Bluebell Capital Partners, a London-based hedge fund, has proposed Glencore create a new structure for its coal division as it presses the mining and commodity trading company to exit the world’s most polluting fossil fuel.
“The real debate should not be about ‘if’ Glencore should spin off coal, but ‘how’ a spin off should be executed, taking into account both financial and environmental considerations that support Glencore’s strategy to responsibly run down coal,” according to a letter addressed from Bluebell, which was reviewed by Financial Times.
Activist investors have been able to force some change in corporations. Engine No.1 won a proxy battle related to climate change over board seats with oil producer ExxonMobil last year. Bluebell is currently in a battle with Belgian chemicals company Solvay.
Glencore chief executive Gary Nagle pushed back against the idea, telling investors and analysts in December that it was in the best interests of the company and “the planet” to run down its mines over the next 30 years, according to FT.
“We do not have any of our major investors asking to spin off coal,” Nagle said at the time. “In fact, they have come to realise . . . that perhaps spin-offs are the wrong scenario.”
The proposal set out its demerger plan, which involves creating a separate coal company with A and B shares.
Under Bluebell’s proposed plan, Glencore would spin off the coal business with a dowry to fund mine rehabilitation and a dual class structure. Such moves have been historically frowned upon by UK investors, according to the FT report.
Glencore would retain the A shares, which would give it control of the demerged company and marketing rights to all its coal, but only a 9.09 percent economic interest in the company’s operations. Existing Glencore shareholders would get B shares and a 90.91 percent economic interest.
“By decoupling governance and economic rights, Glencore would be able to continue to exercise responsible stewardship, whilst separating coal in the interests of shareholders,” the letter said.
Glencore declined to comment, according to the FT.
Thermal coal prices are close to all-time highs hit last year on expectations of a continued shortage of energy supply.
Coal use has increased despite environmental concerns as global economies recover from the pandemic. Renewable energy installations have not kept up with energy demand. Neither have traditional commodities like natural gas, which have seen surging prices.
Meanwhile, a long standing German program to shutter nuclear power plants and nuclear maintenance in France have all contributed to coal’s continued resilience.
