Beyond the boardroom: green, red tape ‘sovereign risk issue’
Delays in resource project approvals are making the nation’s east coast ‘a major sovereign risk’ for companies.
Delays in resource project approvals are making the nation’s east coast a major sovereign risk for companies and investors, according to two of the nation’s leading industry executives.
New Hope Group chief Shane Stephan and Aurizon managing director Lance Hockridge both warned that extended and duplicated approvals processes, and legal actions, were impacting investment decisions. “It is not a question of ‘will it’, it has become an issue of sovereign risk,” Mr Hockridge, whose company hauls for coal and iron ore miners, told The Australian’s Beyond the Boardroom series, in partnership with the Australian Institute of Management yesterday.
“Certainly, as I talk to colleagues in the industry and customers, it is already that.”
Mr Stephan, whose company has been trying to get approval to expand its Acland coalmine near Oakey in Queensland for nearly 10 years, said it had become “incredibly challenging” to get new developments approved and even for existing developments to continue.
“It’s a real challenge and it is something that we mustn’t take for granted, or we will lose what is a great competitive advantage for Queensland and also our country,” he said.
The comments came after Rio Tinto managing director Jean Sebastian Jacques last month said a WA Nationals plan to add a $5 per tonne royalty on iron ore exports was the global mining giant’s biggest sovereign risk concern, despite operating in nations such as Mongolia and Madagascar.
They highlight a growing risk to Australia’s perception as a safe place to invest. While unlikely to stop investors from putting their money here, a higher risk perception for the country means that projects and companies will have to deliver greater returns to attract investment.
New Hope has said that if its $900 million New Acland expansion, which kicked off the approvals process in 2007, is delayed further and fails to be in production by the end of next year, it will be forced to close the existing mine costing 350 mine jobs and another 500 contractors.
This is looking increasingly likely after delays from a 31-week court case in the Land Court threaten to be added to by new water licence regulation proposed by the Palaszczuk government.
Mr Stephan said delays at New Acland had been a major factor in a recent decision to spend $865m buying Rio’s stake in the Bengalla coalmine in the Hunter Valley of NSW.
“That mine is fully approved out to 2039, also, it’s in another jurisdiction so we’re diversifying our risk from being totally Queensland-based into NSW,” he said.
“So these decisions have real impacts upon risk levels, which drive confidence to invest and drive those investment decisions.”
Mr Hockridge said the risk was not limited to Queensland. He said Hunter Valley coal locomotive diesel emission standards were causing the company problems.
“No one is complaining about that (reducing emissions), it’s how it’s done, when it’s done and particularly, the cost,” he said.
“If we halve the emissions from locomotives in the Hunter Valley, it would shift the emission load in NSW by less than one-tenth of 1 per cent — how does that represent good governance in a circumstance when this industry has been, and remains in, the kind of challenging circumstances that we’ve seen?”
Approvals are getting harder not because of the standards, but because of duplication and the way opponents can use social media and, often, the courts, the executives say.
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