15 November 2019
LNG Limited shareholders are clearly fed up with the company’s terrible financial performance in recent years, with the company’s share price now sitting at less than 5% of its 2015 peak.
Huge protest votes were cast by LNG Limited shareholders regarding all items of business at the company’s annual general meeting, yesterday in Sydney:
- A staggering 79.6% of shareholders voted against the remuneration report.
- 59.7% voted against the re-election of chairman Paul Cavicchi.
- 63% voted against the re-election of non-executive director Philip Moeller.
- And 70.4% voted against the remuneration incentives for CEO and Managing Director Gregory Vesey.
Cavicchi, who had been LNGL’s chairman since December 2016, will now need to be replaced. Another casualty claimed by shareholders was non-executive director Philip Moeller, who had been with the company for more than four years.
Perhaps voicing one of the reasons behind investors’ angst, one shareholder raised concerns about LNGL’s poor cash position, asking how confident the company was that it could raise the equity it may need to maintain a positive cash position in the next year.
“It’s always hard to raise capital, no matter how well we do, they always want us to do better,” CEO and managing director Greg Vesey said.
CFO Michael Mott added: “It’s a difficult time right now in energy, and it’s been difficult to find capital […] What we found is that capital is available but at a cost, so it’s up to what you are willing to pay for that.” “What you said it’s accurate, it is a tough market, but we feel confident about our ability to work with our counterparts and achieve a positive outcome for the company.”
That confidence needs to be questioned in light of Carbon Tracker’s analysis, which found US$153 billion worth of potential capital expenditure on US and Canadian LNG projects between 2015 and 2025 could be stranded under a 2°C global warming scenario. Since that report, modelling of 1.5°C warming scenarios, as targeted by the Paris Agreement, has become much more prevalent and suggests an even higher LNG stranded asset risk.
On this topic, the LNG Limited Board was asked whether the company had stress tested their assets and planned capital expenditure “against a 1.5°C warming scenario, or even a well-below 2°C warming scenario?”
The CFO’s long-winded answer could have been shorter: No.
Vesey was then asked whether LNG would commit to conduct 1.5°C scenario analysis and disclose its results to shareholders before a final investment decision is taken on each of the Magnolia and Bear Head LNG projects. “I will commit to looking at it, how about that?” was his reply.
With Carbon Tracker’s analysis showing LNG project with a breakeven price greater than US$10/mmBtu risk being stranded in a 2°C warming scenario, LNG Limited will need to do more than “look at” climate change scenario analysis if it wants to turn around its investors’ dim view of the company’s prospects.
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