Category archive: Business

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Australian Mining Companies Join Suicide Prevention Program

As Australia celebrates R U OK Day, an industry has been working on its own awareness program. More than 1,000 construction and business sites across the country are taking part in MATES in Construction Fly the Flag Day, a campaign to raise awareness of suicide prevention.

MATES national chief executive Chris Lockwood said the number of participating sites has more than doubled last year’s, indicating greater momentum for the program.

“For the first time this year we have mining and energy businesses participating along with construction sites,” said Lockwood.

As part of its campaign, the organisation has trained over 140,000 workers to develop life-saving skills to recognise co-workers’ possible struggles and intervene when needed. According to Lockwood, 190 Australians who work in the construction industry take their own life each year, accounting for a suicide every second day. Australian Mining reported that construction workers are six times more likely to die from suicide than a workplace accident.

“The construction industry, which is predominantly male, has a culture that can often leave workers feeling isolated and not knowing how to ask for help,” said Lockwood.

“Factors such as job insecurity, high work demands, and financial stress combined with relationship breakdowns put workers in the construction industry at greater risk and MATES will continue to do all we can to prevent suicides in this and similar high-risk industries.”

Brad Geatches, MATES chief executive for Western Australia said that the industry was partly responsible for workers’ distress due to its competitive, insecure nature. However, ”society is generally becoming more aware of the issue of mental health and suicide, it’s coming out of the shadows, stigmas are breaking down,” said Geatches.

Australian Business Conditions Continue Declining in July

Business conditions have slipped again in July across most Australian industries, continuing the downward trend starting in April.

The NAB’s monthly business survey revealed that conditions fell in the mining, manufacturing, retail and finance sectors. “The retail sector remains clearly the weakest, declining again in the month to see the retail conditions index fall to 0 points,” said NAB chief economist Alan Oster.

Construction became one of the few industries to have a “sharp” increase in conditions, which Oster said likely came from “the large pipeline of both residential and infrastructure-related work”.

Measures of trading and profitability also dipped in July, with the latter falling five points to +10.

However, business confidence remained relatively consistent, rising one point to +7. Employment index also rose five points to +10. “The employment index – based on historical patterns – is consistent with jobs growth of around 23,000 per month, which should see the unemployment rate continue to edge lower over the rest of 2018,” said Oster.

Mining industry had the highest employment index, followed by finance, business and property services and construction.

“Overall, the survey results are broadly in line with our outlook for the economy for the rest of 2018,” said Oster.

“The business sector looks relatively healthy, and we expect to see enough employment growth to see a gradual reduction in spare capacity, which should in time see a rise in wage growth, and a more general lift in inflation.”

Amazon Continues Dominating Cloud Infrastructure Market

Amazon Web Services continues to dominate the cloud computing infrastructure market, although Microsoft is catching up with its Azure offering.

A new report by Gartner found that the worldwide market for infrastructure as a service (IaaS) public cloud services grew 29.5 per cent with a revenue of US$23.58 billion in 2017, increasing from 2016’s $18.213 billion. The top four vendors – Amazon, Microsoft, Alibaba and Google – represented 73 per cent of the market, with Amazon holding a little more than half of the market share.

“The top four providers have strong IaaS offerings and saw healthy growth as IaaS adoption is being fully embraced by mainstream organisations and as cloud availability expands into new regions and countries,” said Sid Nag, research director at Gartner.

On the second spot, Microsoft took home a $3.13 billion in revenue in 2017, a 98 per cent growth from the previous year’s $1.579 billion. This growth is expected to continue after the company’s latest quarter, which saw the revenue from Azure public cloud service increasing by 85 per cent from the same period a year ago.

Alibaba and Google also saw a significant growth of 63 per cent and 56 per cent respectively. Gartner attributed Alibaba’s rise to its investment in research and development.

“This reflects a fundamental change in what and how organisations are consuming technology,” said Nag.

“Some legacy infrastructure offerings, such as IUS, are seeing lower and slower uptake that impacts the combined IaaS and IUS market… Additionally, a groundswell of demand for cloud-skilled personnel is forcing technology providers to change how they compete to meet this exploding demand.”

