Aurizon seeks ‘stranded asset’ compensation for transporting thermal coal
Aurizon and other owners of thermal coal infrastructure in Queensland and NSW want to be compensated for “stranded asset” risk – the danger that their rail lines and ports could be made obsolete by the shift from fossil fuels to clean energy.
ARTC said via a spokesman that Hunter Valley thermal coal should be in demand in south-east Asia for some time to come but “we do recognise that in the long-term there will be risk as to the level of demand”.
Deputy Prime Minister and Transport Minister Michael McCormack said ARTC was an independent business but the government supports strong coal markets as an important means of ensuring “regional Australia has good, long-term, local jobs into the future”.
Still, the fact these claims are being seriously entertained by regulators is at odds with the reluctance of thermal coal exporters such as Yancoal and Whitehaven to stress-test their thermal coal exports against the risk of tougher climate policies as they pocket bumper profits.
The claims come as Standard Chartered, Mitsubishi UFJ, Marubeni, Nippon Life, Swiss Re and other global financial institutions are backing away from thermal coal power at an accelerating rate, and global investors are also moving sharply away from thermal coal. Energy Minister Angus Taylor and Resources Minister Matt Canavan continue to talk up coal in Australia.
‘Thermal coal’ risk
Aurizon derives a quarter of its central Queensland coal network revenues from thermal coal and three-quarters from steelmaking coking coal.
Its claim for stranded asset risk cites “long-term demand risks and exposure to thermal coal”, the uncertainty of which is shown by low levels of exploration expenditure.
Risks include unexpected changes in environmental and energy policy and the rate of technology change, which could accelerate the shift to renewable energy in markets the thermal coal industry is relying on for expansion, which are mainly in Asia.
One analyst said the QCA had effectively rejected the claim on the basis that it had granted Aurizon an accelerated 20-year “net regulatory depreciation” allowance, or 5 per cent of the asset base a year.
The analyst said the claim is a “double-edged sword” for Aurizon.
“It means that coalminers have to pay more [but] at the end of the day the are all in this together.
They are all going to get stranded at the same time and if they are truly worried about stranding at this point in the cycle then they should be provisioning for it and disclosing more and stuff like that – and they’re not,” he said.
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