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The activist shareholder group Market Forces has asked the corporate watchdog to investigate whether the New Hope coal company has misled investors by claiming that coal “will remain an important part of the energy mix.”
In letters to New Hope Corporation and the Australian Securities and Investments Commission, lawyers for Market Forces say statements by the company’s chief executive, Reinhold Schmidt, may constitute “deceptive and deceptive conduct” under of the Corporations Act.
In September of last year, Schmidt told the Australian Financial Review that “thermal coal is part of the long-term energy mix, it will always be there.”
At the company’s annual general meeting the following month, Schmidt was asked if he was upholding this statement. He responded by referring to the “current policies” and “stated policies” scenarios of the International Energy Agency.
“If you look [those scenarios] coal will remain… an important part of the energy mix. Australia has a very important advantage over other coal producers; our charcoal is of better quality and my statements remain unchanged.
In its letters, Market Forces says the statements omitted that the IEA had qualified its forecast by highlighting “significant uncertainties, including faster action to phase out coal.”
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The investor action group also alleges that New Hope – a purely coal-fired thermal company – may have misled shareholders by selectively referencing only the two most optimistic IEA scenarios about the continued use of coal, as opposed to two other scenarios that modeled a more aggressive approach to global climate action.
“A reasonable New Hope shareholder could be misled into believing that the IEA had predicted that coal would be a ‘significant part’ of the energy mix, and not that the IEA had also created forecast scenarios in which the demand for coal could decrease considerably by 2040 and unspecified that either scenario is more likely than the other, ”the letter to Asic said.
David Morris, chief executive of the Environmental Defenders Office, which acts for market forces, said consumer laws contained guarantees “so that investors can understand what reshaping economies means.”
He said that although the executives of the coal companies sincerely believed that coal would not be phased out, they were still required to disclose the relevant risks to shareholders.
“Companies like New Hope need to tell the whole truth, not a handpicked story,” Morris said.
“Our legal framework does not allow companies to omit key facts so as to mislead investors in their financial product. The IEA is clear enough to say that none of their scenarios are pre-established, all are possible.
“But they said if you want to meet the Paris target, you don’t need any new coal, no new gas, from now on. This is a relevant fact that should be borne in mind of any investor in an outright coal business.
Christian Slattery, a Market Forces activist, said New Hope’s business strategy depended on “coal scenarios consistent with the failure of the Paris agreement.”
“This company is betting the house against our climate,” he said.
“By doubling down on dirty coal expansions in the face of increasing climate action, New Hope is building a financial house of cards that puts its shareholders and investors at enormous risk.”
New Hope has been approached and declined to comment.
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