Guest essay by Eric Worrall
Market Forces, an Affiliate of Friends of the Earth, wants regulators to smack New Hope Mining for claiming coal is here to stay. But New Hope have quietly challenged the viability of the entire renewables industry, in an official company document. If this goes to court, buy plenty of popcorn.
New Hope mining company referred to Asic, accused of misleading investors over future of coal
Investor action group Market Forces says coal company is ‘building a financial house of cards’ by telling shareholders coal will remain ‘significant’ in energy mix
Shareholder activist group Market Forces has asked the corporate watchdog to investigate whether coal company New Hope misled investors by claiming that coal would “remain a significant part of the energy mix”.
In letters sent to New Hope Corporation and the Australian Securities and Investments Commission, lawyers for Market Forces have alleged that statements by the company’s chief executive, Reinhold Schmidt, may amount to “misleading and deceptive conduct” under the Corporations Act.
In September last year Schmidt told the Australian Financial Review that “thermal coal is part of the long term energy mix, it will always be there”.
At the company’s annual general meeting the following month, Schmidt’s was asked whether he stood by that statement. He responded by referring to the International Energy Agency’s forecast “current policies” and “stated policies” scenarios.
“If you look at [those scenarios] coal will remain … a significant part of the energy mix. Australia has got a very strong benefit when compared to other coal producers; our coal is of better quality and my statements remain unchanged.”
In its letters, Market Forces says these statements omitted that the IEA had qualified its forecasts by pointing to “significant uncertainties, including more rapid action to phase out coal”.
From the Market Forces website;
ASIC investigation requested into New Hope statements
21 July 2021
Gambling on failure of the Paris Agreement
The energy demand scenarios New Hope relies upon to justify its future business prospects are consistent with global warming of around 3ºC. This would lead to catastrophic ecological, social and economic consequences, and gambles on the complete failure of the Paris Agreement, which aims to limit global warming as close as possible to 1.5ºC.
As of July this year, 191 countries have ratified the Paris Agreement, while countries representing over 50% of the global economy have committed to net zero emissions by 2050 . According to the IEA’s most recent report (Net Zero by 2050: A Roadmap for the Global Energy Sector), no new coal mines or expansions can proceed and coal demand must plummet in order to achieve net zero emissions by 2050 .
Actively expanding the coal industry
At a time when coal companies should be winding up their operations, New Hope is actively expanding the coal industry via its proposed $900 million New Acland Stage 3 coal mine – a 12 year expansion to the existing mine that would produce over 170 million tonnes of carbon emissions  and see three vast open-cut coal pits dug on the prime agricultural land of the Darling Downs.
Additionally, media reports suggest New Hope may be bidding to purchase BHP’s Mt Arthur coal mine, one of the biggest thermal coal mines in Australia . New Hope recently raised $200 million of bonds, “for general corporate purposes, which may include further growth expansion and opportunistic M&A [(merger & acquisition)] activity” .
Should New Hope have said more about the sovereign risks to its business model?
Given even France is failing to meet its Paris Agreement commitments, according to a French court ruling, surely it could be argued in any future court case that the Paris Agreement is a political fantasy.
There are sovereign risks, which New Hope acknowledges; According to New Hope Coal Annual Shareholders Report 2020, … One major headwind for the Company is the continued reluctance of the Queensland Government to approve the New Acland Stage 3 project, despite overwhelming community support, and the economic damage being wrought on the State by COVID-19. New Hope first applied for Stage 3 approvals in 2007 and has been locked in the process by anti-coal activist groups since then …
But New Hope has also laid out a challenge to the entire renewables industry, in that same annual shareholder report.
… Once again, during a period of low pricing in the coal business, we see activists take the opportunity to predict the end of the industry, pushing for their preferred solution of renewables which, at this time, cannot economically or practically displace fossil fuels. According to the 2020 BP Statistical Review, in 2019 coal consumption declined, but still accounted for 27% of primary energy supply. Despite considerable growth, renewables accounted for just 5% of supply. In electricity generation, coal’s share decreased but still accounted for 36%, well above the next most popular fuel which was gas at 23%. Renewables grew from 9% of electricity generation in 2018 to 10% in 2019. Coal’s decline in 2019 was not just due to an increase in renewables, but also to the increasing competitiveness of gas in the fuel mix. Coal use declined strongly in the US and Western Europe but was largely offset by increases in Asia. The International Energy Agency’s World Energy Outlook 2019 Current Policies Scenario has steam coal use increasing significantly from current levels through to 2040, whilst the Stated Policies scenario has steam coal use staying relatively flat through to 2040, with over 80% of steam coal demand being in the Asia Pacific region …
I strongly suspect Friends of the Earth will realise they have bitten off more than they can chew, and that they will quietly slide back into their hole when they come to their senses.
But maybe we will get lucky, and Friends of the Earth will continue their self destructive attack.
Because New Hope Mining has done what we have all been waiting for – they have quietly challenged the entire renewables industry, by explicitly pointing out the falsehood of claims that renewables are a viable replacement for fossil fuel in an official company document.
If Australia’s ASIC regulator attempts to prosecute New Hope, the issue will end up as a court case which could drag in other companies, as New Hope defends its claim that renewables are not a viable replacement for coal.
If New Hope wins, it could up-end the entire Australian renewables industry, by opening the door to a stream of counter suits, official complaints to ASIC about wild claims made in the official corporate documents of green energy companies.