Delegates, here is the June MERC Newsletter, please circulate the Newsletter to your fellow Councillors and senior staff, so they can appreciate and understand the excellent work the Association and you are doing on behalf of your Council and community, with regard to mining and energy related matters.
New format for Newsletter
A suggestion by Cr Scott Ferguson, Blayney Shire Council Mayor and member of the Executive Committee of MERC that the newsletter have an Executive Summary at the front so busy delegates and staff of member Councils can have a quick read of the issues within the newsletter on matters of interest to them. Thereafter they can delve further into the details.
As we realise everyone is time poor so here goes with a different format for you. There will be an Executive Summary with governance items and then summaries of other items with more details are located further in. This should still give delegates the information they need albeit in a more condensed way. Hope you enjoy and any feedback would be appreciated.
(a) GOVERNANCE MATTERS
- Next Meetings of Association – Next Ordinary meeting to be held in Sydney 2nd September 2022 at Club York, Second Level, 99 York Sydney. Executive Committee meetings will be called by Chair beforehand. After that a 2 day mini conference, AGM and Ordinary meeting to be held in Dubbo, arrangements and dates to be sorted. A discussion held with Dubbo event staff on 13th July on how it may work – more later.
- COVID-19 Virus Impact on MERC – In 2022 MERC will be resuming its’ activities in the normal manner. What this means for MERC delegates is that 2022 will have quarterly as “face to face” meetings with use of zoom in exceptional circumstances. Executive Committee meetings will be by zoom means as determined.
- Speakers for Next Meeting in Sydney – Minister for Planning, Minister for Energy, Minister for Regional NSW and Deputy Premier will be pursued. CEO NSW Minerals Council has confirmed for 2nd September meeting in Sydney..
- Orana Opportunity Network (O2N) – MERC is trialling as a Bronze Member of ON2 for 12 months. Their Newsletters are available on their website on email@example.com.
- CRC Transformation in Mining Economies (CRCTiME) – MERC is a partner with CRC TiME on a no cost but consultative basis. They provide updates on progress with opportunity for members to join webinars, workshops, surveys etc. Latest update is below.
- Renewable Energy Zones (REZ) – Mike Young, Executive Director – Planning & Communities, Energy Corporation, Department Energy & Climate Change provided delegates with an informative insight on what is happening with Renewable Energy Zones in NSW. There is an opportunity for MERC to be part of a working party with Energy Co to successfully roll out the REZ’s. Waiting for Mike to get back to EO to talk about opportunities for MERC to be involved in the REZ roll-out.
(b) MATTERS OF INTEREST
- Department Fair Trading – Proposed Constitutional Changes
The NSW Government wants to update rules for the day-to-day operation of incorporated associations so they are fairer, more productive and better meet the needs of the community and business. We have drafted a proposed Regulation* that keeps many of the existing rules, but introduces some new requirements in areas such as:
– using technology for committee and general meetings
– financial reporting requirements
– postal or electronic ballots
– filling casual vacancies.
- Mine Safety News – NSW Mines Regulator
We’ve released a consolidated report on air quality, dust or other airborne contaminants at above surface coal mines, based on findings from our assessment of 36 mines between December 2020 and October 2021. Airborne contaminants include fumes, mist, gas, vapour, dust or other microorganism that are potentially harmful to workers.
We commend the sites with best practice controls and monitoring equipment to ensure exposure to airborne contaminants is minimised, however workers at some sites had difficulty identifying the range of airborne contaminant hazards in their workplace.
Of the 36 sites assessed under the inspection program, 17 separate mines were given notices relating to the principal hazard of air quality or dust or other airborne contaminants. The consolidated report includes key assessment findings as well as recommendations to industry
- Hunter Valley Mining Land Could Create 13,000 jobs if Reused.
Repurposing defunct mining land for use by the renewable energy, agriculture, manufacturing and conservation sectors could create more than 13,000 jobs in the Hunter Valley, a report says. Key points:
– 130,000 hectares of mining land is scheduled for release over the next two decades;
– A report says the land could be “maximised” for use by various sectors;
– Environmental lobby group Lock the Gate commissioned the report by EY Consulting.
