June 25, 2020
Issue 328  |  View Past Issues

Editor's Note

Shareholder activism is charting new territory this week with a vote on a resolution filed by the NGO Kiko Network requiring Mizuho Financial Group, a major Japanese bank, to align its business strategy with the Paris Agreement. A week after being outed as one of four insurers of Adani’s Carmichael coal project, Aspen Insurance has agreed to end its support for the project when its current policy expires. All four insurers have now dumped the project.

In India, the Supreme Court has rejected a plea from private power producers for a further delay in the deadline for the installation of flue gas desulphurisation units on coal plants. A lawyer representing local communities near the Cerrejon mine in Colombia has called for a United Nations inquiry into human rights impacts of the project on water supplies and the health of the Indigenous Wayuu people. As debate over the German Government’s draft coal exit law proceeds, lawyers for NGO groups have warned that contracts negotiated for plant closures risk legal problems if future governments want to pursue a more ambitious phase-out timetable than the current 2038 end date. 

As the COVID-19 crisis continues to grow, analysts argue the impact on the seaborne coal market will affect all the major exporters but with Indonesia likely to be hit worst. This comes as a South Korean power utility seeks approval for a proposed investment in anew coal plant in Indonesia. In China, the powerful National Development and Reform Commission has restated its commitment to the coal caps in the current 2017 five-year energy plan, a move seen as a warning to states pushing for a raft of new coal plants to provide a short-term boost in construction jobs.

Bob Burton


When is a new mine not a new mine?

The major Canadian metallurgical coal mining company, Teck Resources, is pitching its Castle Mountain project to regulators as a mine extension and not a new mine requiring federal environmental assessment, writes Paul Fischer in The Narwhal.

Renewable energy surges in Africa but Chinese-backed coal plans remain

While renewable energy projects are taking off across Africa, Chinese-backed coal plants in countries such as Zimbabwe risk leaving nations with unsustainable loan payments, writes Simon Nicholas for the Institute of Energy Economics and Financial Analysis in Business Day.

Top News

Indian Supreme Court rejects bid for pollution deadline extension: India’s Supreme Court has rejected an application from the Association of Power Producers for a two-year extension to the December 2022 deadline for the installation of flue gas desulphurisation (FGD) units to cut sulphur dioxide emissions. The requirement for FGD units was first notified in late 2015 to come into effect in December 2017 and then, after lobbying by power utilities, the deadline changed to December 2019 and then December 2022. Sunil Dahiya from the Centre for Research on Energy and Clean Air said the court should take the next step and shut down the non-compliant plants. (Reuters)

Another insurer dumps Adani’s Carmichael coal project: Aspen Insurance has announced it will cease to insure Adani’s proposed Carmichael coal project after its current policies expire. Two weeks ago, leaked information revealed Adani had policies with four companies: Aspen Insurance, AXA XL, Liberty Mutual and HDI. All four have now ruled out further support for the project. However, Aspen Insurance did not provide details on the policies it has with Adani or when they will expire. Adding to Adani’s troubles is the decision by the South African bank Investec to rule out any role in raising funds to refinance Adani’s Abbot Point coal terminal, a central part of the Carmichael coal project. In 2017 Investec helped raise A$500 million in bonds for the terminal but has told Adani it will play no further role when its contract expires in 2022. (Guardian, Australian Financial Review [paywall])

Indian states seeks exclusion of coal blocks from auction: The Chhattisgarh government has requested five coal blocks be excluded from the list of nine put up for auction by the Modi Government as they would intrude on Hasdeo Arand forest, the Lemru Elephant Reserve and the Mand River catchment. The state said that the areas had been set aside in a bid to reduce the conflict between elephants and villagers. The call followed the Jharkhand state government commencing a legal case in the Supreme Court challenging the national government’s decision to auction coal blocks for commercial mining in the state. Maharashtra’s Minister for the Environment has also written to the national government requesting the exclusion of a coal block near the Tadoba Andhari Tiger Reserve. Last week the Modi Government opened 41 coal blocks in Madhya Pradesh, Chhattisgarh, Jharkhand, Odisha and Maharashtra for sale to private companies. (Hindustan Times, Hindustan Times, Indian Express)

