Australia's largest new coal project, one hailed by Prime Minister Tony Abbott as a poverty-busting "miracle", is unbankable in the assessment of Queensland's Treasury, which also has question marks over the development's transparency.
Documents released under Queensland's freedom-of-information laws show officials at the highest level of the Queensland Treasury held grave doubts about Indian mining company Adani's capacity to see through its Carmichael coal mine project in central Queensland even as former premier Campbell Newman was promising taxpayer funds to help establish the mine.
The proposed mammoth coal mine would open up the vast Galilee Basin, producing up to 60 million tonnes of coal a year for shipment from terminals at Abbot Point but has sparked controversy partly due to its proximity to the Great Barrier Reef.
The Abbott government has strongly backed the project. Mr Abbott said it puts Australia on the path to becoming "an energy superpower".
"It's one of the minor miracles of our time: that Australian coal could improve the lives of 100 million Indians, and it just goes to show what good that freer trade can do for the whole world," Mr Abbott said on a visit to India last September.
But Fairfax Media can reveal Treasury officials warned the former Newman government in Queensland the project was unviable as Adani sought hundreds of millions of dollars in public money to help construct a rail line from the mine to its coal terminals.
The revelations come as the federal government also prepares for a final decision within days from UNESCO's world heritage committee on whether the Great Barrier Reef should be given a formal in-danger listing.
Hundreds of pages of correspondence from senior figures in the Queensland department, including former under treasurer Mark Gray and principal commercial analyst Jason Wishart, express fears about Adani's high level of debt and identify the mining giant as a "risk" because of its unclear corporate structure and use of offshore entities.
In one document, an email from November last year, days before an announcement that the Newman government would help Adani build its rail, Projects Queensland principal commercial analyst Jason Wishart wrote to David Quinn, the executive director of Projects Queensland: "It is unlikely to stack up on a conventional project finance assessment."
Projects Queensland is a division of the Queensland Treasury. Mr Wishart noted that Adani could argue the "blue sky" on controlling the supply chain for development of new power stations in India but said that altered the nature of the project and its risk.
"This effectively makes it an Indian energy market play not a coal project."
A trail of emails between September and December shows a rising level of urgency in Treasury as officials tried to conduct a proper financial assessment of Adani while the Department of State Development, Infrastructure and Planning (DSDIP), led by Deputy Premier Jeff Seeney, pushed ahead with a proposal to assist the company.
On November 11, Mr Wishart said the expansion would put Adani's financial position under "increased strain" while another Treasury briefing notes "the group is highly susceptible to cost shocks".
Mr Wishart wrote that Adani Enterprises Limited – the Bombay Stock Exchange-listed parent company for a network of related Adani entities – had total assets of $21.5 billion, but which were "heavily geared" with liabilities of $16.4 billion.
"Continued expansion to meet power and mine ambitions will place this financial position under increased strain," he wrote.
"Ultimately the success or failure will depend on how well the continued expansion into the Indian electricity market goes, with the Carmichael coal and infrastructure development being an Indian power market play."
Asked about an unnamed press article, Mr Wishart wrote in another email in last October to then Under Treasurer Mark Gray that while there was not a funding "boycott" it was "fair to say that there is not a lot of market support for investing in Galilee thermal coal projects at present."
"That level of funding interest has been declining with the slide in the coal price over the last two years," he said.
He noted funding was also being impacted by a continued "poor outlook" for the commodity as well as pressure from green groups on banks for supporting such projects.
The hundreds of pages of documents have sparked calls for an inquiry into the mine, its associated approvals and the conduct of the former state government in particular.
"These secret documents make clear that Treasury has serious concerns about Adani's financial ability to actually build these projects and that its demands for proper due diligence have continued to be ignored," Jeremy Tager, spokesman for the North Queensland Conservation Council said.
"The Palaszczuk government should immediately conduct a full due diligence analysis and release the findings publicly before risking taxpayers' money on the Adani project or granting further approvals."
The documents also reveal that by late November, Mr Quinn and Mr Gray had raised questions of an "exit strategy" for the state and ask what security Queensland could take on any loan to Adani.
"I think any answers I provide are unfortunately 'best guess' based on the veneer of information we have to date," Mr Quinn wrote on November 30.
"Only other meaningful Adani asset in Australia over which some form of security may be able to be granted is possibly the 'value' in the mining tenement itself."
On October 31, Mr Wishart wrote that the publicly available information on the Adani group was "not particularly transparent" and the company had failed to provide adequate information to "address sources of equity and debt".
That same day, he emailed Mr Gray and Mr Quinn to say neither DSDIP nor the Queensland Investment Corporation "has been able to provide anything substantive on Adani's financial capacity or credit worthiness at this stage."
The revelations will also put pressure on the Abbott government, which has said Galilee Basin projects could eligible for taxpayer finance from a $5 billion northern Australia loan scheme – provided they demonstrate they would not be commercially viable without government assistance.
Mr Seeney did not respond to a detailed list of questions from Fairfax Media on Tuesday.
In a statement, he said: "There was no deal with Adani. There were negotiations and due diligence was underway as part of the negotiations for investment infrastructure. But it never got to the point of a deal."
An Adani spokeswoman said: "Adani developed and presented a strong and robust business case for these projects to the Queensland government."
In February, a Fairfax Media investigation raised questions about the ultimate ownership of Adani's Australian interests . Company documents suggest billionaire Gautam Adani, the public face of Adani, does not ultimately control many of the companies. Instead his eldest brother Vinod Shantilal Adani holds pivotal positions. Vinod has been named in an Indian criminal investigation into the alleged siphoning of $1 billion from Indian shareholders in three Adani companies into offshore accounts.
A web of companies that appear to be linked to Adani's coal developments in Australia extends from the low tax regime of Singapore to the tax haven of the Cayman Islands.
Complicating matters is conflicting paperwork, with Indian documents suggesting Adani Enterprises divested its stake in Abbot Point port for $235 million in 2013 to a private Singapore entity for which Vinod is the sole director.
Adani told a federal inquiry into tax avoidance this year that the transfer of the coal terminal to the Singapore vehicle had not yet been completed, but the company intended to finish the transaction.
The 2014-15 financial results for Adani Ports and Special Economic Zone, the publicly listed Indian company Adani says continues to hold the terminal, make no mention of any financial interest in Abbot Point terminal one.
The Treasury documents also note Adani had taken terminal one at Abbot Point, which it leases from the Queensland government, "off the books".
Greens deputy leader Larissa Waters said the documents appeared to confirm what critics of the project had been saying.
"It was perfectly obvious that the project wasn't viable, which makes it more insulting that public money was going to be stumped up under the former Newman government," Senator Waters said.
She added that the Abbott government's north Australia fund should not be a "lifeline for the Galilee Basin mega mines because they're clearly a huge economic risk and a massive threat to the climate and the reef."