Whitehaven Coal’s finances on ‘knife’s edge’ say investors, risking balances at Australia’s largest super fund

A group of activist investors say shares in a major coal company will go down as the miner expands its coal operations – putting the superannuation investments of 3.6 million Australians at risk.

Modelling from clean energy finance organisation Market Forces concludes Whitehaven Coal starting up new coal mines will lead to lower share prices under the various international climate agreements and targets.

“Our modelling demonstrates that Whitehaven becomes less valuable the more it expands coal production, raising serious concerns for investors including AustralianSuper about how the company plans to spend their capital,” Market Forces campaigns manager Brett Morgan said.

AustralianSuper is the country’s largest super fund and the largest shareholder in Whitehaven, parking the super funds of some 3.6 million Australians in the coal mining company.

AustralianSuper fully divested from Whitehaven in 2020 – only to romp back into the fold as the miner’s largest shareholder when Whitehaven bought BHP’s metallurgical coal assets.

The super fund snapped up another nine million shares in February, taking its stake to 11.8 per cent, worth a little more than $752m.

Market Forces argues coal investment is becoming less and less attractive as pollution targets take effect.

“Whitehaven’s financial resilience is on a knife’s edge, with lower coal prices and higher operational costs making growth projects uneconomic,” Mr Morgan said.

“As Whitehaven’s largest shareholder, AustralianSuper must challenge the company’s risky growth strategy, demanding an end to new coal and protecting its members’ retirement savings.”

The analysis finds Whitehaven cashing out its shareholders via buybacks would be of better value to shareholders than new coal projects.

Both the miner and AustralianSuper declined comment.

Market Forces commissioned an external consultant to run the numbers on Whitehaven’s business, analysing status quo operations, ‘brownfield’ coal mine extensions, and new ‘greenfield’ mines.

These operational scenarios were measured against global temperatures increasing 2.4C as per the Energy Agency’s Stated Policies scenario, and Australia’s legislated target of less than a 1.5C increase under the Net Zero Emissions by 2050 scenario.

If Whitehaven pursues “most expansionary” greenfield targets, the company will be forced to buy 1.5-2 million tonnes of carbon credits each year from the mid-2030s, the modelling finds. Whitehaven’s pre-tax earnings would fall between 6-10 per cent.

The analysis also takes aim at Whitehaven’s “own bullish” long-term coal price projections, which are higher than investment banks and the Australian government’s forecasts, and “consistent with catastrophic warming levels well above 2.4C”.

“Whitehaven’s proposed coal developments only create value for shareholders in a world that fails to meet its climate goals, which would be catastrophic for the global economy,” Mr Morgan said.

Market Forces are calling for Whitehaven to disclose its “resilience testing” for development projects under low coal price, low coal demand scenarios, and want to see a justification for allocating company capital to “risky” growth projects.

Whitehaven will present its annual results to the ASX on Wednesday.

Whitehaven is wrestling with supply issues at the Narrabri mine in NSW, and has come under fire from a major buyer in state-owned Taiwan Power Company, known as Taipower.

Taipower is one of Asia’s largest thermal coal buyers and typically takes about 13 per cent of Whitehaven’s NSW coal; but Narrabi has been plagued with inconsistent output for the past six years.

In March, the NSW government ruled it will allow coalmine expansions and permit extensions; the move banned exploration and mining on untouched greenfield sites though.

Most of Whitehaven’s mines are in NSW, but Queensland as a whole produces most of Australia’s coal.

In Queensland, new coal mines need a comprehensive environmental impact statement to be filed if production will be over 2 million tonnes per year.

A mine expansion which produces 5 million tonnes is also subject to the heightened environmental regulation.