Colombian community launches legal challenge against Cerrejon mine: A lawyer representing the Wayuu indigenous community in Colombia has urged the United Nations Special Rapporteur on human rights to investigate the Cerrejon coal mine over its resumption of operations during the COVID-19 pandemic and the impact of the mine on the community’s water supply and air quality. While the UN’s Special Rapporteur has no formal powers, they can report the findings of an investigation to the company’s shareholders. Cerrejon is a joint venture of BHP, Anglo American and Glencore with the thermal coal from the mine largely sold to European consumers. Both BHP and Anglo American have flagged a tentative interest in exiting from the project in the medium term. Cerrejon argue that it has not acted “inappropriately” either in response to the COVID-19 crisis or more generally. (Reuters, Sydney Morning Herald, Cerrejon)

Australian coal lobby group relaunches old climate policy as new: The Minerals Council of Australia (MCA), the peak Australian coal industry lobby group, has unveiled a revised climate policy which restates support for the Paris Agreement. It also announced a goal of net zero emissions but provided no timetable to meet the target. The central element of the policy is a three-year plan to 2023 which restates the mining industry’s support for carbon capture and storage and nuclear power but omits any mention of coal. The new policy follows increasing investor pressure on major MCA members BHP, Rio Tinto and Glencore over their continued funding of lobby groups campaigning against effective climate action. The new policy has been dismissed by investor and advocacy groups as a PR stunt lacking targets or a commitment to phasing out coal power or for the decarbonisation of steel production. (RenewEconomy, Australasian Centre for Corporate Responsibility, Minerals Council of Australia)

Chinese planning agency flags limits to new coal plant capacity: China’s National Development and Reform Commission (NRDC) has restated it aims to cap coal plant capacity at 1100 gigawatts (GW) by the end of 2020. China currently has about 1040 GW of coal plant capacity. The NRDC said 2020 energy consumption would be capped at five billion tonnes of coal equivalent, which allows for a 2.9 per cent increase on actual 2019 levels. The NRDC also flagged that it wants to reduce the number of operating coal mines to 5000 from the present 5268. Greenpeace China said the NRDC announcement was a warning to provincial authorities that had approved or announced 46,000 megawatts (MW) of new coal plants this year in addition to the 48,000 MW already under construction. (Reuters , Argus, Sixth Tone)

South Korean analysis flags Indonesian coal plant not financially viable: An analysis by the Korea Development Institute (KDI) of the proposed 2000 MW Jawa 9 & 10 coal plant in Indonesia has found that the project would result in US$43.58 million in losses over its lifetime. KDI found KEPCO relied on overly optimistic assumptions about power sales and construction costs, and understated risks to power generation due to the COVID-19 pandemic. KDI is a South Korean policy agency tasked with assessing the viability of projects government agencies are proposing to finance. KEPCO is pushing for board approval for the project as well as a stake in the consortium planning to build the Vung Ang 2 project in Vietnam, another project KDI estimates the utility would lose money on. (Business Green)


Australia: Hundreds of Queensland coal workers stood down as price falls hit mine viability.

Australia: Griffin Coal fined A$210,000 (US$145,000) over the 2018 death of worker trying to stop a mobile shovel.

Australia: An investigation has been launched into New Hope Corporation expanding its New Acland Coal mine beyond the area covered under previous environmental assessment.

India: After deadly border clash, Haryana state cancels contracts for Chinese company to install pollution control equipment on two coal plants.

India: Villagers protest proposed coal dump near railway station in Odisha.

India: Villagers oppose plans to double the width of Goa rail corridor to cater for coal.

Mozambique: Ncondezi Energy delays 300 MW coal plant and mine as state-owned utility reassesses power outlook.

Poland: The rate of new COVID-19 infections in the coal mining region of Silesia is declining as mines remain closed.

South Africa: Eskom may only recover 1.26 billion rand (US$69 million) of the 5.6 billion rand (US$323 million) it is owed by the Gupta family company, Tegeta Resources.

Sri Lanka: Controversy grows over Ceylon Electricity Board plan for a further 300 MW coal unit at the 900 MW Norochcholai plant.

Taiwan: Survey reveals 67 per cent of Taichung residents oppose restarting two coal units at Taipower’s Taichung plant.

Turkey: Call for explanation after the Minister of Environment said 14 coal units at six plants can  restart operation after being granted a one-year extension to meet pollution standards.

US: Court blocks Mountain Coal Company after it bulldozed a road into a Colorado roadless area during COVID-19 court hiatus.