Luis Villa del Campo Nasdaq

US-China Trade War Sinks AUD, Global Stocks

The rising tension between US and China in trades has sent almost every major asset sinking, including oil, global stocks and Australian dollar.

The Trump administration announced that it will impose a 10 per cent tariff on $US200 billion worth of Chinese goods, including consumer items such as clothing and refrigerators. This decision followed China’s implementation of reciprocal tariffs on $US34 billion in US import goods.

The Dow Jones was down 0.9 per cent to 24,700, while the S&P and Nasdaq closed 0.7 per cent and 0.6 per cent lower respectively.

Chinese stocks declined by 1.6 per cent, while European markets such as Paris, London and Frankfurt lost between 1.3 and 1.5 per cent each. Japan’s Nikkei also dropped by 1.2 per cent, and Hong Kong’s Hang Seng dipped 1.3 per cent.

Gold fell 0.9 per cent to $US1,244.4 per ounce, while brent crude oil was down 6 per cent to $US74.17 per barrel.

Australian dollar plunged 1.2 per cent to 73.65 US cents, and is expected to continue declining. “We remain of the view that trade tensions are likely to get worse before they get better and as such we still see more downside risk for the Australian dollar,” NAB’s senior foreign exchange strategist Rodrigo Catril told the ABC.

AGL Announces Power Price Drops

AGL has announced price drops for power in New South Wales, Queensland and South Australia, following competitor Origin’s similar move this week.

Residential electricity prices will be cut by 0.3 percent in NSW, 1.5 percent in Queensland and 0.4 percent in SA, much lower than what market analysts predicted.

“While these price cuts are slight, they’re part of a downward trend that is emerging as more investment in new sources of supply comes into the market,” said AGL’s chief customer officer Melissa Reynolds, referencing the increasing network and green costs.

“We understand power prices have been high and that has put pressure on many households.”

On Tuesday, Origin announced that it will cut residential electricity prices in south-east Queensland and SA by 1.3 percent and 1 percent respectively, while maintaining the same prices for NSW and the ACT.

Origin’s Power Price Changes. Source: Origin/ABC

Both drops are far lower than the Australian Energy Markets Commission’s (AEMC) forecast, which expected 5.8 percent fall in NSW, 7 percent in south-east Queensland and 6.9 percent in SA in 2018-19.

Julian Meehan Adani

Queensland Government Considers Using Public Funds for Adani Road Project

The Queensland government is considering covering the $100 million cost of road access for Adani coal mine, despite promising that no taxpayers fund would go to the project.

The ABC said documents obtained under a right to information revealed the Palaszczuk government is still in negotiations with Adani and Isaac Regional Council about upgrading access to the proposed Carmichael mine site in central Queensland.

However, the Department of Transport and Main Roads said no decision has been made yet.

In November, Palaszczuk said she would not rule out helping the local council fund the access road. A spokesman for the government said it would cooperate with local councils in regard to their infrastructure needs. “Significant projects can impact on local road networks and improvements to those networks can benefit the greater community,” he said. “Costs associated with major projects are recovered by the state on a commercial basis.”

The ongoing negotiations have received backlash. “Annastacia Palaszczuk has lied to Queenslanders and has broken yet another election promise,” said Opposition Leader Deb Frecklington.

The Mackay Conservation Group said the government must rule out funding the road project. “The Queensland Coordinator General recommended Adani be responsible for road upgrades and Adani said it would pay for the upgrade,” said the group’s spokeswoman Maggie McKeown. “Why then would the premier spend public funds on this project?”

Ricoh Becomes Australia’s First Carbon-Neutral IT Services Company

Ricoh has become the first IT services company in Australia to achieve carbon-neutral status.

Following its achievement as the first tech services organisation in the country to achieve a carboNZero certification, Ricoh went further in its efforts to reduce its greenhouse gas (GHG) footprint. The company worked closely with not-for-profit Enviro-Mark Solutions to develop a multi-pronged GHG reduction strategy.

The strategy covered a number of areas, including a reduction in electricity consumption, freight and fuel usage, staff air travel and waste to landfill.