The Diversification and Growth: Transforming Mining Land in the Hunter Valley report, commissioned by Lock the Gate, says $3.7 billion in gross economic output over a 25-year period could be generated, alongside $7b in potential industry output, if steps are taken to transform former coal mining sites. It also argues more needs to be done than the current “minimum legal standard” that mine owners have to abide by in terms of land rehabilitation.
“The release of land as mines are scheduled to close and the global shift from coal provides the Hunter with new opportunities to pivot its economic base while leveraging its major workforce, industry and supply chain strengths,” the report by EY Consulting said
Research from the University of Newcastle released to the ABC earlier this year concluded that almost 17,000 people in the Hunter Valley worked in a direct or indirect mining job, and that 50 per cent of Greater Hunter residents wanted to see a transition away from fossil fuels.
“For the Hunter, the phasing down of fossil fuel based industries creates several key vulnerabilities, especially managing the transition of its large industrial employment base,” the report said.
- CRC for Transformations in Mining Economies (CRC TiME)
CSIRO Futures is partnering with the Cooperative Research Centre for Transformations in Mining Economics (CRC TiME) to scope a potential project on the opportunity for the Australian Mining, Equipment, Technology and Services (METS) sector to improve mine closure outcomes. While this study is in the scoping phase they are seeking interviews with key CRC TiME partners to guide the direction of the project, including identifying key questions that the project should seek to address and opportunities for the project to add value to the sector.
Other topics discussed in this interview may include:
– Barriers to successful mine closure
– Strengths of the Australian METS sector in mine closure activities
– Opportunities for the METS sector to support local solutions to improve economic, environmental and social outcomes.
Interview with Executive Officer occurred 10th June where NSW’s Resources for Rejuvenation project was outlined to them.
Hunter Hydrogen Symposium
RDA Orana and the Orana Opportunity Network are proud to be partnering with New H2 in the development of the Hydrogen Hub in the Hunter and are working to ensure that the hub supports hydrogen projects in our region.
Following a year of work, New H2, is presenting the Hunter Hydrogen Symposium, bringing together leaders across government, industry and academia to explore the most recent developments, challenges and opportunities across the Hydrogen sector.
The event includes a limited-seat industry dinner on Tuesday, August 2nd at Fort Scratchley – co-hosted by HunterNet and Business Hunter – followed by a full-day symposium at Rydges Newcastle. The symposium will showcase the hydrogen projects underway across the region, provide an update on policy developments, and discuss the latest advancements in hydrogen research and innovation. The symposium will also provide a platform to navigate the conversations required for both industry and community in the Hunter that will support and underpin the region’s growth. Enquiries to RDA Orana
- Environment Protection Licence
New standard conditions for large mines with an Environment Protection Licence come into effect from 2nd July 2022. The reforms are set out in Schedule 8A of the Mining Regulation 2016 & will bring greater consistency across all large mines in NSW.
Andrew Bray, National Director, Re-Alliance, June 2022 writes:-“We’re in the midst of an energy crisis. Power prices are rising, there’s a threat of blackouts in some states and the Australian Energy Market Operator has just temporarily suspended the electricity spot market. All this has been brought about by a number of factors – the key one being our reliance on fossil fuels.
Outages at coal-fired power stations have exacerbated an energy supply crunch, and the high cost of fossil fuel generation has made the market “impossible to operate”.We need an energy market that can operate with stability and provide affordable power to Australians.
The good news is that we know how to achieve this: by investing in renewable energy infrastructure. Renewables can provide us with clean, reliable and cheap power, and with an abundance of solar and wind, we can be self-reliant on our energy sources.
Regional communities must be active participants in our energy transformation, and we want to see more accessible decision-making processes, higher and fairer payments to transmission hosts and neighbours, and action to coordinate best possible local outcomes during the peak construction phase.
Last week, we were pleased to see two key announcements that promise a swifter and more thoughtful approach to our transition to renewables.
1. Energy ministers from across the country met and agreed to develop a national transition plan for Australia’s energy sector to reach net zero.
