Adani and POSCO E&C to build rail line for multibillion coal project

India’s Adani Mining Pty Ltd and South Korea’s POSCO E&C have signed a binding agreement to develop a greenfield rail line for a long-delayed A$16.5 billion ($15 billion) coal and rail project in Australia.

Image credit: flickr User: Martyn Hearson
Image credit: flickr User: Martyn Hearson

The cost and other details of the contract to build a 388 kilometre rail line for the Carmichael coal mine in the eastern state of Queensland will be set by the end of 2014, according to Reuters.

The agreement gives exclusive rights to POSCO E&C to be the EPC (Engineering, Procurement and Construction) contractor for the greenfield standard gauge rail project.

The company will help fund the rail line by buying an equity stake, which could help Adani raise debt funding from South Korea, essential for a project that analysts have said would be uneconomic at current weak coal prices.

“The binding agreement will enable us to develop a cost efficient rail solution and this relationship gives Adani access to the Korean market, POSCO’s expertise and capital,” Adani Australia Chief Executive Jeyakumar Janakaraj said in a statement.

“This is the largest EPC (engineering, procurement and construction) project in the region for POSCO E&C, and we will put in our best effort to maximise our engineering, procurement and financing capabilities to successfully complete the construction,” said Tae-Hyun Hwang, President of POSCO E&C, said in a statement.

A condition of the state government’s approval for the project was allowing open access to the rail line for other coal producers, including a project planned by compatriot GVK and Hancock Prospecting, controlled by Australia’s richest woman, Gina Rinehart.

The North Galilee Basin Rail (NGBR) construction is expected to commence in early 2015 and will have a capacity to haul 60 mtpa.

Adani and POSCO E&C will jointly manage the development of this rail line.

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