The most senior creditor to a West Australian coal mine at the centre of a deepening energy crisis is a heavily indebted Indian company with a credit rating deemed "junk" by a major ratings agency.
Records show a little-known Indian company called Sindhu Trade Links, through its subsidiary Oceania Resources, is a big lender to Griffin Coal.
Griffin is a crucial link in the state's main electricity grid, and it was tipped into receivership two months ago amid mounting losses and debts totalling more than $1.4 billion.
Company filings show Oceania is owed $US60 million ($AU90 million) by the failed mine, which it also manages in return for multi-million-dollar fees.
According to its 2020 financial report, the most recent lodged with the corporate watchdog, Oceania had net assets of just $784,722 as of March 2020 and collected $6.4 million in revenue for the year.
Of this, about $2.9 million was paid in "agency fees", with the remaining $3.5 million flowing as interest on the debt owed by Griffin, which is one of WA's two coal mines near Collie, south of Perth.
Receiver Matt Donnelly, from Deloitte, has said Oceania sat higher in the creditor pecking order than Griffin's biggest lender, giant Indian bank ICICI, which was owed more than $1 billion.
But in what a state MP has described as a bizarre and "murky" twist, Oceania borrowed the $US60 million from ICICI, which subordinated its own claim on the mine under the deal.
Lender's health 'a concern'
South West Liberal MLC Steve Thomas said Oceania was so thinly capitalised it appeared to be "little more than a shelf company".
Dr Thomas said it was troubling a company with seemingly so few assets could be the most senior creditor to one of WA's most strategically important energy operations.
"It should be a source of concern for anyone overseeing the long-term energy and coal industries in this state," Dr Thomas said.
"And I would have thought the government should be concerned that the debt and ownership structure of Griffin is in such a murky and unclear situation.
"You would have to say the ownership structure is deliberately opaque."
Griffin's fall into receivership in September has sparked fears for the security of WA's biggest power system, which services more than 1 million customers in the southern half of the state.
Through its biggest customer, the Bluewaters coal-fired power station, Griffin indirectly supplies about 15 per cent of the power typically used in grid.
It also supplies ASX-listed miner South32, whose Worsley alumina refinery, a big regional employer, depends on the coal.
Amid Griffin's longstanding problems and fresh woes that have affected rival miner Premier Coal, South32 and the state-owned power provider Synergy have moved to import supplies from abroad despite record prices for the fuel.
Energy Minister Bill Johnston acknowledged the situation in Collie was a worry.
"At the moment, in January and February we do need all the generators that we have available and so we continue to need the coal stations in Collie," Mr Johnston said.
WA coal central to problems
The deteriorating financial health of Oceania's parent company, Sindhu Trade Links, has been the subject of reporting by India Ratings and Research, a subsidiary of US ratings agency Fitch Group.
In a report from December 2020, the ratings firm downgraded Sindhu's credit rating from IND BBB- to IND B+.
Dr Thomas noted that anything rating below BBB- was considered sub-investment grade, or junk, by lenders such as banks and funds.
He said this was because of the relatively high probability of such firms becoming insolvent and failing to repay their debts, meaning they typically had to pay much higher rates of interest to borrow any money.
As part of the December 2020 report, senior analyst Ankur Rustagi noted Sindhu's problems in large part stemmed from the poor performance of its coal assets, which include Griffin.
What's more, Mr Rustagi said Sindhu has been forced to seek relief from debt repayments under emergency measures offered by the Reserve Bank of India during COVID.
Sindhu also applied to India's central bank for an emergency credit line.
Mr Rustagi said Sindhu had total outstanding debt of about $130 million at the time, a "low cash balance" of just $3.7 million and had experienced "steep decline in revenue" to just $49 million for the first half of the year compared with $77 million for the previous corresponding period.
He said that unless the company could restructure its debts successfully, India Ratings may impose "a multi-notch downgrade".
"[India Ratings] expects the operating profit from the company's coal operations to remain lower-than-expected in the near-to-medium term, leading to deterioration in the consolidated credit profile," Mr Rustagi wrote.
Oceania continues to act as lender
Oceania declined to be drawn on a series of questions about its financial position or ability to help provide the funding necessary to breathe new life into the Griffin mine.
A company spokesperson instead said it was continuing to act as both a lender and manager of the operation.
"Oceania likewise encourages all stakeholders to work together positively and pragmatically to quickly and efficiently resolve a way forward, which ensures the sustained viability of the mine well into the future and for the benefit of the state and the people of Collie," the spokesperson said.
Dr Thomas said the analysis by India Ratings painted the picture of a company that was "in very poor financial health".
He said the analysis and Oceania's filings with the corporate regulator in Australia suggested the company would not be in a position to fix the operating and financial problems at Griffin.
On top of this, Dr Thomas pointed out that in August last year Oceania was convicted and fined for failing to lodge annual financial reports as required by law.
It was the same offence for which Griffin itself was successfully prosecuted by the Australian Securities and Investments Commission this year.
"It would seem as though these are slightly more than shelf companies but not companies that could be used to save Griffin Coal," Dr Thomas said of Oceania.
"This is a company that does not have the wherewithal to underpin any major investment.
"And that just raises concerns about the debt structure and ownership structure that Griffin has come to."
