Sentiment against part of the coal industry has softened, and Macquarie has read the tea leaves.
Already a subscriber?Macquarie Group’s board has reversed its self-imposed harsh ban on coal deals, paving the way for its bankers to be involved in coal-sector consolidation on Australia’s east coast and coal mines globally.
Indeed, bankers are kicking tyres on coal deals, the source said, noting the wave of consolidation in Australia’s coal sector as BHP, Anglo American, Glencore, Whitehaven Coal, South32 and other major miners trade assets. Australia is the second-biggest country in the world for reserves, while prices have been strong this year at $200 to $300 a tonne; there are buyers for quality operations, albeit still at modest multiples.
Macquarie has told investors its change of heart reflects the ongoing importance of metallurgical coal for steelmaking, the industry’s differential treatment of metallurgical and thermal coal, and the short-term nature of its advisory relationships. If the world changes and it wants to resurrect the ban, it can.But at the end of the day, investment banking is about making money, and Macquarie has been one of the best at it in Australia for decades.
Shareholders asked chairman Glenn Stevens repeated questions about Macquarie’s energy investments, including oil and gas projects, at Macquarie’s annual general meeting last week. Macquarie’s decision comes as Australia’s big four banks think about and rethink their own climate strategies, including whether they bank coal miners.
Westpac goes further, not taking on project finance for greenfield metallurgical coal projects, while National Australia Bank says it will continue to fund metallurgical coal miners “subject to enhanced due diligence which further considers underlying ESG risks”.NAB, a bit like Macquarie, recognises there are no readily available substitutes for the use of metallurgical coal in steel production.
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