Glencore has backed away from plans to spin off its coal business after shareholders urged the company to keep the highly profitable but polluting division.
The FTSE 100 company said shareholders overwhelmingly supported keeping the coal business alive rather than plans to list it as a separate company on the New York Stock Exchange.
More than 95% of Glencore’s investors supported continuing the business, mainly because fossil fuels will increase the company’s “cash generation capacity” and “accelerate and optimise the return of excess cash flow to shareholders”, the company said.
“They realize cash is king,” said Gary Nagle, the company’s chief executive officer.
Nagel drafted a now-defunct restructuring plan last year in which he argued that listing the companies on separate markets would create greater value for shareholders at both companies.
Under the plan, Glencore would combine its coal business with the steelmaking coal division of Canada’s Teck Resources, which it recently acquired, and list the new company in New York.
Glencore has emerged as one of a number of fossil fuel companies hoping to tap the U.S. market, where investors tend to take a more tolerant view of polluting companies than many European ones.
But Nagel said the industry was now a “dynamic space” and views on environmental, social and governance (ESG) issues had “changed significantly”.
“The ESG pendulum has swung the other way over the last nine to 12 months,” he said. “The world has realized it needs coal as we move towards decarbonization.”
The comments are likely to infuriate environmental groups that have campaigned against coal, saying it is one of the dirtiest fossil fuels and a major driver of the rise in global emissions that is accelerating the climate crisis.
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Glencore said underlying profits for the first half of this year fell 33% to $6.3 billion (£5 billion) from $9.4 billion a year earlier, and confirmed its board would accede to shareholder calls to retain the coal unit despite its high carbon emissions.
Former executives of the company, including its billionaire former oil trading chief, were recently indicted on charges of conspiring to make corrupt payments to benefit the company’s oil operations in West Africa between 2007 and 2014.
Alex Beard, who ran Glencore’s oil division from 2007 until his retirement in 2019, is due to be charged along with former Glencore executives Andrew Gibson, Paul Hopkirk, Ramon Rabiaga and Martin Wakefield following a lengthy Serious Fraud Office investigation into allegations of bribery at the company.
Nagle said Glencore now has a “best in class compliance program” and produces a “responsible and ethical” business. “This is something we work on every day,” he said.
