Millions of Australians' retirement savings could face diminished value if Whitehaven Coal, a major undiversified coal mining company, proceeds with its expansion plans, according to an activist investor group. AustralianSuper, the country's largest superannuation fund and Whitehaven's biggest shareholder with an 11.8 per cent stake, is under pressure to challenge the coal company's growth strategy.
Activist group Market Forces warned that 3.6 million Australians invested in AustralianSuper could be exposed to potential losses. Their analysis suggests that Whitehaven's value may decrease if it expands coal production, particularly given the potential future costs associated with carbon credits.
Market Forces campaigns manager Brett Morgan stated that Whitehaven's financial resilience is precarious, with lower coal prices and increased operational costs already making growth projects potentially uneconomic. The group's modeling indicates that aggressive expansion could necessitate the annual purchase of 1.5 million to two million tonnes of carbon credits from the mid-2030s. These additional costs could reduce Whitehaven's pre-tax earnings by six to 10 percent, placing the company in a vulnerable position.
"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," Morgan said.
The analysis also criticized Whitehaven's long-term coal price forecasts as overly optimistic, exceeding projections from investment banks and the Australian government. Market Forces noted that the company's projections align with a scenario where global temperatures rise well above 2.4 degrees Celsius, which they argue would be "catastrophic for the global economy."
Market Forces has urged Whitehaven Coal to disclose the performance of its proposed developments under scenarios with lower coal prices and reduced demand. They also called on the company to justify its expenditure on what the group describes as "risky" growth projects.
Whitehaven Coal is advancing several significant growth projects, including expansions at its Vickery and Narrabri operations and the continuation of its Maules Creek mine in New South Wales. The company also has plans for a $1 billion mine in Queensland, which could produce up to 17 million tonnes annually. This Queensland project has faced opposition and legal challenges from environmental groups.
In March, the New South Wales government implemented a ban on new 'greenfield' coal mines, prohibiting the construction of new mines on previously undeveloped land. Whitehaven Coal declined to comment on the Market Forces claims, while AustralianSuper was contacted for comment.
The company is scheduled to present its annual results to the Australian Securities Exchange on Wednesday.