"Glencore Abandons Plan to Exit Coal After Investors Say No"

" Glencore Abandons Plan to Exit Coal After Investors Say No \r\n \u00a0Glencore 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. \r\n Glencore\u2019s 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 \u2014 and one of its biggest champions \u2014 prepared to follow its rivals in exiting. \r\n Glencore\u2019s 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 \u2014 but that would mean missing out on the bumper profits they\u2019re still pumping out. \r\n For many investors, Glencore offers a unique proposition: a miner that produces metals like copper that are needed to decarbonize the global economy, while 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 favor of keeping the coal unit to help fund growth in metals and support shareholder returns, Glencore said on Wednesday. \r\n Glencore\u2019s 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\u2019s 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. \r\n 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 longtime CEO and top shareholder Ivan Glasenberg. The remaining company would have been one of the biggest miners and traders of copper, nickel and cobalt \u2014 all essential commodities for the energy transition \u2014 but without the financial cushion provided by coal. \r\n On Wednesday, Nagle indicated shareholders have made the right decision, telling reporters that \u201ccommon sense has prevailed.\u201d \r\n Asked about what had changed to explain the pivot, the CEO said the ESG pendulum had swung back in the past year and that investors recognized that Glencore was the best owner of the coal business. \r\n Glencore announced the decision on coal alongside its first-half financial results, which included core earnings of $6.34 billion, 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 $1.5 billion in the first half. Glencore rose 0.8% by 8:21 a.m. in London. \r\n Built on Coal \r\n Coal has always formed a central part of Glencore\u2019s business and an exit seemed an unlikely proposition for a company that was built on the dirtiest fuel. \r\n Glasenberg, who led the company for two decades, was a former coal trader who would often point to the insatiable demand from Asia even as the west moved to step back from coal. Glasenberg\u2019s last deal while preparing to step down in 2021 was the purchase of a thermal coal mine in Colombia. Nagle, his hand-picked successor and a fellow South African, also started his career in the coal business and has also long defended the fuel. \r\n Glencore has said repeatedly that it would exit if there was pressure to do so from investors, but for years the company kept digging up coal while most of its biggest rivals sold out. (Glencore\u2019s plan was instead to run its existing operations until they were depleted.) \r\n That appeared to change when Glencore tried to buy Teck Resources Ltd. a year ago, with a proposal to split the combined company into two separate coal and metals producers. \r\n Glencore failed to win Teck, but it did walk away with its coal mines as a consolation prize. It announced at the same time that it planned to separate out the coal business anyway within two years after the deal closed. The decision was based on positive feedback from investors to its original plan for Teck, the company said on Wednesday. \r\n Yet over the months that followed, it became increasingly clear that investors were not ready to say goodbye. Bloomberg reported in April that several of the company\u2019s top holders favored keeping the coal business. \r\n After Glasenberg, who owns 9.9%, Glencore\u2019s biggest shareholders are Qatar\u2019s sovereign wealth fund, Capital Group and BlackRock Inc. If Glencore had gone ahead with its spinoff, many investors including BlackRock would have seen their exposure to the profitable coal business cut off because of policies that prevent them from owning pure-play coal companies. \r\n Buying Teck\u2019s mines saw Glencore take control of a large suite of coking coal mines \u2014 used to make steel \u2014 that\u2019s now added to its own business that was predominantly based around thermal coal that is burned to generate power. \r\n The discussion over the future of Glencore\u2019s coal mines highlights a wider debate about whether investors and mining companies should reduce their exposure to the business, which creates the risk that they are replaced by operators and shareholders who are less concerned about cutting global emissions. \r\n The mining world has also changed since Glencore announced it was planning to spin off its biggest earner. BHP Group, the largest miner, failed in an attempt to buy rival Anglo American Plc in a $49 billion deal earlier this year, and dealmakers at rivals are also eyeing potential mergers and acquisitions as a new era of dealmaking takes hold across the industry. \r\n For Glencore, slimming down and losing much of its firepower would have limited its options to compete with its biggest peers in any potential M&A. \r\n \u201cScale is important in this industry,\u201d said Nagle. "

"Glencore Abandons Plan to Exit Coal After Investors Say No"

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