Accountant raises red flag over mysterious foreign company at center of WA energy crisis

Auditors for an Indian-owned company at the heart of a deepening energy crisis in Western Australia gave the company its worst possible rating when signing off on its financial accounts.

The revelation comes as shipments of coal arrive in WA to supply the state’s utility and one of the country’s largest miners, which is cash-strapped due to malfunctions in the local coal industry.

An obscure company called Oceania Resources made headlines this week when it emerged that the company was the oldest lender to a failed Washington coal mine that owes nearly $1.5 billion.

As a senior creditor, a company is at the front of the queue that must be repaid if an asset — in this case, Griffin — is sold.

Oceania, a subsidiary of heavily indebted Indian conglomerate Sindhu Trade Links, lent Griffin Coal US$60 million (AU$90 million) in 2015.

It has also taken in millions of dollars in fees each year to act as manager for the mine.

But in a turn of events described as “confused and murky” under Liberal MP Steve Thomas’ parliamentary privilege, Oceania borrowed the $60 million from Griffin’s largest lender, ICICI.

The bank is India’s largest private financial institution and owes Griffin more than $1 billion. The company is based in Collie, 180km south of Perth in the historic coal mining hub of WA.

Auditor raises the red flag

In the most recently filed annual financial statements for Oceania dated March 31, 2020, the Company’s auditor, Perth-based practice BDO, provided a Disclaimed Opinion on the State of the Books.

According to the Australian Government’s Auditing and Assurance Standards Board, a refuted opinion is the lowest possible grade an auditor can give to a company’s financial accounts.

The Board notes that such an opinion is to conclude “that the financial statements are materially incorrect or that the auditor is unable to conclude, due to an inability to gather sufficient appropriate audit evidence or a number of uncertainties” .

BDO stated in its independent report that it “was unable to obtain sufficient appropriate audit evidence”.

Consequently, BDO said it could not “confirm or verify” whether Oceania would be able to recover the money it loaned Griffin.

The auditor also noted that the $60 million loan at Griffin represented more than 90 percent of Oceania’s total assets.

Concerns about Oceania’s financial strength were echoed somewhat by analysts assessing the plight of its parent company Sindhu.

In December 2020, a subsidiary of global ratings giant Fitch downgraded Sindhu’s credit rating to IND B+, downgrading the company’s debt to junk status.

Anything below BBB- is considered sub-investment grade by lenders or banks as such borrowers are more likely to go broke and not be able to repay their loans.

WA grid fluctuating at the edge

Griffin’s fall into receivership in September raised fears about the safety of WA’s largest electric grid, which serves more than a million users in the southern half of the state.

Through its largest customer, Bluewaters coal-fired power plant, Griffin indirectly supplies about 15 percent of the electricity typically used on the grid.

It also supplies ASX-listed miner South32, whose aluminum refinery in Worsley, a large regional employer, depends on the coal.

But amid problems at rival mining company Premier Coal, which supplies state-owned utility Synergy, WA has been forced to import coal from abroad.

A spokeswoman for Southern Ports confirmed that a ship carrying 28,000 tonnes of coal from Indonesia arrived in Bunbury, south of Perth, this week.

Another ship is believed to have arrived with supplies from New South Wales.

dr Thomas, who represents the South West region in the upper house of the state legislature, said he was deeply concerned about WA’s coal industry, the town of Collie and the local electricity system.

He suggested that Oceania and its parent company, Sindhu Trade Links, had little ability to bring Griffin back to life and were “shady”.

“This is a company with a shady history,” said Dr. Thomas to Parliament.

“I think none of these companies could be able to help or support Griffin Coal Mining Company.

Oceania “works” on the landline

Oceania said through a spokesman this week that the company intends to fix the problems at Griffin.

“Oceania Resources has worked with and supported the Griffin Coal Mine as a lender and operator of the Griffin Coal Mine since 2015 and continues to do so,” the spokesman said.

“As a key stakeholder of the mine, Oceania likewise encourages all stakeholders to work together positively and pragmatically to quickly and efficiently find a way forward that will ensure the sustainable viability of the mine well into the future and for the benefit of the state and people of Collies .”