“Every aspect of our national operations was put under the microscope so we could understand the sources of all our existing GHG emissions,” said Tori Starkey, general manager – marketing at Ricoh Australia. “Taking such a holistic approach meant we would be well placed to make our subsequent activities as effective as possible.

“Far from being a set-and-forget exercise, these strategies will continue to be evaluated and improved over time. At the same time, customers are enjoying more efficient service and product deliveries while also being able to achieve their own footprint improvements … With increasing attention being paid to achieving a reduced corporate environmental footprint, many businesses have set a goal of making their operations carbon neutral. For Ricoh Australia, this goal has become a reality.”

Rio Tinto’s Climate Change Resolution Marks a Significant Shift in Investor Culture

Anita Foerster, University of Melbourne and Jacqueline Peel, University of Melbourne

What does the advocacy group the Australian Centre for Corporate Responsibility (ACCR) have in common with the Local Government Super fund, the Church of England Pensions Board, and the Seventh Swedish National Pension Fund?

Quite a lot, it seems. These three institutional investors joined with the ACCR to co-file a shareholder resolution on climate change at mining giant Rio Tinto’s Australian annual general meeting in Melbourne yesterday. While Rio’s board advised shareholders to vote against the resolution, there was a very healthy showing of 18.3% shareholders voting in support (over 20% including abstentions).

The resolution called on Rio to review and comprehensively report on its membership of industry associations such as the Minerals Council of Australia (MCA). The MCA’s pro-coal political lobbying has been distinctly at odds with the position of companies such as Rio, which publicly support measures to reduce carbon emissions in line with the Paris climate agreement.




Read more:
Is BHP really about to split from the Minerals Council’s hive mind?


This alliance between civil society and institutional investors is significant for several reasons.

Institutional investors (large investors such as superannuation funds which pool money to buy shares and other assets) are increasingly concerned about the long-term resilience of their investments to the business risks posed by climate change.

For an energy-hungry miner such as Rio, these risks include changing energy prices and markets, as well as operational disruptions caused by climate impacts such as storms, floods, and droughts.

Investors want companies to disclose these risks fully and to outline how they will manage them to maintain company value over the long term. As the Rio resolution suggests, they also want companies to be transparent and consistent in their approach to climate change. Paying multimillion-dollar memberships for industry associations that lobby against climate action is inconsistent with the long-term investment goals of such shareholders.

New phenomenon

Shareholder resolutions on climate change are a relatively new phenomenon in Australia. In the United States, however, there is a long history of using resolutions to pressure companies to address human rights abuses and change their approach to issues like climate change.

In Australia, advocacy groups such as ACCR (and its counterpart Market Forces) have taken up this tool more recently and lodged resolutions to Australian banks, utilities, oil and gas companies, insurers, and now the big miners, asking for improved disclosure and better management of climate risks.

What’s more, institutional investors are increasingly backing these requests. This latest resolution to Rio Tinto is also reportedly supported by key voting advisors ACSI and Regnan, as well as other major Australian super funds.

As a result, it marks a significant shift in investor culture in Australia, signalling an increased willingness to engage proactively and publicly on environmental, social and governance issues.

Compared with the US and UK, shareholders in Australia have more limited rights to bring resolutions to an AGM expressing their views or requesting that certain actions be undertaken by company management. Australian court decisions have upheld a strict division of powers between company management and shareholders. Nonbinding advisory resolutions on matters that interfere with company management are not permitted. This means shareholders must lodge a special resolution to change the company constitution to allow them to put forward an advisory resolution on a substantive matter such as climate change.

This is not only clunky and inefficient, but also acts as a significant deterrent for investors to support a substantive resolution with which they would otherwise concur. There are renewed calls for law reform, widely supported by institutional investors and also, increasingly, by some of the companies facing these resolutions, to change the law to allow for a more consistent and orderly approach in Australia.

Do these resolutions actually change behaviour?

From their brief history in Australia so far, it appears that shareholder resolutions on climate change, together with a range of other influences, do have the potential to drive change. Many Australian companies that have faced these resolutions so far have responded with significant improvements in climate risk disclosure and management.

