Under the “New Policies Scenario” forecast by the International Energy Agency (IEA) in its 2010 World Energy Outlook (WEO) coal-fired electricity generation will grow to about 11,000 terrawatt hours from a current level of about 8,000 by 2035. Coal-fired power plants currently provide about 41 percent of global electricity. By 2030 that share is expected to grow to about 44 percent.

According to the IEA, a drop in coal-fired generation among Organization for Economic Cooperation and Development (OECD) countries will be more than made up for significant increases in the developing world, led by China and India.

Electric power consumption in China increased 12.2 percent during the first seven months of 2011 over the comparable 2010 period. That new demand was satisfied in part via 41 gigawatts of new generating capacity added this year, 27.7 gigawatts of which was coal-fired. For every obsolete coal-fired plant that China dismantled over the past three years, two new coal-fired plants have been built.

The US Energy Information Administration (EIA), in its International Energy Outlook 2011, predicted China will build 1,020 gigawatts of generating capacity by 2035, of which almost half–48 percent–will be coal-fired. In the Middle Kingdom 600 gigawatts of new capacity already exceeds the current coal capacity of the US, the European Union and Japan.

In India power generation will rise 72 percent between 2008 and 2035, much of it coal-fired. Coal currently accounts for more than 60 percent of India’s energy use. Regulatory hurdles prevent full-scale production of the country’s ample domestic reserves, so India must import supplies to keep a blackout-plagued system running.

India imported about 100 million tons of coal in 2010-11, of which about 70 percent was the thermal variety used in electric power generation. The overall figure is forecast to jump to 114 million tons in 2011-12, as the country struggles to close a peak-hour power deficit of nearly 14 percent.

It’s against this backdrop that Australian Edge Portfolio Aggressive Holding New Hope Corp Ltd (ASX: NHC, OTC: NHPEF) announced last week that its board of directors would formalize a process that until then had consisted only of “a number of preliminary and incomplete proposals from third parties” about buying the company.

New Hope operates three open-cut mines in Queensland–New Acland, Jeebropilly and New Oakleigh–that produce about 5million metric tons a year of thermal coal. It also owns 100 percent of the Queensland Bulk Handling (QBH) coal export terminal at the Port of Brisbane, which has a capacity of 10 million metric tons per year.

Approximately 65 percent of New Hope’s coal sales are exported to customers in a number of countries in the Asia-Pacific area, with the remaining 35 percent being sold domestically for electricity production and to a wide variety of general industry processors and manufacturers. New Hope exports its coal through QBH.

Although a burgeoning development pipeline includes metallurgical coal projects, New Hope’s bread and butter is thermal coal, the variety used to produce electricity. And growth in the production of electricity is one of the surest trends on the planet.

The stock closed at AUD5.12 on its home exchange the morning Australian Edge launched in the US, Sept. 27. In our preview issue we noted that New Hope, then with a market cap of AUD4.2 billion and valued at 1.79 times book, had to be considered a “potential acquisition.” New Hope’s Oct. 5 announcement sparked a big rally in the company’s share price, as the Australian Securities Exchange (ASX) listing jumped to an all-time high of AUD6.21 by Monday’s close.

According to the company statement, “selected parties will be invited to submit proposals to the Board for its consideration. The process is expected to take several months and may or may not result in a proposal being made or recommended by the Board.”

During its Sept. 20 annual earnings announcement New Hope revealed it will pay a final dividend of AUD0.05 and a special dividend of AUD0.15 per share on Nov. 8 to shareholders of record as of Oct. 24. The stock will trade ex-dividend beginning Oct. 18.

Management reported a AUD503.1 million net profit for fiscal 2011 (ended Jul. 31), but the net profit number was inflated by asset sales. Underlying profit–what the company earned from ongoing operations–fell by 20 percent to AUD146.9 million because of disruptions caused by flooding in Queensland. Output was hurt much less than forecast, however, and raw coal production at New Acland reached a quarterly record. Coal sales were up 9 percent year over year, 105 percent above the flood-marred previous quarter.