With a breakdown in collaborative action between energy ministers over the past decade, it was heartening to see ministers meeting collegially again. They focused on actions to address the current energy challenges, but also recognised the need for large-scale renewable generation and agreed to develop a strategy to transition to net zero. We hope this is the start of a much-needed coordinated approach to Australia’s energy transition.
Read more about what this meeting means for our energy future.
2. The NSW Government announced a $1.2billion investment in transmission and storage infrastructure to facilitate the development of NSW’s Renewable Energy Zones.
Urgently building transmission infrastructure is crucial to our energy transformation, and so we’re pleased to see this investment from the NSW Government.
We hope this development will be thoughtful and incorporate more community voices and needs, such as for increased and fair landholder payment arrangements for those hosting new transmission infrastructure. Read more about this announcement.
In other renewable energy news, the 2022 National Renewables in Agriculture Conference and Expo is happening in Albury on Thursday 18 August. Integrating agricultural practices into a renewables future is critical, and as interest in on-farm renewable energy explodes amid skyrocketing electricity prices, it’s a pertinent time to be having these discussions. Click here for tickets and more info.
Our energy system is clearly in a mess right now, but we know the steps that are needed to fix it. If we have the courage to make these changes and bring regional communities with us at the same time, we’re hopeful that this could be the last energy crisis we see.
- Renewable Energy Zones (REZ’s)
A REZ is a hub of renewable projects across a region that forma a modern-day power station, producing a large amount of energy for the State. The State Government has set them up in the New England, Southern NSW and Hunter/Central Coast Regions. The latest updates from Energy Corporation NSW & NSW Consumer Trustee, by James Hayes, CEO EnergyCo:
”We are pleased to announce that the NSW Government has reached another important milestone in delivering the Central-West Orana REZ Access Scheme. Access Schemes are a key part of the NSW Government’s plan to coordinate new renewable energy and storage investment in REZs across the state”.
If MERC is to get more involved in the REZ’s it would need to have a discussion at a future meeting to review the current Strategic Plan actions and how it would like to resource any actions if it were to become more involved in the processes across the whole of the State given the growth of the REZ throughout NSW. Waiting on Mike to outline how this would work.
Related Matters of Interest – Coal Mining, Renewable Energy & Microgrid Issues
“Recycling Centre Tests Solar System Made of Second-Hand Panels in Landmark Plot’ Sophie Vorath writes on 14th July 2022: “A waste and recycling centre in the New South Wales regional centre of Dubbo has become the testing ground for a ground breaking solar project – the installation of an 8kW PV system using second hand panels.
Dubbo Regional Council (DRC) announced its participation in the trial on Tuesday, in partnership with Blue Tribe, CSIRO, Solar Professionals and the New South Wales state government. Council’s role is to host the second-hand solar system on its Small Vehicle Receival Centre at the Whylandra Waste and Recycling Centre.
If all goes to plan, it’s hoped that Dubbo residents can reuse solar panels in their own homes or businesses. The project was born when School Infrastructure NSW, faced with the challenge of de-commissioning around 30,000 PV modules over the coming few years, engaged Blue Tribe to help work out how to manage the solar waste stream responsibly.
As Blue Tribe tells it, “numerous ideas were developed and the Second Life Solar concept was born.” That concept – and plans to give it a test-run with a second-hand system in Dubbo – then received NSW government backing in the second round of the Environment Protection Authority’s Circular Solar grants program.
The Circular Grants scheme aims to address the estimated 3,000–10,000 tonnes a year of waste solar panels and battery systems NSW alone is expected to be generating by 2025; and 40,000-71,000 tonnes per year by 2035.
Solar panel collection and recycling programs will be a huge part of the solution to this waste problem, and a dedicated solar recycling industry is slowly establishing itself in Australia, via start-ups including Reclaim PV, the Solar Recovery Corporation, and a co-operative called Lotus Energy.
But recycling is not the only option. As One Step reported here, another important avenue that is being explored is the market for second-hand panels, which currently exists at a niche level, only – but holds major potential.
Solar panels are designed to operate for 25-30 years but as consumers upgrade to larger rooftop systems, they are often replacing modules that are still fully operational and less than 10 years old – and because they don’t know what else to do with them they often wind up in the tip. In Dubbo, which has been a leader in rooftop solar uptake in New South Wales, this threatens to become a big problem for local waste management services – unless, of course, it can be flipped into an even bigger opportunity.
