The investor-led U-turn highlights the conundrum facing fossil-fuel companies and the shareholders that own them. — AFP
LONDON: Glencore Plc has abandoned plans to spin off its coal unit just nine months after saying it would exit the profitable but polluting business, following discussions with its shareholders who pushed back against the move.
Glencore’s announcement last year that it would split itself in two by hiving off coal marked a major strategic pivot for the company, as well as a watershed moment for the wider mining industry as the biggest shipper of coal – and one of its biggest champions – prepared to follow its rivals in exiting.
The investor-led U-turn highlights the conundrum facing fossil-fuel companies and the shareholders that own them.
From coal to oil, producers have come under pressure to cut their emissions – but that would mean missing out on the bumper profits they’re still pumping out.
For many investors, Glencore offers a unique proposition: a miner that produces metals like copper that are needed to decarbonise the global economy, while also generating huge coal profits.
The company has spent the last month consulting shareholders, and the majority of those that expressed a clear opinion were in favour of keeping the coal unit to help fund growth in metals and support shareholder returns, Glencore said on Wednesday.
Glencore’s coal business is one of its most profitable units, driving record returns in recent years.
It has benefited significantly from the energy crisis in the wake of Russia’s invasion of Ukraine, as well as a dearth of new production as rivals and banks turn their back on the sector.
And while the West is seeking to wean itself off the dirtiest fuel, global demand for coal is at record levels.
The announcement in November that Glencore planned to spin off its coal business promised to represent a defining moment in the tenure of chief executive officer Gary Nagle, who took the helm three years ago from long-time chief executive officer and top shareholder Ivan Glasenberg.
The remaining company would have been one of the biggest miners and traders of copper, nickel and cobalt – all essential commodities for the energy transition – but without the financial cushion provided by coal.
On Wednesday, Nagle indicated shareholders have made the right decision, telling reporters that “common sense has prevailed”.
Asked about what had changed to explain the pivot, the chief executive said the “Environmental, social and governance pendulum had swung back” in the past year, and that investors recognised that Glencore was the best owner of the coal business.
Glencore announced the decision on coal alongside its first-half financial results, which included core earnings of US$6.34bil, down 33% from a year earlier.
Its sprawling commodity trading business also reported a sharp drop in earnings as the volatility that its traders thrive on began to fade, with profit of US$1.5bil in the first half. — Bloomberg