The company also has more than AUD1.5 billion in cash and comparable securities on its balance sheet. It has no debt whatsoever.

Now a combination of factors–including concerns over the long-term security of coal supply among major consumers, the value proposition of producing coal in Australia for export and stock prices brought low by panic–have made New Hope a ripe target.

Rumors about New Hope are now mashing up with rumors about Xstrata Plc (London: XTA, OTC: XSRAF), a diversified miner that itself is the potential target in other speculation concerning raw materials giant Glencore International Plc (London: GLEN, OTC: GLCNF). Also mentioned as potential New Hope acquirers are Rio Tinto Ltd (ASX: RIO, NYSE: RIO) and Peabody Energy Corp (NYSE: BTU).

Yancoal Australia, a subsidiary of China-based coal miner Yanzhou Coal Mining Company Ltd (Hong Kong: 1171, NYSE: YZC) bought Syntech Resources, which owned the Cameby Downs  thermal coal mine in Queensland, for AUD202.5 million in August and Wesfarmers Ltd’s (ASX: WES, OTC: WFAFF) Premier thermal coal mine in Western Australia for AUD296.8 million in September. Cameby Downs is near New Hope’s New Acland mine in the Surat Basin.

New Hope draws a four-two-two buy-hold-sell line from the analysts who cover it. Since the bounce two analysts have issued downgrades–Paterson Securities from “hold” to “sell” by Paterson Securities and from “buy” to “neutral” by Citi–reflect the stock’s nearly 20 percent rise over the past week.

Our primary reasons for recommending stocks and including them in the Australian Edge Conservative Holdings are based on their ability to build wealth over the long term. New Hope, a charter member of the AE Portfolio Aggressive Holdings, was attractive from a fundamental standpoint, but it has always been upfront about its willingness to sell to anyone willing to pay a good price, as Managing Director Robert Neale told Dow Jones in mid-September.

It looks like we’re about to find out if there’s a suitor willing to pay such a price. We’ll have more on New Hope and other Australia-based coal producers in the October Australian Edge, which will be published this Friday, Oct. 14.

The Roundup

Aggressive Holding New Hope Corp Ltd (ASX: NHC, OTC: NHPEF) has soared well past our buy under price of USD5.50 on the company’s announcement of its intention to seek offers from potential suitors. Estimates of an eventual take-out price that would satisfy Managing Director’s Robert Neale’s definition of “a good price” could range up to USD10 per share.

Our buy price is based on a view of New Hope as a long-term wealth builder, not for any speculative purposes. Although we’re happy when such occurs, we never want to get involved with a company that we wouldn’t want to own absent the consummation of a takeover deal. We’ll review the New Hope situation as part of a larger look at Australian coal production in the October AE.

Elsewhere, big news will be made Wednesday when the lower house of Australia’s parliament votes on a proposal to tax the nation’s biggest greenhouse gas emitters.

Beginning Jul. 1, 2012, Australia’s 500 biggest polluters will pay a tax of AUD23 (about USD22.86) per metric ton of GHG kicked into the atmosphere. The carbon tax will increase by 2.5 percent per year, plus inflation. In 2015 this scheme will expire and the market will set the price of carbon emissions and emissions credits.

The plan also includes measures to soften the blow to business. The government would set aside AUD9.2 billion over the first three years to help industries adjust to the new tax, including AUD5.5 billion for upgrading coal-fired power plants that aren’t closed down; AUD1.3 billion for coal mines to target methane emissions; and an additional AUD1.3 billion to create jobs at the mines most affected by the tax.

High-emission exporters, such as steel, aluminum and pulp and paper makers, would get free carbon permits to assist them while they undertake initiatives to reduce pollution. The proposal grants the steel industry an additional AUD300 million in “adjustment payments.”

