CoalWire 104, October 1, 2015

October 1, 2015

editor’s note

The chaos in the coal industry grows by the week. Goldman Sachs analysts are now suggesting global thermal coal use may have peaked, while falling coal prices are taking a toll on companies such as Glencore, the world’s largest exporter, Indonesia’s largest exporter Bumi Resources and Poland’s largest hard coal miner, Kompania Weglowa. Meanwhile the US-China climate agreement announced last week commits China to “work towards strictly controlling public investment” in coal projects. This is hugely significant and could be a game-changer for new coal plants both domestically and internationally.

The coal industry’s credibility has been further eroded by Hitachi agreeing to pay a fine to settle a US action over secret payments for South Africa power plant contracts and in India 20 power companies are under investigation for tax evasion.

features

Ex-coal industry head says there’s no room for new coal

“In the International Energy Agency’s scenario to meet the 2 degree C limit, by 2040 there is room for only 780 GW [Gigawatts] of unabated coal power generation, and all of this must be the most efficient ultra-supercritical coal plants. The size of the world’s current coal fleet is 1900 GW, with an additional 300 GW under construction. Therefore even if not another single additional coal plant was built from today, we still need to retire two-thirds of the world’s current coal fleet by 2040 in order to stay within 2°C,” writes Ian Dunlop, a former chairman of the Australian Coal Association, in the Climate Change Task Force.

Suggested Tweet: Ex-coal industry head says there’s no room for new #coal http://bit.ly/1LYLnlv

US West Coast coal export projects ‘more pie in the sky than ever’

“The outlook for coal markets off the West Coast of the U.S. continues to weaken. This fast-developing erosion is rooted in a structural, long-term move that makes elaborate coal-export schemes more and more ill-advised as coal’s decline deepens. Projects pitched, for example, at Longview, Washington, at the Port of Oakland [on San Francisco Bay], and for the Chuitna River near Anchorage [in Alaska] today are more pie in the sky than ever,” writes Tom Sanzillo from the Institute for Energy Economics & Financial Analysis.

Suggested Tweet: US West Coast #coal export projects ‘more pie in the sky than ever’ http://bit.ly/1P2Ybwr @ieefa_institute 

Poland’s crippled coal company a symptom of a far larger problem

“The financial crisis engulfing Poland’s publicly-owned hard coal mining company, Kompania Weglowa, has largely been caused by the stubborn refusal of the Polish Government to adapt to Europe’s rapidly changing energy landscape,” writes Bob Burton in EndCoal.

Suggested Tweet: #Poland’s crippled #coal company a symptom of a far larger problem http://bit.ly/1LkOwlg @bobburtonoz #climate

campaign update

Shift in Credit Agricole coal policy to leave Croatia’s Plomin C plant stranded

A revised coal plant policy released by the French bank Crédit Agricole excludes it from providing finance for new plants or upgrades of existing plants in high-income countries as defined by the World Bank. The World Bank defines Croatia as being a high-income country. Campaign groups have welcomed the change and believe the new policy will exclude the bank from financing the controversial US$890 million Plomin C coal plant in Croatia. The new policy follows the release in mid-September of a report by Friends of the Ea­rth, Zelena Istra, CEE Bankwatch Network and BankTrack which argued that the bank’s support for the project would breach its policy on coal-fired plants.  (BankWatch, Crédit Agricole [in French), Crédit Agricole [Google Translate version])

Suggested Tweet: #Croatia: major blow for #Plomin plant as @CreditAgricole announces new #coal power policy http://bit.ly/1POd4Rr cc @Energetika_SEE

top news

China pledges controls on financing overseas coal projects: At a joint media conference the US and Chinese governments announced that China has “agreed to work towards strictly controlling public investment flowing into projects with high pollution and carbon emissions both domestically and internationally.” The policy could have significant implications for new coal plants in China, and internationally, as China has become a major public funder of new coal plants around the world, including in Africa, Turkey and Asia. The shift isolates Japan, which counts financing international coal plants as climate action, and undermines concern that Chinese banks would fund projects other development banks won’t. (White House, Reuters)


Hitachi settles US charges over South African power plant deal: Hitachi has agreed to pay a US$19 million fine to settle charges brought under the US Foreign Corrupt Practices Act over US$6 million in “improper payments” to Chancellor House, the business arm of the ruling African National Congress. US$5 million was paid to Chancellor House as “dividends” from the profits from contracts to build boilers for the Medupi and Kusile power stations for the state-run utility Eskom. A further $1 million was paid to Chancellor House as “success fees” for “its exertion of influence” during the contract tender process. (US Securities & Exchange Commission, Bloomberg)


US coal lobby group halves staff: The American Coalition for Clean Coal Electricity (ACCE), the major US coal industry lobby group, will cut its staff by half to just eight due to falling membership and reduced member contributions. ACCCE, which has been a leading opponent of the Obama Administration’s Clean Power Plan and other policies affecting the coal industry, represents some electricity utilities and coal companies such as Peabody Energy and Drummond Company. (Politico, ACCCE)

