Shareholder wealth destroyed as thermal coal goes up in smoke
December 21, 2019 (Sydney IEEFA) — A tipping point for the future of fossil fuels may have been reached this year as financial markets massively down-rated traditional energy companies, with their slumping share prices destroying “staggering” amounts of shareholder wealth.
That is the view of Tim Buckley, Director of Energy Finance Studies at the Institute for Energy Economics and Financial Analysis, who argues in his new report Tipping Point: Global Renewable Energy Leaders Outperform on Global Markets that professional investors now recognise the inevitability of thermal coal’s decline and the uptake of clean, renewable energy.
Investors in coal-fired power plants, he notes, “are banking on questionable premises. First that governments will not put a substantial price on carbon emissions or pollution, and secondly, that the double-digit deflation in renewable energy and battery technologies will cease.”
BUCKLEY CONTRASTS THE PERFORMANCE OF EIGHT OF THE WORLD’S LARGEST LISTED, PRIVATE RENEWABLE ENERGY ASSET OWNERS/INVESTORS that are aggressively decarbonising their holdings with diehard fossil fuel stocks, showing that renewable energy investments vastly outperform them.
The stock price of Australia’s Macquarie Group, a leading investor in green energies, has risen 129% over the last five years, quadrupling the Australian equity market’s growth. But in 2019 alone, Australia’s four main coal miners – Whitehaven, Yancoal, New Hope Corp and Coronado Coal, have declined between 18% and 37%.
“As the capital flow moves to predominantly bankrolling renewable energy, the capital market derates the incumbent industry now owning stranded thermal power plants,” say Buckley.
“The world could well look back on 2019 as the tipping point: The moment when global capital markets accepted the technology-driven inevitability of a crossover from polluting thermal coal and increased uptake of sustainable, clean, renewable energy.”
Author contact: Tim Buckley (email@example.com)
The Institute for Energy Economics and Financial Analysis (IEEFA) conducts global research and analyses on financial and economic issues related to energy and the environment. The Institute’s mission is to accelerate the transition to a diverse, sustainable and profitable energy economy.