“There are more than 2.8 million small-scale solar systems installed Australia-wide, and Dubbo is the second largest installer of small-scale solar systems in NSW,” said the DRC’s manager of resource recovery and efficiency, John Wisniewski. “So if we can find extended uses for our solar panels, we’ll be reducing our overall environmental footprint,” he said, adding that the trial would also help boost the service life of solar panels, increase the uptake of renewables and help meet Council’s 50% renewable energy target.
“Around the country we are installing record amounts of rooftop solar systems but at the same time we are also throwing away fully functioning older solar modules into landfill,” said James McGregor from the Blue Tribe Company. “As we transition to 100% renewables it is like filling up a bucket with a hole in the bottom of it. “This project is about giving these panels a second life by diverting them from landfill and utilising them to continue to generate clean energy to help us get to NSW’s net zero targets sooner,” he added.
“We couldn’t think of a better place to trial this than at DRC’s Whylandra Waste and Recycling Centre in the heart of one of the leading solar communities in Australia.”
NSW isn’t the only state exploring this avenue for used solar panels. A Queensland-based research project investigating the potential to reuse second-hand solar panels, including on the rooftops of households unable to afford the cost of a new PV system, recently won the backing of Energy Consumers Australia.
The project, called Reclaimed PV Panels Market Assessment, and led by the University of Queensland, will use the $42,869 ECA grant to explore potential revenue streams and consumer interest for used solar panels. The project will also identify current market or policy barriers to reusing, repurposing, and recycling discarded solar modules, and explore opportunities to use a circular economy to better include consumers not currently able to access PV due to financial constraints”.
“Warren Buffett Snaps Up 2 Australian Solar Farms & Big PV & Storage Pipeline” Giles Parkinson, 7th July 2022 writes: “US investment magnate Warren Buffett has made his first major play into the Australian renewables sector, with the purchase of two operating solar farms in New South Wales, and a deal to co-develop a multi-gigawatt pipeline of solar and battery storage projects.
The two NSW projects are the 150MW (ac) Suntop solar farm and the 105MW (ac) Gunnedah solar farm, which have been bought from Canadian Solar by CalEnergy Resources Australia, a subsidiary of Northern Powergrid, which is in turn is owned by Buffett’s Berkshire Hathaway Energy Co.
The deal between Canadian Solar and Buffett’s CalEnergy extends to a multi-year development services agreement that provides a framework for the two companies to work together to build out Canadian Solar’s growing renewable energy pipeline in Australia.
Buffett’s main renewables play so far has been through MidAmerican Energy, based in Dec Moines, Idaho, along with much of his other businesses, but of his renewables play has been in wind energy, not solar.
MidAmerican boasts more than 7,300MW of wind capacity and 64MW of solar energy in its renewable energy portfolio and has plans for a big 2GW wind project with some 50GW of solar. He is also behind the Gemini project in Nevada which will boast 690MW of solar and 590MW of battery storage (no duration revealed).
“We are delighted to work with CalEnergy in Australia to grow their renewable energy portfolio,” said Dr. Shawn Qu, the chairman and CEO of Canadian Solar. “The sale of these projects in New South Wales paves the way for a strong collaboration between our respective companies. In Australia, we have now brought seven development projects to NTP (notice-to-proceed) and beyond and continue to develop and grow our multi-GW solar and storage pipeline. “I look forward to continuing to contribute to Australia’s decarbonization and renewable energy growth ambitions.”
Suntop and Gunnedah both have long term supply agreements with global online shopping giant Amazon for around two thirds of their output, part of Amazon’s commitment to source the equivalent of all its electricity consumption from renewables. Amazon announced in May that both Suntop and Gunnedah had started sending power to the grid.
Canadian Solar says the two projects, which have a combined capacity of 345MW (on a dc basis) have now reached substantial completion and are expected to generate more than 700,000MWh a year, avoiding more than 450,000 tonnes of CO2-equivalent emissions annually.
