A KOREAN Government restructure of state-owned resource companies has raised big questions about the future of the controversial Bylong and Wallarah 2 coal mine proposals.
Under the surprise restructure KEPCO, which has poured more than $600 million into the Bylong coal project in the Upper Hunter, will “stop overseas power generation resources development and gradually sell shares it holds in nine mine fields”, said a Korean Ministry of Strategy and Finance media release.
State-owned Kores, behind the Central Coast Wallarah 2 proposal, will also withdraw from international resources projects, said the release.
The restructure announcement comes after years of bullish international resource development by Korean Government-owned utilities under South Korean president Lee Myung-bak, which led to the Bylong and Wallarah 2 investments.
But while campaigners against the Bylong and Wallarah 2 projects have welcomed the news, in Korea the proposal to sell off a percentage of the utilities to private investors has been seen as a political response by current president Park Geun-hye, and unlikely to generate private investment interest.
Bylong landholder Craig Shaw said the restructure of KEPCO would give a “much-needed financial reality check” for the Bylong project, but the announcement added more uncertainty to a proposal that had “been on dodgy ground for a while now”.
“You've got to wonder why the Korean private sector would be interested in funding capital-intensive overseas greenfield coal projects like Bylong, especially with the government's renewed focus on renewable energy development. This may be the beginning of the end for the Bylong Coal Project,” Mr Shaw said.
“While the project may have made some strategic sense for Korea five or six years ago, it doesn’t now, given the radical changes we’re seeing in the global thermal coal market. The Korean Government’s reappraisal of its strategy is a very sensible move.”
Tarwyn Park owner Stuart Andrews, who sold the farm where his father Peter’s natural sequencing farming method was developed to Kepco, said “I don’t really know what to think about the restructure”.
“The whole thing is ridiculous. It doesn’t make any economic sense to develop a brand new mine when established mine owners are trying to sell their mines, but I can’t see them walking away from it. They’ve done a lot of money. The company’s been talking it up here in Australia but I’ve wondered for some time now whether they’ve actually got support in Korea,” Mr Andrews said.
Lock the Gate Alliance called on the NSW Government to use the opportunity to cancel the Bylong Coal Project application, and permanently protect the area from mining.
“The NSW Government needs to fulfil its promise of protecting agricultural land from mining, and ensure that no mining project is considered in Bylong. We call on Premier Baird to ensure Bylong is protected from coal mining in perpetuity,” said Lock the Gate Hunter coordinator, Steve Phillips.
The Bylong project’s uncertain future is symptomatic of the ongoing structural decline of the Hunter coal industry, Mr Phillips said.
“More than ever, we need to be protecting and promoting long-term jobs and sustainable industries. We cannot keep letting mining companies dictate the future of our region,” he said.
Institute for Energy Economics and Financial Analysis analyst Tim Buckley said the restructure was symbolically important, but the practical driver of the announcement was excessive financial leverage by the state-owned utilities.
“This is a major strategic shift by the Korean Government,” Mr Buckley said.
“A focus on debt retirement will reduce the capacity of these groups to fund new greenfield developments, and might bring greater commercial pressures to bear. It is a blow for Belong, but far from the end of the project, given the privatised entities will probably still want to be vertically integrated.”
Korean Federation for Environmental Movement spokesman Jieon Lee said he did not believe KEPCO would ultimately withdraw from its projects, and would likely sell them to subsidiaries.
A KEPCO spokesperson said the company remained committed to the Bylong project.
“The project is a critical component to the company’s plans to secure high quality coal resources to meet increasing energy demand in South Korea with more than $600 million invested to date,” the spokesperson said.