Whitehaven boss Paul Flynn is riding high on astronomical coal prices. He’s worried our emissions reduction targets are out of step with reality.
When Paul Flynn hands down Whitehaven Coal’s huge profit today, it will be hard to believe it’s only two years since the company was barely breaking even and seeking covenant relief amid coal prices below $US50 per tonne.
The habits of this lifetime are hard to change, so I do the same thing, that same ritual is still one that I do, and it makes for a more easily digestible breakfast when you see coal prices where they are, of course. How will you make the cashflows of today available for yourself in future if lending for coal becomes harder to find? Do you create your own “future fund” or your own “war chest” so sometime in future if prices are lower and lending is harder you can self-fund?
We have been working towards putting more metallurgical coal into our business ... and of course Vickery [coal project in NSW] can bring more metallurgical coal into our business and Winchester South [in Queensland] is a cornerstone of that drive. Is any part of the timing decision on Vickery related to the fact we are in an inflationary environment, or is it purely that contest for capital against your own stock?
I don’t think so. The market is short [of coal] with the prices we are enjoying here, and the bigger conundrum for our customers is they have made significant investments in coal-fired generation. Is there any appeal for you in having a European presence in the Vickery offtake for the sake of customer diversification?
What did you make of the International Energy Agency’s suggestion that the world could not afford any more coal or gas projects if it were to keep temperatures to 1.5 degrees? None of us would sit here and say we shouldn’t be committed to a lower emissions pathway. I think the challenge is our aspirations have got out of step with the practical reality of delivering on that plan, virtuous as it is.
We are involved because we want to stay close to understanding what has gone on there, but I would rather focus on practical outcomes that deliver the emissions reductions pathways we believe are appropriate. I think there are some interesting examples of CCS around the globe. We have one up in Queensland, which Whitehaven contributes funding to through Low Emissions Technology Australia, where we have an opportunity to retrofit a capture plant on the back of the Millmerran power station and capture and sequester carbon dioxide in the Surat basin.
So if you have distorted the market so badly in doing that so you can’t take those subsidies away, then you should provide assistance to other technologies to push the development of all solutions for emissions reduction. Wind and solar don’t replace baseload generation, so other technologies that can assist in the removal of emissions from the existing baseload generation fleet should be stimulated.
I don’t see the need. That is a national commitment the government makes. People keep asking about that. I say, “well, that is not a question that individual corporations need to be answering, it is at a nation-state level”. The most important thing the Labor government needs to consider is their pre-election commitment, repeated post-election, that emissions-intensive, trade-exposed industries will not be compromised vis-a-vis their international competitors.
How that plays out is the important piece of the puzzle we want to see uncovered as part of the consultation process. But as I say, balancing the complexity of this change and honouring the commitment that organisations like us – which are emissions-intensive, trade-exposed companies – won’t be compromised. That would give rise to a greater emissions profile over time if we were to be penalised relative to them.
One of the things this consultation process for the safeguards mechanism, hopefully, will drive, will be a deeper understanding and consideration of the complex nature of the problems we are trying to solve here. And obviously at the end of the supply chain are our customers – Japan, Korea, Taiwan, very important countries to our country. India is an important piece of that puzzle as well. Their aspirations for emissions reduction hinge on us continuing to support them while they make that change. It is not just keeping the lights on, it is providing the energy to make the solar panels and other materials necessary to produce the renewable energy infrastructure you desire.
I think it sounds, again, like an over-simplification. You can’t magically make reliable energy out of renewables, and high prices isn’t going to change that. More renewables isn’t going to change that.
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