These are the first operating assets in Australia for CalResources, which has focused mainly on the oil and gas industry since being established in the 1970s and owns two as yet undeveloped gas projects in Australia. It also owns projects in the UK and Poland. Its project developments are managed by Perth-based Travis Enman, an ex Woodside and Shell executive who established the company’s Australian operations since 2011.
“EnergyAustralia Downgraded Over Coal Plant Breakdowns, Coal Supply Shortages” Giles Parkinson writes 7th July 2022 : “The repeated breakdowns at the ageing Yallourn coal generator in Victoria and the coal supply shortages at the Mt Piper coal generator in Victoria have led to a significant downgrade of EnergyAustralia by the international ratings agency S&P Global Ratings.
The downgrade to BBB- from BBB+, and its negative watch, will lead to a bigger bill for borrowings, and comes as analysts take stock of depleted earnings, margin calls, and the possibility that EnergyAustralia – one of the country’s big three “gen-tailers” – may breach its debt covenants and go its parent for more funds.
EnergyAustralia and other big coal generators should be rolling in windfall profits given the high wholesale electricity prices in Australia, but the fact that many have suffered multiple outages and have also had to buy coal supplies on the spot market has led to big losses instead.
S&P says EnergyAustralia is facing a $200 million hit to its earnings this calendar year, a $1 billion liquidity crunch on the margin calls, and its ability to cash in on high prices in coming years is in doubt because its coal generators are not reliable.
“EA has faced several unplanned outages at its coal plants, mainly at the ageing Yallourn plant, along with coal supply shortages at Mount Piper. Management actions have not yet materially improved operational performance over the past few years,” it noted. “Exacerbating this are volatile wholesale market conditions. Several baseload coal plant outages, extreme weather, low output from renewables, and high demand have forced up electricity prices.
”It says EA faces potential liquidity issues, despite a cash balance of around $490 million, and will have to use its parent company CLP as a “backstop” for any further liquidity needs “over the next 12 months at least.”
The issue is further complicated by the uncertainties created by the age of Yallourn plant, questions about resumption of adequate coal to Mount Piper, and the future course of coal prices. EA also needs to spend on transitioning its portfolio to replace its retiring fleet, including in at least one big battery project in Victoria, and potentially some pumped hydro projects in NSW.
“We believe EA may be at risk of breaching one of its debt covenants, being the interest coverage ratio. The interest coverage ratio threshold is required to be greater than 1.45x and is calculated on a rolling 12-month basis as of end of June and December. “We believe that the management will be proactive in managing any potential breaches, if required. We will monitor the progress; and this risk is incorporated into the negative outlook.
S&P notes that EA’s dependence on fossil fuels (54 per cent coal and 30 per cent gas) that are subject to more frequent outages and other operational issues leave it exposed to climate transition risk, like its other big peers who have also failed to keep up with the switch to
renewables. “Exposure to flooding and end-of-life asset retirement costs and associated waste management also increase medium-term environmental risks.”
Meanwhile, Origin Energy, which has made similar profit warnings because of coal supply problems for its Eraring coal generator, has confirmed one of the four units at what is the country’s biggest coal generator remains out of action. “A fault caused unit 1 at Eraring to come offline on Tuesday evening, and our onsite team is currently working to diagnose the cause and the actions we need to take to rectify it over coming days. Eraring’s other units are not affected,” a spokesperson said.”
“Works Start at Big NSW Solar Project to Power NBN” Michael Mazenbarb 7th July writes: “Construction works have commenced at a south-central New South Wales solar farm, and will mark the first step towards the National Broadband Network sourcing all of its power needs from renewable energy sources.
The 75MW Wyalong solar farm is being developed by Greek-based Mytilineos and will sell around half of its output to NBN Co under a 10-year power purchase agreement, the first of several NBN expects to sign to meet its 100 per cent renewable energy target. A ground-breaking ceremony for the project was attended by federal communications minister Michelle Rowland, who said the solar project would supply the NBN with 80GWh, enough to supply the broadband network with around one-fifth of its energy needs.
“This initiative will not only support NBN Co with their climate transition, it will also support Australia’s transition to net-zero and create up to 150 jobs in the Griffith and West Wyalong community and stimulate the local economy,” Rowland said.