North Carolina slashes Duke Energy coal ash pollution fine: Environmentalists have criticised a decision by North Carolina environmental regulators to slash a US$25 million fine imposed on Duke Energy for coal ash pond pollution at the L.V. Sutton plant to just US$7 million across 14 sites in the state. The Southern Environmental Law Center said the settlement represented a fine of just $500,000 per site. For the Sutton plant this represented a 98 per cent reduction from the original US$25 million fine. Duke Energy has claimed the settlement resolves all enforcement action over pollution at its sites. (New York Times, Southern Environmental Law Center)


Colombian court temporarily lifts railway curfew: A Colombian court has temporarily lifted a night-time curfew on Fenoco’s coal railway to allow for testing the effectives of noise control measures. In January legal action by 139 residents of the town of Bosconia succeeded in banning coal trains between 10:30pm and 4:30am. The regional environmental agency has until October 30 to file a report on results of a 15-day trial on the railway noise levels. The Fenoco railway carries coal produced by Glencore and Drummond to export terminals near Santa Marta. (Bloomberg)

“The IPCC’s estimate of a carbon budget that would likely limit global temperature rises to 2 degrees above pre-industrial levels … amounts to between 1/5th and 1/3rd world’s proven reserves of oil, gas and coal. If that estimate is even approximately correct it would render the vast majority of reserves ‘stranded’ – oil, gas and coal that will be literally unburnable without expensive carbon capture technology, which itself alters fossil fuel economics,”

said Mark Carney, the Governor of the Bank of England in a speech to an insurance industry event.

news

China: Coal company profits have fallen by 65 per cent in 2015 compared to the previous year.


China: Poll finds 76 per cent of respondents rank air pollution very-to-moderately big problem.


Indonesia: J-Power to miss October 6 deadline for 2000 megawatt (MW) Batang plant in Central Java.

Mongolia: Government considers sale of power plants and coal mines to plug fall in coal revenue.


US: Peabody Energy’s creditors hire law firm to defend their interests in debt restructuring.


US: Mayor urges New York City’s five pension funds to divest US$33 million invested in coal.

companies + markets

Falling Chinese demand to push prices lower: Goldman Sachs estimates that the global thermal coal market between 2016 and 2019 will be flat at about 5.9 billion tonnes a year, down one per cent from the estimated six billion tonnes consumed in 2014. The analysts estimate that Chinese coal imports will continue to fall, dragging prices down to US$54 per tonne in 2016 for Newcastle benchmark thermal coal. They also argue that the “seaborne market has gone ex-growth” and that no new investments will be needed in thermal coal for several years. (Platts)


Glencore under pressure; doubts about viability: The dramatic changes in Glencore’s share value – a 30 per cent fall one day and a 17 per cent rebound the next day – has raised significant doubts about the future of the diversified commodities company. Glencore has interests in over 30 operating coal mines in Australia, South Africa and Colombia. The company produced 68.7 million tonnes in the first half of the year and is the world’s largest seaborne exporter of thermal coal. With debt of almost US$30 billion and shares valued at just US$17 billion, the likelihood of coal projects being sold off or mothballed have increased dramatically. (ABC, Bloomberg)


Indian investigators uncover coal import scam: The Directorate of Revenue Intelligence (DRI) has formally requested the assistance of Singapore in one of its investigations into 20 Indian private and publicly-owned power companies paying inflated prices for Indonesian coal. DRI is investigating coal imported between 2011 and 2014 via agents in Singapore, Hong Kong and Dubai. By paying an inflated price to an offshore agent, funds could be held in secret offshore accounts. The DRI is also investigating the falsification of coal testing results to report low grade coal as higher-grade coal. (DNAIndia)

Indonesia coal producer pleads with creditors: Indonesia’s largest coal exporter, Bumi Resources, has stated that due to current low thermal coal prices it can only afford less than half of its current US$4 billion debt. The company has proposed that US$1.5 billion of loans and bonds be converted into shares. China’s sovereign wealth fund China Investment Corporation and the China Development Bank hold US$780 million of the debt proposed to be converted to equity. (Bloomberg)


Another delay and cost overrun for Kemper CCS plant: Mississippi Power, a subsidiary of Southern Company, has announced the commissioning of the 582 MW Kemper Carbon Capture and Storage plant in Mississippi will be delayed from the original March schedule until sometime after April 19. The delay will result in the cost of the US$6.2 billion project increasing by at least US$15 million, with a further US$234 million in investment tax credits to be repaid to the Internal Revenue Service. The company estimates each month’s delay after March will add US$25-30 million to the cost of the project. (Bloomberg, Southern Company)


UK CCS project loses power sector backer: UK power generator Drax has announced it will quit funding the White Rose Carbon Capture and Storage (CCS) project when the feasibility study on the project is completed within six to 12 months. The company said that “dramatic” changes to the company’s profitability, partly caused by government cuts in support for renewable energy, forced the company to cut spending. The company said the site for the White Rose project, which adjoins Drax’s existing coal-fired plant, would continue to be available for the project. (BBC)