September 15, 2016
Issue 150  |  View Past Issues
CoalWire

Editor's Note

Thermal coal’s retreat continues with Myanmar’s newly-elected government giving strong indications the 14,000 megawatts (MW) of proposed new coal plants will no longer be supported. In Sri Lanka, the government has confirmed it no longer supports the controversial proposed Sampur coal plant.

While the recent rise in coal prices has generated excitement within the ranks of the coal industry and business commentators, this is mostly attributed to China’s coal mining rationalisation policy. With a recent agreement to fine-tune the implementation of the policy – while still meeting capacity reduction targets – analysts expect both thermal coal and metallurgical coal prices to drop.

Bob Burton

Features

Another coal domino falls as the Indian Government’s billion tonnes a year by 2020 target fades

Another domino in India’s coal-centric energy policy has toppled with the Indian Government conceding its oft-stated aim of producing a billion tonnes a year of coal by 2020 is meaningless and unnecessary, write Bob Burton and Ashish Fernandes in EndCoal.

Campaigns

Sri Lanka scraps Indian-backed Sampur plant

In response to a lawsuit brought by the Environmental Foundation challenging the proposed Sampur coal plant, Sri Lanka’s Attorney General has told the Supreme Court the Ministry of Power and Renewable Energy will not proceed with the project. The Environmental Foundation had challenged the project on the grounds of discrepancies in the environmental impact statement for the plant and the long-term health effects from the use of coal. The 500 MW plant was proposed by a joint venture between the Ceylon Electricity Board and the Indian Government’s NTPC. As a result of the Attorney General’s submission, the legal challenge has been terminated. (Colombo Gazette, Daily News)

Top News

Myanmar looks to abandon coal projects: In a revised energy master plan, which is likely to be finalised by the end of the month, the newly-elected Myanmar Government may back away from support for proposed coal plants. Aung Ko Ko, a senior official at the Ministry of Electricity and Energy, said many people were “reluctant to implement coal-fired power plants, that's why we won't be able to implement the planned coal power plant projects.” As of July 2016 Myanmar had just over 14,000 megawatts (MW) of proposed coal plants and a further 445 MW under construction. (Reuters, CoalSwarm)

Norway dumps Duke Energy: Norway’s sovereign wealth fund has sold US$304 million of shares in Duke Energy and its three largest subsidiaries due to the risk of “severe environmental damage.” The Ethics Council, which advises the fund, noted the companies “repeatedly discharged environmentally harmful substances from a large number of ash basins at coal-fired power plants in North Carolina.” The fund has also divested US$245 million in bonds it held in the companies. (Bloomberg)

Indian power companies flout waste water regulation: Indian power utilities are mostly flouting a Ministry of Power directive issued in January for coal plants within 50 kilometres of municipal wastewater plants to use treated water. The directive, intended to ensure raw water is used for agriculture and water supply, is being resisted because treated water costs more. (Times of India)

US budget bill could gut coal ash standards: A water infrastructure budget bill likely to pass the US Senate includes a coal industry–backed amendment to overturn the Environmental Protection Agency's (EPA) national standards regulating coal ash disposal. The proposed amendment would allow different standards to be adopted for each coal ash site. The EPA standards came into effect in 2014, six years after the December 2008 coal ash dam disaster at the Tennessee Valley Authority's Kingston Fossil Plant in Tennessee. (DeSmog, Environmental Integrity Project)

IEA notes rise of renewables and coal overspend: The International Energy Agency’s World Energy Investment 2016 reports investment in renewables was, for the first time, greater than global electricity demand growth in 2015. It also notes 80 per cent of the new investment in coal power generation is in Asia, with China accounting for half of that. The IEA warns “China has overinvested in new fossil fuel capacity” and continued construction of new coal plants is “inconsistent with market fundamentals.” (Carbon Brief, Bloomberg)

“We wouldn’t look for new coal investments as it’s not worth it for the investor exposure,” said Graham Kerr, the CEO of South32, the company launched in May 2015 to operate BHP Billiton’s unwanted South African coal mines.

News

Australia: Despite damaging water supply to endangered swamps, Centennial Coal seeks mine expansion.

