They’re shutting the gate, but the black horse has bolted. Despite three of Australia’s big four banks stopping their lending to new projects and putting a deadline on a total withdrawal from coal, with the fourth also significantly diminishing its involvement, the Australian coal industry is still very much alive and kicking.
It appears not to have penetrated the collective wisdom of bank board rooms that a ban on lending to coal is not an effective disincentive for the booming sector that makes up almost 80 per cent of the Australian coal industry – exports. As Bloomberg Report recently noted, ‘Moves by some of the world’s biggest banks to end coal financing for the sake of the planet was supposed to create major headaches for companies like Whitehaven Coal Ltd. Yet there was the Australian miner on a conference call last month announcing the refinancing and extension to 2023 of a A$1 billion credit line’. This was backed mostly by Chinese and Japanese lenders largely replacing the Australian banks that had dominated the previous facility. Available for general corporate purposes and extended on terms comparable with the senior revolving corporate debt facility it replaced, it was accompanied by additional bank guarantee capacity arranged bilaterally with members of the banking group along with an eight-year export credit facility for purchasing Japanese mining equipment.
Asian banks whose clients’ prosperity depends on the supply of Australian coal are clearly prepared to do the business the Australian banks shun, with banks from these end-user countries increasingly coming to Australia to fund resource projects; Bank of China and Mitsubishi UFJ Financial Group are both part of Whitehaven’s loan syndicate, while Chinese, Japanese and Korean state-owned export credit agencies are providing a ‘significant portion’ of the money committed to building coal power stations in SE Asia.
According to Bloomberg, Asian banks ‘dominate global funding for coal mines and plants, particularly in countries like Vietnam and Indonesia, which have some of the world’s most aggressive plans to ramp up coal power production over the next decade’. This relatively easy credit runs counter to the mounting environmental pressure to put the coal industry out of business that has seen global banks including Goldman Sachs and BNP Paribas withdrawing support for coal mines.Asian banks and export credit agencies, private equity firms and the cash-flow from coal sales are all keeping the mines operating with ample funding. Bloomberg points to lead lenders. The Export-Import Bank of China and the Japan Bank for International Cooperation that have committed $29 billion for new coal power projects in Vietnam and Indonesia alone.
With the International Energy Agency predicting that rising Asian coal use (dominated by Australian exports) will see coal still meeting 22 per cent of increased world energy demand by 2040, our banks’ black ban on our major single export is close to being environmentally irrelevant. So while foreigners benefit from our cleaner coal in their lower-polluting HELE generators (of which we have none) that provide their consumers with cheap power, Australian consumers suffer the consequences of our cheapest energy source being denied funding (on ideological rather than commercial grounds) for new developments – or even for the upgrading or adding to the operational longevity of existing ageing plants And the latest Westpac declaration raises serious concerns over its yet undeveloped plans to ‘align its portfolio’ in keeping with its acceptance that ‘a transition to net zero emissions will be required by 2050’, as will a 90 per cent market share for renewables. This puts oil and gas at risk as Westpac will continue to assess whether investments in them could continue in the light of the bank’s commitment to net zero emissions by 2050.
So the fossil fuel war is far from over, with the environment lobby confirming its next target is oil and gas. Having given way to activist pressure on coal, the banks will soon find that, like Danegeld, the raiders will come back for more on their hit list. Westpac should go back to banking, not wanking; Natural gas must be a viable affordable substitute for coal in any power supply shortfall caused by the bank-backed rush to renewables.
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