Coal 1-Green Power 0. If anyone had been keeping score in the lead-up to the Copenhagen climate change summit over the past few months that would be the unlikely result. The summit may be dominating the headlines, but on the stockmarket money is heading towards — in some cases returning to — coal.
Earlier this week Rio Tinto dumped a gas-based carbon capture project to concentrate on a coal and petroleum coke project. On Tuesday the Queensland government announced the $7 billion float of what is effectively a “coal carrier”, Queensland Rail. Yesterday those lucky enough to get on board the IPO of Stanmore Coal booked a 100% profit on its first day of trade.
Politicians, and many of the people who elect them, strongly favour renewable energy and dislike fossil fuels such as coal and oil. Money disagrees. Money is voting heavily for coal, as a survey of Australia’s top coal and renewable energy stocks reveals.
Since July 1 an investor who owned a portfolio of six of the biggest locally listed coal stocks would have enjoyed a collective rise in value of 27.7% before dividends, outperforming the ASX 200’s increase of just18.1% increase. Over the same period the top six renewables trailed the ASX 200 during the period, achieving a gain of just 16.7%.
It’s worth noting the Queensland Rail float has a notional value of $7 billion and will create one of the biggest stocks on the ASX, with coal hauling at its heart. It will be a business that roughly resembles the US coal-hauling company Burlington Northern Santa Fe, which is subject of a $US34 billion takeover bid from high-profile investor Warren Buffett.
Coal remains a critical part of the industrial and investment worlds and it would be a courageous investor who ignores that reality, even if they disagree with the poor environmental effects of burning coal. The Eureka Report test of “coal versus renewables” underlines the investment case of money versus the somewhat ambiguous claims about climate change, its cause and effect, and whether the numbers underlying the debate have been fudged by “irrationally exuberant” scientists.
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