Companies + Markets

Japanese bank faces shareholder resolution with growing support: A shareholder resolution requiring Mizuho Financial Group, a major Japanese bank, to align its business strategy with the 1.5 degrees goal of the Paris Agreement and end support for overseas coal projects will be put to a vote on June 25. The resolution, which was filed by the NGO Kiko Network, has won backing from the Swedish pension fund AP7, the Danish pension fund PKA and shareholder advisory companies Institutional Shareholder Services and Glass Lewis. BlackRock, which holds an estimated five per cent stake in Mizuho worth about US$1.3 billion, has not indicated how it will vote. Kiki Network estimates that between 2016 to 2019 Mizuho provided US$4.24 billion in lending and underwriting to coal power projects. (Reuters, Kiki Network)

NGO warns German coal exit contracts expose government to legal risk: ClientEarth, a UK-based legal non-profit, has warned that two legal opinions suggest the German Government’s draft coal exit law may lock in unnecessary compensation payments with closure contracts and open the door to later legal claims if a future government seeks to accelerate the phase-out to before 2038. Under the proposed law €4.35 billion (US$4.9 billion) would be allocated in compensation. ClientEarth argues that the establishment of a strategic reserve for LEAG – which operates four coal plants comprising 12 units – would be in breach of the European Union’s Electricity Market Directive. The draft law allows the government to legislate closures if contracts with power generators have not been concluded by June 30, 2020. (ClientEarth)

Mongolian coal company faces collapse as shares suspended: The trading of South Gobi Resources (SGR) shares in Canada has been suspended after the company failed to file its 2019 annual return and its interim 2020 return by June 15. South Gobi Resources owns and operates the Ovoot Tolgoi mine near the Mongolian border with China but has been struggling to finance the project and has been rocked by allegations of fraud by staff. The company has stated there is no guarantee it will be able to file the reports and warned that shareholders “may suffer a significant decline or total loss in value of its investment in the Company’s common shares.” If the ban on share trading persists China Investment Corporation (CIC) could declare the company in default of its agreement and demand immediate repayment of its debenture. The announcement came just two days after SGR reached an agreement with CIC to defer payment of US$74 due in June 2020 until September, pending approval by the Toronto Stock Exchange. (South Gobi Resources, South Gobi Resources [Pdf])

Russian exports slump: Russian coal production fell to 31 million tonnes in May, a 14 per cent fall compared to the same period in 2019. The decline was largely due to a decline in exports, with European demand falling as reduced demand resulted in significant stockpiles combined with low gas prices and increased renewables generation. In South Korea, Russia’s key thermal coal market, demand was reduced by restrictions on the operation of coal plants to cut pollution. Russian coal exports through Murmansk were curtailed after the June 1 collapse of a railway bridge over the Kola River. A temporary rail diversion around the site, reportedly catering for half the capacity of the main line, was opened on June 19. (Montel, Argus)

COVID-19 jolt to seaborne coal market in first quarter of 2020: Thermal coal exports from the leading seven coal exporting countries – Indonesia, Australia, Russia, Colombia, South Africa, Canada and the US – fell by 5 million tonnes in March, the largest fall since January 2016. Argus estimates Indonesian exports may fall by up to 40 million tonnes in 2020 due to the dramatic decline in Indian and Chinese imports as they prioritise domestic production over imports. US, Colombian and Australian exports are estimated to fall by 11 million tonnes, 7 million tonnes and 3 million tonnes respectively in 2020. While Russian exports are estimated to fall by 7 million tonnes in 2020, the depreciation of the rouble against the US dollar will mean producers will be competitive in the Asia-Pacific market and may erode Colombia sales to Turkey. (Argus)

BHP hires JP Morgan to offload Australian thermal coal mine: BHP has reportedly hired the US investment bank JP Morgan to sell its Mt Arthur thermal coal mine in the Hunter Valley in New South Wales. In 2015 BHP spun most of its coal assets and other unwanted projects off into South32 but decided to keep the Mt Arthur project and its one-third share in the Cerrejon coal mine in Colombia. With investors pressing for divestment from thermal coal, BHP is now faced with trying to sell the Mt Arthur mine at a time that coal prices are low and there are few companies or banks seeking to increase their exposure to the sector. (Reuters)


The Coal Curse: Resources, Climate and Australia’s Future, Quarterly Essay, June 2020. (An overview is here.)

This paywalled essay explores the power of the Australian coal lobby and its ability to block meaningful domestic action on climate policy.

Increasing the EU’s 2030 GHG Emissions Reduction Target, ClimateACT, June 2020. (Pdf)

This 62-page study estimates that the European Union could achieve a target of a 55 per cent to 65 per cent reduction in greenhouse gas emissions by 2030. This would require coal generation to be largely phased out by 2030 and eliminated by 2040.