The government would also purchase and decommission the worst coal-fired power plants–about 2,000 megawatts of generation capacity–including the controversial Hazelwood power plant, reputed to be Australia’s least carbon-efficient power station.

Prime Minister Julia Gillard has the numbers in both the Australian House of Representatives and the Senate, which will take up the matter the week of Nov. 7. It has cost her, however, with the Australian public, to which she offered a promise of no carbon tax while campaigning for the prime ministership. She’s now at record-low support in opinion polls, as voters confront the reality of rising prices for food, travel and other goods and services.

Conservative Holdings APA Group (ASX: APA, OTC: APAJF) and AGL Energy Ltd (ASX: AGK, OTC: AGLNF, ADR: AGLNY) have joined up to develop a 242 megawatt gas-fired power station at Mount Isa in Queensland. The duo has signed an electricity supply agreement with Xstrata Plc’s (London: XTA, OTC: XSRAF) Mount Isa Mines that will begin in late 2013 and run through 2030.

The Diamantina power station will include two 121 megawatt combined cycle, gas-turbine units. It will be fully operational by early 2014. AGL will supply gas to the power station for its first 10 years, after which Xstrata will provide it.

APA and AGL have executed fixed-price construction contracts for construction as well as a long-term service agreement covering major maintenance with Siemens. The companies will jointly finance the estimated AUD500 million project.

APA Group is a buy under USD4.20. AGL Energy–which because of its extensive renewable energy portfolio is actually likely substantial benefits from Australia’s carbon tax–is a buy under USD15.30.

Australia & New Zealand Banking Group Ltd (ASX: ANZ, OTC: ANEWF, ADR: ANZBY) shares have rebounded sharply along with global financials, as the rumors swirling around Greece and its debt turned positive late last week and over the weekend. The bank also announced that it would cap executive pay as part of a plan to control costs in the face of loan growth that’s likely to slow in coming quarters. ANZ, offering a yield of 6.6 percent at current levels, is a buy under USD22.

Momentum toward ratification of Telstra Corp Ltd’s (ASX: TLS, OTC: TTRAF, ADR: TLSYY) AUD11 billion deal with Australia’s National Broadband Network (NBN) seems to be gathering, as proxy advisory firms Institutional Shareholder Services and CGI Glass Lewis as well as the head of the Australian Shareholders Association both urged a “yes” vote by their respective constituents.

Telstra announced in September that required regulatory approvals won’t be had in time for a scheduled Oct. 18 shareholder vote during the company’s annual meeting. Buy Telstra’s American Depositary Receipt (ADR), which is worth five ordinary shares traded on the Australian Securities Exchange (ASX) under the symbol TLS, under USD16.

Aggressive Holding BHP Billiton Ltd (ASX: BHP, NYSE: BHP) has won the approval of Australian federal and South Australian state regulators for a planned AUD30 billion expansion of its Olympic Dam uranium and copper mine. If a royalty arrangement can be worked out with South Australia, anticipated by March 2012, Olympic Dam could be, according to Resources Minister Martin Ferguson, “one of the world’s largest mines, if not the largest.”

Should construction on the 11-year phased plan proceed Olympic Dam’s copper output will increase four-fold to about 825,000 tons (750,000 metric tons) a year. Uranium oxide production will increase by about 21,000 tons (19,000 metric tons) a year. BHP Billiton is a buy under USD40.

Aggressive Holding GrainCorp Ltd (ASX: GNC, OTC: GRCLF) completed its AUD80.6 million acquisition of Germany-based maltster GermanMalt GmbH & Company. GrainCorp, which announced the deal in July, hopes to boost its malt sales in Africa and South America and improve its ability to supply customers.

GrainCorp plans to change the German company’s name back to Schill Malz. Schill Malz has four malthouses, with an annual production capacity of 190,000 tons. The deal makes GrainCorp the fourth-largest maltster in Europe, which is the locus of about 50 percent of the global barley and malt trade. It’s a strategic move that expands the company’s product offerings. GrainCorp is a buy under USD8.50.