“It is critical Australian organisations and communities find ways to reduce emissions, and NBN Co through its 100 per cent renewables commitment is not only reducing emissions, it is also the first Australian telecommunications company and Australian government business to join the global RE100 initiative,” Rowland added.
The event was also attended by former Nationals leader, and local MP, Michael McCormack, with the project to involve the installation of around 127,000 solar panels and engaging 150 workers during the construction phase. Construction of the solar farm is expected to be completed over the next six months, with first power produced in late 2022.
NBN Co announced its commitment to the RE100 initiative in December last year, which sees corporate energy buyers commit to purchasing the equivalent of all their electricity needs from renewable energy sources. It has committed to transitioning to 100 per cent renewables by the end of 2025 and will participate in the Science-based Targets Initiative, with NBN indicating it will publish targets for its Scope 1, Scope 2, and Scope 3 emissions later this year.
NBN Co chief development officer, Gavin Williams, welcomed the commencement of construction at the first project that will supply renewable power to the telecommunications company. “It’s particularly pleasing that we are moving from ambition to action and demonstrating through deeds rather than words, our commitment to reduce emissions and support the nation’s transition to a net-zero carbon economy,” Williams said. “We have a strong commitment to helping make the network as efficient and resilient as possible.”
“As we deliver on our company purpose to lift the digital capability of Australia not only are we aligning with the latest climate science we are also playing a role in helping support climate technologies and the livelihoods of people working in new energy jobs.”
Telstra announced a commitment to shifting to 100 per cent renewable energy in early 2020, and Optus made a similar commitment in May this year – but neither of the telecommunications giants appear to have signed up to the RE100 initiative.
“Whitehaven Coal Urges NSW to Keep Hands off Coal Cash Cow” Peter Ker Resources reporter in the Financial Review, Jul 18, 2022 writes: “Cashed up coal miner Whitehaven says it will make sure politicians in NSW understand the consequences of increasing royalties ahead of next year’s state election, as a global energy shortage prompts customers to seek contracts that are double or triple the normal duration. The politics of energy dominated Whitehaven’s investor update on Monday, which sparked a surge in the company’s share price to record levels when managing director Paul Flynn indicated next month’s full-year earnings would be 15 times higher than last year.
A series of geopolitical interventions over the past two years have caused extraordinary turbulence in coal markets and resulted in prices for top quality NSW thermal coal being nine times higher than they were in August 2020. At $US433.90 a tonne on Friday, top quality NSW thermal coal was close to the record price of $US436.07 a tonne set on May 20. Prior to September last year the price had never been higher than the $US194.79 set in 2008 and the price was below $US50 per tonne in August 2020.
China’s ban on Australian coal in 2020 combined with numerous weather and pandemic related disruptions to mines in several nations – including multiple incidents of flooding in NSW – to drive coal prices to record levels long before war in Ukraine prompted many coal consumers to blacklist Russian products and drive prices even higher. European nations will officially stop using Russian coal on August 10 and Mr Flynn said Whitehaven had agreed to send a few shipments of NSW coal to European customers.
But fresh from a trip to Whitehaven’s biggest sales destination, Japan, Mr Flynn said he remained focused on servicing the North Asian customers that had supported the business over the past decade and the South East Asian customers that are expected to be the world’s strongest future growth market for thermal coal. Mr Flynn said those Asian customers were more focused on long-term security of supply than the extremely high prices they were having to pay for coal.
“Customers are really just worried about continuity of supply, they were quite measured in their conversations, they all understand cycles come and go they were starting to raise their attention more toward two to three-year type contracts and it was really just about locking in that physical supply rather than price right now,” he said. “Our existing customers, they are starting to look at longer-term arrangements so where we have had an evergreen type annual contract, they are looking to do something a little more firm and put a second or third year on the back of that.
“It is really just about locking in that physical supply rather than price right now. There is a tricky balance we are going to have to manage here in terms of interest from non-traditional jurisdictions and balancing the needs of existing customers who have been with us a long time. That promotes more [coal market] tightness and presumably a longer horizon of good pricing here.”
