Technology risks

Aurizon said via a spokesman that its central Queensland coal network is worth $6 billion and "if there is risk that the life of the infrastructure is shortened due to market forces Aurizon's return should reflect that heightened risk, that is, a higher return to allow recovery over the shorter asset life".

"While demand for Queensland coal remains strong, the risks to thermal coal production as generation transitions to more renewable power sources need to be built into the risk profile."

Ian Macfarlane, head of the Queensland Resources Council, said Aurizon itself pointed out the strength of the thermal coal market during its August investor briefing, and the federal industry department agrees.

"We've seen record royalties and strong demand, especially from the Asian region where new coal-fired power stations are still being built," Mr Macfarlane said.

Dalrymple Bay Coal Terminal Management unsuccessfully sought compensation for "stranded asset" risk on its thermal coal handling infastructure, but the market has improved sharply since the 2016 determination. Robert Rough

Dalrymple Bay Coal Terminal Management, owned by Canada's Brookfield Asset Management, and federal government-owned Australian Rail Track Corporation, which owns the Hunter Valley coal rail system in NSW, have made similar claims in vain.

Could be persuaded later


The QCA rejected DBCTM's claim in a November 2016 ruling, saying it was not convinced the port's stranding risk had materially increased, though it might be persuaded in future. The Australian Competition and Consumer Commission in June 2017 found policy changes could affect demand for thermal coal on ARTC's Hunter Valley network but "the nature and severity of these systematic risks has not significantly changed".

The thermal coal market has improved sharply since 2016. Prices have more than doubled and demand for DBCTM's coal handling exceeds capacity, making stranding less of a concern now.

ARTC said via a spokesman that Hunter Valley thermal coal should be in demand in south-east Asia for some time to come but "we do recognise that in the long-term there will be risk as to the level of demand".

Whitehaven and Yancoal are reluctant to stress-test their thermal coal exports against the risk of tougher climate policies as they pocket bumper profits. Rob Homer

Deputy Prime Minister and Transport Minister Michael McCormack said ARTC was an independent business but the government supports strong coal markets as an important means of ensuring "regional Australia has good, long-term, local jobs into the future".

Still, the fact these claims are being seriously entertained by regulators is at odds with the reluctance of thermal coal exporters such as Yancoal and Whitehaven to stress-test their thermal coal exports against the risk of tougher climate policies as they pocket bumper profits.

The claims come as Standard Chartered, Mitsubishi UFJ, Marubeni, Nippon Life, Swiss Re and other global financial institutions are backing away from thermal coal power at an accelerating rate, and global investors are also moving sharply away from thermal coal. Energy Minister Angus Taylor and Resources Minister Matt Canavan continue to talk up coal in Australia.

'Thermal coal' risk


Aurizon derives a quarter of its central Queensland coal network revenues from thermal coal and three-quarters from steelmaking coking coal. Its claim for stranded asset risk cites "long-term demand risks and exposure to thermal coal", the uncertainty of which is shown by low levels of exploration expenditure.

Risks include unexpected changes in environmental and energy policy and the rate of technology change, which could accelerate the shift to renewable energy in markets the thermal coal industry is relying on for expansion, which are mainly in Asia.

One analyst said the QCA had effectively rejected the claim on the basis that it had granted Aurizon an accelerated 20-year "net regulatory depreciation" allowance, or 5 per cent of the asset base a year.

The analyst said the claim is a "double-edged sword" for Aurizon.

"It means that coalminers have to pay more [but] at the end of the day the are all in this together. They are all going to get stranded at the same time and if they are truly worried about stranding at this point in the cycle then they should be provisioning for it and disclosing more and stuff like that – and they're not," he said.