Sev.en Global Investments increases its bet on fossil fuels with majority stake in Coronado
Sev.en Global Investments company has bought a 51 per cent stake in coal producer Coronado, as the Czech group increases its bet that fossil fuels will be needed for longer.
Sev.en Global Investments has purchased a majority stake in coal producer Coronado Global Resources, as the Czech company increases its exposure to fossil fuels on assumptions that the global energy transition will take longer than anticipated.
Sev.en, a family-owned businesses based in Prague has moved aggressive to acquire coal mines and coal-fire power plants in its homeland before expanding into the UK and coal mines the US.
The purchase of the 51 per cent stake in Coronado is Sev.en’s third major investment in Australia’s fossil fuel industry, headlined by its acquisition of the Vales Point coal power plant – which it recently said could run longer than previously scheduled.
Sev.en’s purchase from private equity form the Energy & Minerals Group of Coronado – which owns the Curragh coal mine in Queensland and several other coal mines in the US – underscores Sev.en’s belief of an ongoing future for coal for both electricity generation and steel manufacturing.
Coronado, which has a market cap of $3.16bn, predominantly produces coking coal.
Financial terms for the deal were not disclosed.
Sev.en chief executive Alan Svoboda said Coronado was an attractive asset that supported the company’s growth ambitions.
“We are excited to become the majority shareholder of Coronado. The company is a global leader in metallurgical coal mining, with world-class performance across its mines,” he said.
“We believe that Coronado has established a successful business strategy, and we will support the company in continuation of its business strategy to grow and strengthen its position both in the US and Australia.
“This deal is a testament of our ability to grow rapidly and successfully and aligns with our long-term strategy for international growth in these two jurisdictions.”
Sev.en, which owns Delta Group and is one of Europe’s largest private power generators, has positioned the company to capitalise on its view that Australia’s energy transition will occur more slowly than many expect.
Sev.en also has a 12.5 per cent stake in coal-fired power generator Callide C, which is one of Queensland’s largest coal power plants, but has been struggling to restart production after a massive fire ripped through the generator. The cause of the fire remains unknown, and has been cited as a key reason why Queensland has incurred higher wholesale prices.
Coal is also experiencing somewhat of a revival. Coal prices soared last year on Russia’s invasion of Ukraine and, although the commodity has edged lower, brokers and analysts have revised their estimates for the price of coal upwards.
There is also less competition for coal assets, as some investors are prohibited by ESG investing principles or are unwilling due to the limited lifespan of the assets.
In May, Sev.en purchased Queensland coal royalties, in a deal worth around $65m. The portfolio included coal royalties from two strata lots located 20KM west of Rolleston. It covers parts of the Rolleston and Meteor Downs South Mines, which are linked by rail to the Port of Gladstone.
In July, Delta informed the Australian Energy Market Operator that its 1320-megawatt Vales Point coal power station on the Central Coast of NSW could stay open an extra four years – until 2033.
Much of NSW’s coal power stations are expected to be retired by the end of the decade as they struggle to financially compete with a rapid influx of renewable energy.
However, Australia’s renewable energy build-out is struggling to keep pace with the retirement of coal and, if the trend continues – Delta Electricity could profit from the significant volatility in the wholesale market as prices surge during evenings or so-called renewable energy droughts.
Coronado shares closed 2.2 per cent, or 4c, stronger at $1.88.
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