Barry Tudor the company approached the financing of Olive Downs “much the same way as any large scale project, developing it with a variety of funding components’’.
“Denham will continue to fund the asset with significant additional equity alongside newly introduced debt. The debt is being sourced from a variety of sources available on commercial terms including banks, non-banks and NAIF,’’ he said.
“Pembroke Resources approached NAIF because NAIF is focused on driving public benefit, economic and population growth and Indigenous involvement in northern Australia – all things that Olive Downs will do. ”
The saving grace for the Palaszczuk Government is that there is no election this time around and you would think it would have come up with a better strategy this time.
There is no such saviour for the activists. If they let this sail through without a fight their argument will look weak.
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