NAB, Westpac face parliamentary grilling over Whitehaven Coal financing

The banks are set for interrogation over their coal exclusion policies, after participating in Whitehaven’s $1bn debt facility.

Whitehaven Coal's Maules Creek coal mine. Picture: supplied

Two of the nation’s major banks face parliamentary scrutiny over their coal exclusion policies after participating in Whitehaven Coal’s $1bn senior bank debt facility earlier this year.

National Australia Bank and Westpac are understood to have participated in the pure-play coal group’s February refinancing, with both banks scheduled to appear before the House economics committee on Friday.

Ahead of the committee hearing, NAB’s head of corporate and institutional banking David Gall said there was no inconsistency between the bank’s involvement in the Whitehaven facility and its 2017 commitment to “no longer finance new thermal coal mining projects”.

“As we’ve previously said, we are continuing to support current coal-fired power generation customers that are implementing transition pathways aligned with the Paris Agreement — a 45 per cent reduction in emissions by 2030 and net zero emissions by 2050,” Mr Gall told The Australian.

“However, we will not finance new or material expansions of coal-fired power generation facilities, or new thermal coal mining projects.”

NAB, he said, would halve its funding of thermal coal mining by 2028, and would aim to achieve zero by 2035, apart from residual guarantees to rehabilitate existing coal assets.

The bank would also cap its mining exposures at 2019 levels and remained on track to deliver that commitment.

While ANZ Bank was part of Whitehaven’s 2017 refinancing, it’s not part of the latest package, while Commonwealth Bank is believed to have exited its relationship with the company about five years ago.

As a result, the share of the facility held by Asian banks rose to more than half.

Managing director Paul Flynn said at the time that the package was oversubscribed and funding costs had not increased.

The Whitehaven refinancing has attracted interest because it’s a pure-play coal company and its $700m Vickery project, which is in the company’s development pipeline, is a greenfields coal project, although it’s mostly metallurgical coal.

The project is currently awaiting secondary approvals after receiving sign-off from the NSW Independent Planning Commission last month.

Whitehaven said in August that it continued to be cautious in allocating capital to expansion, noting the evolving impact of COVID-19 on coal markets and pricing.

In the meantime, its focus was on optimising existing operations and “observing disciplined capital management”.

Funding of thermal coal has become a hot-button issue for banks worldwide, as the sector faces increasing pressure from mainstream investors to slash its exposure to emissions-heavy customers.

Last January, BlackRock, the world’s biggest asset manager, revealed plans to put climate change at the centre of its investment process by rolling out new ESG (environmental, social and corporate governance) funds, exiting some of its coal holdings and taking a tough position on global warming.

Chief executive Larry Fink warned that a warming planet represented a risk to markets that was unlike any previous crisis.

On Monday, at ANZ’s third annual environmental, social and corporate governance briefing, chief executive Shayne Elliott said “good, old fashioned risk management” meant ANZ could shed some of its carbon-intensive customers if their lower-carbon transition plans were poorly developed or they showed no awareness of the issue.

“If we really don’t see an alignment of values, we’d move to exit that customer, and the reason is it’s a red flag about good, old-fashioned risk management,” Mr Elliott said.

“If you are in one of those (high-carbon) industries and you’re not even thinking about this, or you’re dismissive, we’d have massive concerns about the viability of that business.”

Greens leader Adam Bandt, who is a member of the House economics committee, fired off a question on notice to NAB, asking how the Whitehaven deal squared with the bank’s 2017 commitment to “no longer finance new thermal coal mining projects”.

NAB responded that it stood by its commitment.

“In line with our announcement, while we continue to support our existing customers across the mining and energy sectors, we will no longer finance new thermal coal mining projects,” the bank said.

Mr Bandt said on Wednesday that banks could not say they were committed to a zero carbon future if they were continuing to support coal projects.

“This decade will be a reckoning for fossil-fuel financiers,” he said.

“Coal, oil and gas projects are increasingly becoming stranded assets that are not only disastrous for the plant, but for shareholders too.”