Whitehaven said it expects to report $3 billion of full-year earnings before interest, tax, depreciation and amortisation (EBITDA) next month; up from $204.5 million for the year to June 2021.
Less than two years after the miner was asking lenders for covenant relief, Whitehaven now has net cash of $1 billion and will continue making huge cashflows for a while yet based on the traditional lag of several months between market prices and the prices Whitehaven’s customers pay for their coal.
Whitehaven has a share buyback program underway and Mr Flynn will reveal more about the company’s plans for shareholder returns on August 25. Record coal prices and profits are prompting governments to seek a bigger share of the spoils; the Queensland government infuriated miners last month when it added three new levels to the state’s coal royalty regime.
Mr Flynn said the changes were “very negative” and had reduced the net present value of Whitehaven’s undeveloped Winchester South coking coal project in Queensland by 3 per cent. Winchester South was supposed to be Whitehaven’s first step beyond mining in NSW and Mr Flynn said he hoped NSW did not follow suit next year.
“We will be making sure that NSW government leading up to the election in March next year understands the critical role the resources sector plays in NSW and … further investment needs certainty,” he said. “Unpredictable things that occur, such as in Queensland, don’t really foster the confidence necessary to commit billions of dollars of capital to the projects this industry typically spends.”
The NSW government did not change coal royalty rates in last month’s pre-election budget but many in the mining industry fear it will be politically easier to raise royalties next year after the election.
Asked whether governments still cared whether there was investment in more coal projects, Mr Flynn said he believed they did, particularly in Queensland where coal was a big part of the economy. Whitehaven has all state and federal approvals in hand to build a new coal mine at the Vickery site in NSW where Rio Tinto previously mined coal with high-energy content.
In previous years Mr Flynn expressed frustration that Vickery was being delayed by slow approvals processes and legal challenges by environmentalists, but in the past 18 months Whitehaven has repeatedly signalled that it is not in a rush to develop the mine.
Mr Flynn extended the wait for development of Vickery again on Monday when he said Whitehaven was unlikely to take a final investment decision on the project within the next 12 months; a comment he has been making for more than 18 months now.
By waiting longer before developing Vickery, Whitehaven may allow the market for skilled labour to cool from the extreme tightness that is currently forcing it to pay quarterly retention bonuses to key staff. Consumables are also extremely expensive at the moment, with Mr Flynn revealing that suppliers were imposing 26 per cent increases on the price of truck tyres.
It may also allow Whitehaven to use Vickery – which is expected to cost between $700 million and $1 billion – as leverage in royalty discussions with politicians ahead of the NSW election in March 2023.
Mr Flynn said the strong interest Japanese coal-fired power generators had shown in buying Vickery’s coal in years gone by remained evident on his recent trip to Japan. “They know there is going to be structural tightness in the market for some time to come and speaking to the customers, across a few customers there was an aggregate of some 3000 new megawatts coming on, ultra-super critical plants, all of which would be ideally suited to Vickery,” he said, in reference to the new coal-fired power stations under construction in Japan.
“They are brand new units coming on with 30 or 40 year type horizons on them and they are wondering where that coal of the future is going to come from if people stop investing [in new mines].”
Whitehaven shares traded above $6 on Monday morning for the first time since the company took on its modern structure in 2012 when three small companies – Aston Resources, Whitehaven Coal and Coalworks – combined to form a single company.
Shaw and Partners analyst Peter O”Connor said it was “not ludicrous” to suggest Whitehaven shares could soon be fetching $10 per share. “The cash cow will keep on giving for at least another couple of quarters, at this super elevated rate, not least because of pricing lags,” he said in a note.
Asked whether he was seeing evidence that sustainability focused investors were changing their attitudes toward coal in the wake of the energy price crisis sweeping much of the world, Mr Flynn said he believed change was underway.
“The sentiment has certainly moved. No one is forgetting the [emissions reduction] commitments that each country has made but I think everyone is looking at this and saying ‘look how fragile our energy system is’,” he said.
Disclaimer The comments and details in the articles in this newsletter do not reflect the views, policies or position of the Association or its member Councils and are sourced and reproduced from public media outlets by the Executive Officer to provide information for members that they may not already be exposed to in their Local Government areas