The year 2023 saw the Australian coal industry become increasingly financially ostracised. As the rest of the world transitions away from the dirtiest fossil fuel, coal miners have to look further afield for funding which once came easily. Our movement has put consistent pressure on the financial institutions enabling the coal industry, and its working. This is our theory of change in action.
In response, Australian coal miners have made different attempts to continue “business as usual” and secure finance. This article will look at a few players in the Australian coal industry and where they stand as the year draws to a close.
In 2021 BHP, a mining and metals company, started its “pass the buck” approach to climate action when it sold its oil and gas business to climate wrecker Woodside, and one of its metallurgical coal mines (for steelmaking) to Stanmore Resources. Despite a 14.2% vote of support from shareholders for BHP to responsibly wind up its fossil fuel production assets in line with its stated support for net zero emissions by 2050, this year the company sold two more of its coal mines, Blackwater and Daunia, to Whitehaven.
As one of the world’s largest and most diversified mining companies, BHP has the opportunity, and the responsibility, to set a global example by managing down its fossil fuel business. It is more than capable of this, as demonstrated with its plans for the Mount Arthur mine. Instead, the company has continued to sell off its dirty assets to pureplay fossil fuel companies with no plans to align their own business with the climate efforts of the rest of the world. While this may reduce BHP’s emissions in its own reporting, the impact in the real world will almost certainly be worse. With these mines in the hands of companies whose sole focus is fossil fuel extraction, their chance to be managed down is gone.
Even without these two mines, BHP will still produce 36 million tonnes of coal per year. The company has plans to mine coal for many years to come, and is seeking approval for three coal expansion projects at Red Hill, Saraji East and Peak Downs metallurgical coal mines. While BHP says that it is not allocating capital to expand its coal business, it is certainly not winding down its remaining coal operations either.
At BHP’s 2021 annual general meeting, investors Fidelity, BetaShares, CalPERS, DWS, and UBS all voted in favour of Market Forces shareholder resolution, and actively advocated for assets to be managed down. BHP must listen to these investors and set the example of how a coal miner should transition to a fossil free future.
New Hope Group & its parent company, Washington H Soul Pattinson
The situation is different for an undiversified coal company like New Hope, which derives around 95% of its revenue from the sale of thermal coal. In 2021 New Hope went to the bond market, facilitated by Jefferies, a US based Investment Bank. The next year, New Hope cancelled its existing loan (from ANZ, NAB, Macquarie, Mizuho, and Cat Finance) citing the company’s high cash balance.
New Hope Group, owned by Washington H Soul Pattinson (WHSP), a publicly listed investment company, appears to be acting more cautiously than other coal miners in response to the decreasing availability of finance from major banks. New Hope recently acquired a 15% stake in Malabar Resources’ Maxwell mine in 2022 and appears to be considering an expansion of its Bengalla mine, but has no greenfield projects at this time.
While New Hope is still open to “new opportunities in thermal or metallurgical coal”, it is also in discussions with the Queensland government about opening up a wind or solar farm on rehabilitated land. This is quite the turn around for a company chaired by Robert Millner, a man who in 2018 said climate change was a matter up for political debate. As governments all over the world continue to legislate reductions in coal fired power in national energy plans, and renewables costs fall further and outcompete fossil-based power generation, it is harder and harder for even the most profit focused investor to deny that thermal coal is a dying industry.
Unfortunately in the meantime, Washington H Soul Pattinson seems happy to fill the space left by major banks exiting lending for thermal coal miners. The company plans to make a quick buck by expanding its private credit portfolio, lending money to Stanmore resources and possibly Whitehaven for the companies to purchase BHP’s coal mines. Clearly, WHSP sees an opportunity to lend to coal miners in the near term, and may even finance New Hope’s expansion plans. But even WHSP emphasised that this was a short term strategy.
When asked about why WHSP did not increase its exposure to New Hope during a bumper year, the CEO’s response said that they take a long-term view of their investments, seeming to imply that New Hope may not be a good long term investment.
As renewables become more and more economical, and costs for coal miners continue to rise, even New Hope and WHSP seem to be sensing the winds of change.
In stark contrast to companies acting with caution there is Whitehaven. Whitehaven now has five expansion projects on its books. This includes three brand new coal mines – Vickery, Winchester South and Blackwater South, and two extensions at its Narrabri and Maules Creek mines. This buildout is based on an exceptionally optimistic outlook for coal demand, particularly thermal coal, with no other Australian-listed operator pursuing the same number of expansion projects.
As major global banks back away from undiversified coal miners; it is unclear where Whitehaven expects to find the funds for projects like Vickery, which is still awaiting a final investment decision on the full scale project. According to financial news sources, Whitehaven has already had to turn to private credit to refinance the bridge loan for the BHP acquisition, likely facing much higher interest rates as a result.
Those reported to be considering the private credit deal were Washington H Soul Pattinson, Farallon Capital, Varde Partners, and Davidson Kempner Capital Management, though at this time there is no confirmation of which financiers are involved.
In 2023, with a year full of record breaking weather events, it is shocking that any financial institution would lend money to a company still expanding the coal industry. These financiers will have a lot to answer for if they are willing to lend to a coal miner with so many expansion plans.
Whitehaven made $2.7 billion this past financial year, the company should not need external finance from a bank or private creditor. Now Whitehaven will be free to funnel its profits on its upcoming coal expansion projects like Narrabri Stage 3, Vickery and Winchester South.
While it is disheartening that Whitehaven has now secured a five-year, $1.6AUD billion dollar loan, the good news is that many major global banks who either used to bank Whitehaven or are major financiers of other coal companies appear to have declined the deal. This is a huge achievement, involving people from all over Australia and the world.
It is a promising sign that the work of the global climate movement to end finance for new fossil fuels is working, but clearly there is more to do while there are still financiers willing to lend to companies expanding coal.
We still have the opportunity to impact Whitehaven’s expansion plans. The company will still likely need external finance for its full scale Vickery project and at least another billion dollars for Winchester South (which is due to receive final approvals by the Queensland State Government). With corporate or project finance from major banks looking less likely, we think Whitehaven will again try to turn to the bond market for finance, or lean into the world of private credit.
Wherever these dirty coal companies go in the murky world of finance, we will be right behind them shining a light on the people still prioritising profit over planet. Stay tuned.
Representatives from Pacific Climate Warriors, School Strikers, Sapna South Asian Climate Solidarity, and others travel to a Whitehaven mine on Gomeroi country. Image credit: @350 Pacific