Glencore counter-bid offers hope for Thai energy security

The deal, which will cost Yancoal around US$2.45 billion (Bt83 billion) could give China a high level of control over strategic infrastructure and coal exports from Australia to the rest of the world. Given this, the interruption in Yancoal’s deal by Anglo–Swiss multinational Glencore may be welcome news to other mining companies in Australia and to their customers throughout Asia, including in Thailand.
Yancoal’s agreement with Rio Tinto allowed for negotiations with another party if a better offer was tabled, and now Glencore has entered the scene with a counter-bid which is not only $100 million higher, but also fully funded, which has been a sticking point for the highly indebted Yancoal.
In fact, both Yancoal and its Chinese parent Yanzhou are already heavily burdened with debt, according to Yancoal Australia’s 2016 financial report. Parent company Yanzhou has committed $1 billion toward the funding, increasing concerns that Yancoal is far too closely tied to Chinese state-owned enterprises.
The deal would give Yancoal control of a significant portion of the coal exports in Australia, including those to Thailand. This could create a risk of Chinese state intervention in Australia’s coal mining industry, allowing it to raise prices or disrupt supply to Thailand. Access to coal from Australia is so important to Thailand that the deal even requires approval from one of Coal & Allied’s biggest clients, BLCP Power Ltd in Thailand.
The deal will also give Yancoal (and subsequently its Chinese parents) influence over critical infrastructure for Australia’s coal mining industry. This includes the Port Waratah Coal Services, which operates the largest coal export terminal in the world. Japanese importers consider this port so essential that they own 30 per cent of it, and hold three board seats, to ensure ongoing supply of coal exported from Port Waratah.
The mining company is not being coy about its ambitions to control the regional market: Yanzhou, Yancoal’s parent company, has said that the deal means “Yancoal Australia will be a major coal supplier to Japan and South Korea, and (a) Chinese coal enterprise will have a big say in negotiation and pricing in (the) Asia-Pacific seaborne coal market.” 
Rio Tinto’s shareholders are scheduled to vote on the deal in late June, so the pressure is on for Yancoal to provide reassurance with regard to its funding and its objectives for the deal. However, miners and coal importers may prefer a buyer for Coal & Allied whose funding and financial stability is more certain, and which doesn’t include a political or state agenda.
Elizabeth Smith