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Adani Group Agrees to Buy Out Linc Energy for $145 Million

Adani Group Agrees to Buy Out Linc Energy for $145 Million

India’s Adani Group (NSE: ADANIENT) has agreed to buy Linc Energy’s future revenue rights to the Carmichael coal project for $145 million.  

The deal means Linc will walk away from a royalty of $2 per ton of coal over the first 20 years of the production at the mine.

"This agreement reflects Adani's confidence in the progress of Carmichael mine, which received final federal environmental approvals from the Australian government last month," Adani said in a statement.

"The agreement...underlines Adani's consistent commitment to ensure that the high-quality coal from the Carmichael mine is cost-efficient."

According to Linc Energy, Adani will pay the $145 million in two installments - $84 million in cash within five days and the remaining balance of $61 million in cash on or before 12 months from the signing of the Deed of Assignment and Assumption.

"It's more about us focusing our strategy into cashing up the balance sheet and driving towards a more focused outcome like drilling our shale in South Australia," chief executive Peter Bond said.

The company, which purchased the Carmichael project from Linc Energy in 2010, will obtain 100 percent of the rights to the project.

Analysts have agreed the buy out between Adani and Linc Energy is a win-win for both companies

"It means they (Adani) haven't given up," said Tim Buckley, a director of the US-based Institute of Energy Economics and Financial Analysis.  

The massive $16 billion Carmichael coal project is an open cut and underground coal mining development in the north Galilee Basin of Australia. The mine, which will include a 189km rail infrastructure, is estimated to produce 60 million tons of thermal coal per year.

Although the project has endured unexpected delays, final approval was announced by Australia’s Environment Minister Greg Hunt last month.

Once in production, the project is expected to add $2.97 billion to Queensland economy each year.