Australian resources companies under fire over carbon comments

Australian resources companies are being criticised for their strong warnings to government and the media on the cost of a proposed carbon reduction scheme, while making milder comments to markets on the likely material impact.

The Australian Conservation Foundation and Australian Climate Justice Project filed a complaint with the country’s competition and consumer watchdog to investigate claims by Boral, Bluescope Steel, Caltex Australia, Rio Tinto, Woodside Petroleum and Xstrata.

The environmental groups compared the companies’ statements to the ASX, analyst presentations and so on with their submissions to the Australian government on the CPRS.

Rio Tinto, for example, warned that half its open cut coal mines might close by 2020 if the government’s carbon pollution reduction scheme (CPRS) came into effect. But the environmental groups claim it made no specific warning to shareholders other than to say “Rio Tinto’s costs could increase and its results could be materially affected. Rio Tinto is at risk of increased energy prices.”

Crikey reports, the environmental groups are contrasting the companies’ government submissions with both their own market statements and estimates from other sources on the likely cost:

A research report by Goldman Sachs JBWere in early May suggested the financial materiality of the CPRS (and “materiality” is the requirement for ASX disclosures) is likely to be insignificant for ASX100 companies, with five of the six companies referred to the ACCC facing carbon costs as a proportion of EBIT of 5% (Boral), 11% (Bluescope), 2% (Caltex), 4% (Rio) and 3% (Woodside).

Except, those figures are BEFORE you factor in the free permits to be handed out to EITEs. Most of those companies therefore face costs of 5.5% of those numbers, which is a negligible amount even for Boral.

The complaint was made to the Australian Competition and Consumer Commission on the grounds that the statements to the media and government submissions were ‘representations made in the course of trade or commerce’.

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