Norway's sovereign wealth fund asked miners to consider coal demergers

Norway's influential sovereign wealth fund asked mining companies in its investment sphere to consider spinning out their coal assets in 2015.

The fund, which is a top five shareholder in BHP Billiton, made the request just months before BHP spun out South32.

The Norwegian sovereign wealth fund has not named the miners it has asked to consider spinning out coal assets, but the ...
The Norwegian sovereign wealth fund has not named the miners it has asked to consider spinning out coal assets, but the list is likely to include BHP and Anglo American. Photo: Rob Homer

The coal push was revealed in the fund's 2015 annual report.

It also shows the fund divested from 73 companies in 2015 for ethical and governance reasons.

The fund has made headlines in recent years for its increasingly strict stance against investing in fossil fuels.

It took the stance further in 2015 by asking miners to consider divestments of their own.

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"In the first quarter of 2015, we started dialogues with a number of electricity producers about their plans for transitioning to less emission-intensive energy systems, and with mining companies, requesting their views on a possible move in the industry towards spinning off coal-mining operations," fund management said in the annual report.

"We sought public reporting that demonstrates companies' approach to divesting from, or spinning off, coal assets."

The fund did not name the mining companies it asked to consider spinning out coal assets, but the list likely included BHP and Anglo American.

The push came about six months after BHP revealed the assets that would go into its demerger, including South African thermal coal and Illawarra coking coal. 

It was a couple of months before that demerger was completed in May 2015.

When asked whether the fund had asked BHP to spin out coal assets, a BHP spokeswoman said the company would not reveal details of meetings with shareholders.

The fund's coal request resulted in a series of meetings where mining companies outlined plans on how to transition to a low carbon future.

The fund said it had attended such a meeting with BHP.

"In September, we joined a scenario planning seminar hosted in London by BHP Billiton. We also welcome the publication of a position statement on climate change by Anglo American," the fund said in its annual report.

Shortly after that September meeting, BHP published its "climate change portfolio analysis" which outlined how it planned to continue operating profitably in a carbon-constrained world.

"In a 2 degrees scenario, we expect the demand for most of BHP Billiton's products will continue to rise in absolute terms. As the energy mix changes, copper, gas and uranium could see stronger demand than otherwise would have been the case," BHP's chief commercial officer, Dean Dalla Valle, said on September 29.

BHP still has metallurgical coal assets (an ingredient in steel) in Queensland and a smaller thermal coal (for energy) presence in the Hunter Valley, NSW.

The Norwegian fund said it was more concerned with thermal coal than metallurgical coal.

"Mining companies focusing on metallurgical coal that can be used in the production of steel were retained in the portfolio," the fund said.

Eleven of the 73 companies divested by the fund in 2015 were rejected because of links to coal.

The fund divested from 14 companies with coal links in 2014, and it was believed that Australia's Whitehaven Coal was one of those.

The fund continues to invest in BHP and Anglo American, as well as Australian stocks like Woodside Petroleum, Santos, Oil Search and Newcrest Mining.

The fund, which was amassed on the back of Norway's oil reserves in the North Sea, made a return of 7.58 per cent in 2014.

It made a return of -0.79 per cent in the first nine months of 2015. It has not yet reported full-year results for 2015.

The fund's value was estimated to be more than 7 billion Norwegian kroner ($1.1 trillion) at the end of 2015.

It had been previously reported that BHP considered demerging its coal assets under the umbrella of "project fresh" when coal prices were close to their 2011 peak. 

That plan had not been confirmed publicly.

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