Bangladesh: Amnesty International launches support for activist jailed over anti-coal Facebook posts.

Greece: Gazprom flags interest in expanding the Vevi coal mine and Florina Power Station.

India: Charges filed over alleged illegal export of coal to Bangladesh.

UK: Proposed Druridge Bay mine to be subject to inquiry on compatibility with climate protection.

Companies + Markets

Fitch Ratings doubts durability of thermal coal price climb: Fitch Ratings, a major credit ratings agency, has warned the increase in the Asian thermal coal price is being driven by Chinese Government policy aimed at cutting oversupply, but is “not supported by improvements in demand fundamentals.” The agency warns the price rise could push China to ease its cuts to coal mining capacity. (Fitch Ratings)

Chinese coal producers negotiate flexible production plan:  Major Chinese coal producers have reached an agreement with the China Coal Trade and Development Association and government agencies to facilitate production cuts or increases depending on prices and stockpile levels. However, coal production will still not be allowed to exceed the amount produced under the May 2016 guideline cutting mines’ allowable operating days from 330 to 276. (Platts, Bloomberg)

Met coal’s spot price likely to fall: The rapid rise in metallurgical coal from US$83.40 to the end of May to nearly US$200 a tonne may be due more to coal traders taking short-term advantage of a tight global market and increased Chinese imports, argues Reuters columnist Clyde Russell. The current contract price for BHP Billiton and Mitsui, the largest met coal exporters, is US$92 a tonne and the price on the Dalian Commodity Exchange in China is US$118.94. (Reuters)

Indian power companies given notice on inflated costs: The Directorate of Revenue Intelligence (DRI) has issued legal notices to 10 Indian power companies for allegedly inflating the costs of coal imported from Indonesia and equipment costs for power plants. Companies served with notices include Adani and Essar. DRI alleges artificially inflated import costs allowed companies to shift money to subsidiaries in low-tax countries while seeking to be paid higher power prices as compensation for higher fuel and plant costs. Adani’s potential bill has been reported as being between US$116 million and $US164 million. (Times of India, Business Standard)

US$3 billion plan to expand Mozambique’s Nacala railway: The Nacala Integrated Logistics Corridor (CLN) – a joint venture between Vale, Mitsui and the Mozambique Government’s ports and rail company, CFM – has agreed to spend a further US$3 billion to increase the capacity of the Moatize railway and associated Nacala port. CLN is aiming to expand the capacity from the projected 9 million tonnes in 2016 to 22 million tonnes in 2018. Vale’s Moatize mine has been hit by the collapse of global thermal and metallurgical coal prices. (AllAfrica)

Mongolia seeks to revive Tavan Tolgoi project: The proposed development of the US$4 billion Tavan Tolgoi metallurgical coal project is being reconsidered after the election of a new government in June. In 2014 a proposal by Mongolian Mining Corporation, Shenhua Group and Sumitomo was blocked in parliament. The project foundered as metallurgical coal prices fell and the Chinese market contracted. To be viable the project requires higher Chinese demand as well as major infrastructure including power, water supply and transport links. (Reuters)

Bankrupt US coal company agrees to end self-bonding: Arch Coal, one of the largest US coal companies, has agreed to provide US$485.5 million in rehabilitation liabilities for its Wyoming mines which had previously been covered by self-bonds allowed by federal regulators. As part of its bankruptcy agreement, Arch Coal has agreed to cover the liabilities within 15 days of its bankruptcy exit plan taking effect. (St Louis Post-Dispatch)

Resources

The Economics of Coal: Where are its Benefits?, Justica Ambiental, September 2016. (Pdf)

This 62-page report details how illusory the proposed benefits from the development of Mozambique’s coalfields have proved to be and how high the social, economic and environmental costs are.

Lowest Cost Decarbonisation for the UK: The Critical Role of CCS, Parliamentary Advisory Group on Carbon Capture and Storage (CCS), September 2016. (Pdf)

This 70-page report argues the case for the UK Government re-committing to funding and assuming liabilities for the development of CCS for both the power and industrial sectors. (A useful Platts summary of the report is here.)