Santos recently released its first Climate Change Report; AGL has developed a long term energy transition strategy; and BHP Billiton (which faced a similar resolution to Rio Tinto on its membership of industry associations in 2017) has announced its withdrawal from the World Coal Association and reviewed its other industry association memberships, including the MCA.

While these developments are undoubtedly the result of many factors – including technology and market developments, behind-the-scenes engagement with investors on climate risks, and increased pressure from financial institutions and regulators – it seems that shareholder resolutions can help to focus a company’s attention on ensuring its climate stance is defensible to shareholders. The impact of these resolutions in Australia may also be a function of their relative novelty compared with other jurisdictions such as the United States.




Read more:
Why has BHP distanced itself from legal threat to environment groups?


This week’s resolution at Rio Tinto signals a coming of age for investor engagement on climate change in Australia. Shareholder resolutions have clearly become an important part of the toolbox for civil society in Australia seeking to influence corporate decision making on climate change.

As mainstream investors come on board with these resolutions, their potential impact is heightened considerably. For their part, Australian institutional investors seem to be increasingly willing to stand behind calls for better disclosure and management of climate risks by the companies in which they invest, including by forming new alliances and supporting the use of these more activist tools.

The ConversationIn a country with a relatively conservative approach to investor engagement, these are important cultural shifts. They offer promising signs that Australian businesses and investors are taking a more considered and proactive approach on climate risks.

Anita Foerster, Senior Research Fellow, University of Melbourne and Jacqueline Peel, Professor of Environmental and Climate Law, University of Melbourne

This article was originally published on The Conversation. Read the original article.

AGL to Build $400 Million Gas-Fired Power Plant in NSW

AGL will build a $400 million gas-fired power plant near Newcastle, NSW to replace the ageing Liddell coal-fired station.

The energy company said it is assessing sites for a 252-megawatt facility development, due for completion in the end of 2022.

“AGL is committed to supporting the orderly transition of Australia’s electricity generation capability to modern, clean and reliable energy supply,” said AGL chief executive Andy Vesey.

“That’s why we gave seven years’ notice of when we intend to close the Liddell power station at the end of 2022 and we are pleased to commit today to build the power station near Newcastle.”

AGL also said there were plans to “assess the potential” to develop a further 500 megawatts of gas-fired generation capacity, pending commercial and industrial demand.

The company’s announcement to the Australian stock exchange followed pressures from the federal government to sell Liddell power plant instead of closing it. Rivalling company Alinta has expressed interest in acquiring the power plant to keep it open until 2029.

Federal Environment Minister Josh Frydenberg said Liddell’s closure would still bring blackout risk, even with the replacement plan. “That’s why it’s really important that the executives of AGL consider on its merits this offer that comes from Alinta,” Frydenberg said.

The Australian Energy Market Operator (AEMO) said there would be a potential shortfall in capacity of 850 megawatts if Liddell was to be closed, but it also said AGL’s replacement plan “would deliver sufficient dispatchable resources to fill the identified 850MW resource gap”.

Will Rio Tinto’s Bid to Escape from Its Contracts with Rusal Succeed?

Mark Giancaspro, University of Adelaide

Mining giant Rio Tinto is attempting to use new American sanctions on Russia to walk away from an agreement with a Russian aluminium company, Rusal. But if the contract is not worded precisely, the law may actually work to Rio’s detriment.

Many companies have successfully ended contracts when war has broken out or the government has changed the law in ways that significantly impacted the contract. However, the fact a government’s actions have made a contract harder or more expensive to complete does not automatically mean it will be terminated.

Rio Tinto’s case depends on whether it can invoke a “force majeure” clause in its contracts with Rusal. This kind of clause allows parties to suspend or end a contract when unique and unforeseen events beyond their control occur.

Under the new sanctions, companies and individuals within the United States have until May 7 to divest or transfer any debt, equity or other holdings in Rusal. Rusal is controlled by Russian billionaire Oleg Deripaska, who has previously been investigated for money laundering, extortion, bribery and alleged links to organised crime groups.

Rio Tinto has a joint venture with Rusal that could be affected by the US sanctions.

