Top Billionaire Gainers Under Pressure to Shift Away From Coal

(Bloomberg) -- In a world that’s redoubling efforts to become more sustainable, the rise of coal miners just seems unstoppable. 

Take Indonesia’s Low Tuck Kwong, the founder of PT Bayan Resources. Shares of his company have skyrocketed almost 400% this year, pushing the value of his and his son’s stake to more than $17 billion, according to the Bloomberg Billionaires Index. 

Garibaldi Thohir’s PT Adaro Minerals Indonesia has emerged as the world’s best-performing stock of 2022 with a 1,595% gain, while India’s Gautam Adani has become the third-richest person on Earth on the back of surging energy prices. 

That’s all happening as pressure is building for the industry most responsible for carbon emissions to make a turnaround. In the latest effort to shift to cleaner power sources, the US, Japan and other countries have promised $20 billion to help Indonesia — the world’s biggest thermal coal exporter — achieve net-zero in its power sector by 2050.

Also read: Coal Was Meant to Be History. Instead, Its Use Is Soaring

While the deal’s impact may be limited in the near term, it’ll force coal tycoons to think about their long-term strategy, according to Putra Adhiguna, an analyst with the Institute for Energy Economics and Financial Analysis. Indonesia is increasingly seeking help to wean itself.   

“The deal sends a signal that the demand for the future will be reduced,” Adhiguna said. “The pressure is building up faster than expected.”

China, the biggest coal producer and consumer in Asia, has cut down on its imports, adding to a growing list of challenges facing Indonesian miners, which ship about 70% of their output abroad, according to Bloomberg Intelligence analyst Kelvin Ng. He expects the current windfall profits not to be repeated next year.

“This is just crazy,” he said, referring to the surging valuations. “Next year may not be like this.” 

Prices of coal — which remains the world’s biggest source of electricity and generates 60% of Indonesia’s power — have more than doubled this year following a boom in industrial activity post-Covid and an energy crunch in the aftermath of Russia’s invasion of Ukraine. That’s helped producers of the dirty fuel get rich even as rising interest rates and a weakening economy globally have eroded most fortunes — from tech to finance to e-commerce. 

Profit at Bayan Resources jumped 151% to $1.7 billion in the first nine months of 2022 from the same period in 2021. Indonesian miners collectively could more than double their earnings this year, according to a Bloomberg Intelligence report citing consensus data. In the US, coal companies will pay higher dividends over the next 12 months than those in any other sector.   

Low, originally from Singapore, moved to Indonesia more than five decades ago, seeking opportunities in Southeast Asia’s biggest economy. He initially went into construction but later turned to coal mining as he viewed the sector as more stable. He created Bayan Resources in 2004.

Low declined to comment on how the $20 billion pledge from last month might affect his business strategy, though director Alexander Ery Wibowo told local media in August that the company was seeking to expand into alternative businesses, including solar power and geothermal projects. In many energy-transition deals, operators of coal power plants get money upfront to shut them and invest elsewhere. 

Also read: A Coal Tycoon Is Making Billions in a World Aiming to Go Green

Bayan Resources has already installed solar panels and solar-powered lighting at its projects, and the Tabang mine, which contributes to more than 80% of its production, generates lower levels of sulphur, nitrogen and ash when it burns coal, according to a company report. It also notes that 30% of the diesel Bayan Resources uses for its annual operations is biodiesel sourced from sustainable palm-oil plantations. 

Other peers are doing the same. Adaro Energy, led by Thohir, is building solar-powered plants with more than 200 megawatt capacity on retired mine sites. PT Indika Energy set up a joint venture with an affiliate of Taiwan’s Foxconn Technology Co. to produce electric cars and batteries. Adani, whose fortune was built on coal, has been expanding into green power and other sectors. 

Also read: Asia’s Richest Man Sells the World a Green Dream Built on Coal

Diversification is inevitable for coal miners in the global push to decarbonize, said Maisam Hasnain, vice president and senior analyst at Moody’s Investors Service. Not doing so will reduce access to funding and weaken credit quality, he added. 

“We’re seeing big coal companies starting to talk more about sustainability and diversification,” said Adhiguna of the Institute for Energy Economics and Financial Analysis. “Some of them are using this opportunity wisely and others will have a different future.”

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