AustralianSuper loads up on Coronado Coal

AustralianSuper, the nation’s largest superannuation fund with $180 billion under management, maintains a somewhat ambiguous position on the vexed issue of coal mining.

It is a leading member of Climate Action 100+, an international group of institutional investors that pressures big, publicly-traded polluters to reduce their greenhouse gas emissions. Notably, Climate 100+ was credited with Glencore’s decision to cap its ongoing coal production at 2019 levels.

Also last year, AustralianSuper exerted substantial pressure on the Minerals Council of Australia (and its largest members Rio Tinto and BHP) to provide further detail of its support for the Paris agreement.

Yet today, AustralianSuper remains a (small) shareholder of major Australian coal producers Whitehaven Coal, New Hope and South32.

Clear as mud, right?

Last month, debt-laden coal producer Coronado Global Resources was forced to raise $250 million in an emergency equity raising to satisfy its lenders Westpac and NAB. The largest participant in the institutional component was AustralianSuper, which took up 75 million shares at 60¢ a pop. It emerged with 8.1 per cent of the company.

Coronado owns the huge Curragh coal mine in Queensland’s Bowen Basin, which it bought from Wesfarmers. While 80 per cent of its output is coking coal for steel-making, the other 20 per cent is thermal coal sold on long-term contract to the Queensland government’s Stanwell power station.

With global coal prices at four-year lows, and the placement conducted 85 per cent below Coronado’s IPO price of $4 per share only two years ago, it’s probably a great transaction for AustralianSuper’s account holders.

The investment banks on the deal – Bell Potter, Credit Suisse, Citi and Goldman Sachs – trousered 3.75 per cent of funds raised, or $9.3 million. Taking 18 per cent of the new Coronado shares issued, AustralianSuper effectively paid $1.6 million of those fees.

Which may well be the worst use of members’ money by an industry super fund since Hostplus CEO David Elia shouted Baggy Sam Sicilia lunch at the Flower Drum.

Hilariously, the same investment banks (with UBS) ran the float in September 2018, raising $773 million in September 2018 and divvying up $26.9 million in fees between them. With their clients sitting on an 85 per cent paper loss in two years flat, we can only admire the brokers’ paranormal powers of persuasion to get those clients loading up on even more of it.