The effect of force majeure

Typically, when unique or unforeseen events occur, the contract may be legally “frustrated” and end automatically. Frustration is the legal term for a contract being so radically affected by unforeseeable events outside the control of the parties that it is terminated.

A force majeure clause generally prevents this happening because the inclusion of the clause is regarded as “foresight” of the event. However, force majeure clauses typically allow parties to end the contract if the event lasts for a given time, and don’t always require “radical change” like the frustration doctrine does.

It all turns upon the wording of the particular clause in the Rio Tinto contracts.

Force majeure through history

A successful claim of force majeure was made in the American case of Eastern Airlines v McDonnell Douglas Corp. In this case aircraft manufacturer McDonnell Douglas argued that US government policy during the Vietnam War (occurring at the time) caused the government to prioritise military contracts over civilian ones.

As a result, McDonnell Douglas’s contract with Eastern Airlines was delayed. It invoked a force majeure clause covering “acts of government” to avoid liability for the airline’s lost profits.

The court ruled that McDonnell Douglas was entitled to rely upon the force majeure clause and walk away from the agreement due to the government’s policy.

Importantly, just because a contract has a force majeure clause, this does not mean it can be used freely. Some English cases suggest that parties must still make reasonable efforts to keep the contract alive before resorting to force majeure. Evidence of attempts to preserve its contracts with Rusal would likely work in Rio Tinto’s favour.

The courts have also stressed that force majeure cannot be relied upon where there were reasonable alternative ways to complete the contract.

In the Australian case of European Bank Ltd v Citibank Ltd, Citibank was unsuccessful in claiming force majeure when it transferred European Bank’s deposit to a New York account and the funds were seized by the United States Marshal. The force majeure clause allowed Citibank to escape liability if it could not perform due to “reasons beyond its reasonable control”.

The court held that Citibank could have refunded European Bank’s deposit from other accounts or made other arrangements, so the situation could have been avoided.

In Rio Tinto’s case, its efforts to make alternative arrangements will be of critical importance. If there are no feasible options other than to cancel the Rusal contracts, force majeure will likely apply.

When force majeure doesn’t work

But there are plenty of examples where force majeure events such as government intervention have not been regarded as sufficient grounds to end a contract.

In 1962, a court in the United Kingdom found that the closure of the Suez Canal was not sufficient to end a contract requiring 300 tonnes of Sudanese nuts to be shipped between Port Sudan and Hamburg.

The Suez Canal would have been the cheapest and fastest shipping route. However, it was still possible to deliver the nuts by sailing around the Cape of Good Hope, even if this increased the cost for the seller and took more time.

Inadequate wording in a force majeure clause can also backfire, as in the Kriti Rex case. Here a force majeure clause covering ‘“events beyond the control of the parties” was deemed inapplicable because the courier hired by the purchaser (which damaged the goods) was regarded as being within the purchaser’s control.

So what for Rio Tinto?

Ultimately, the success of Rio Tinto’s attempt to invoke force majeure depends entirely upon the wording of the clauses and whether these account for events such as sanctions being imposed.

But it is highly unlikely the clauses would be this specific as the circumstances are unique. Traditional inclusions in force majeure clauses are things like natural disasters, labour strikes or war, not a foreign government’s political sanction of a company’s controller.

Force majeure clauses are also interpreted quite narrowly by courts, so cannot just be stretched to cover every situation.

If the clauses in Rio’s contracts are deemed not to account for the US sanctions, Rio must rely on the doctrine of frustration. It would need to demonstrate that contracting with a company controlled by a Russian oligarch who has been subsequently sanctioned by the US was a reasonably unforeseeable event when the contract was made, and this event radically altered the contract.

It would not be enough for Rio Tinto to argue it might lose money or be inconvenienced. Though the US government’s actions might have been unexpected, the broader effects of Rusal’s suspension upon Rio Tinto’s operations remain to be seen.

The ConversationIf the consequences are purely financial or inconvenient, Rio Tinto’s legal mettle might be tested.

Mark Giancaspro, Lecturer in Law, University of Adelaide

This article was originally published on The Conversation. Read the original article.