No valentine for coal!Published by MAC on 2015-02-23
Source: Statements, Reuters, Guardian
Valentine's Day this year was set as fossil fuels "Global Divestment Day" (although events happened over several days), and several thousand protesters against reliance on fossil fuels took to the streets in several countries.
Was this merely a "Feel-good folly", as the Wall Street Journal described it?
Far from it. In fact, over the past five years, the eminently serious and sober Financial Times Stock Exchange North American Fossil Fuel Free index has consistently outperformed the conventional benchmark index.
For a relevant article on Indian company Adani's Australian own coal power folly, mentioned below, see: Is Adani's Ozzie venture on the rocks?
Divestment Outperforms Conventional Portfolios for Past 5 Years
US National Resources Defense Council
13 February 2015
The Independent Petroleum Association of America recently commissioned and funded a study, covered in the New York Times and elsewhere, which claimed that university endowments would suffer without fossil fuels in their portfolios. The Wall Street Journal ran an op-ed calling fossil fuel divestment a "Feel-Good Folly."
Let's look at the facts. The global indexing firm FTSE has developed several fossil fuel free indices, and has tracked performance over the past five years. Over this time period, FTSE's North American fossil fuel free index has consistently outperformed the conventional benchmark index.
This five-year snapshot is not necessarily an indicator of future performance, but it is five years of real data demonstrating that a fossil-fuel strategy can make perfect financial sense. The fossil fuel free index also showed less volatility than the conventional benchmark, another factor that puts investors at ease.
The only folly is a failure to see where continued investment in fossil fuels is taking us--into an uncertain future of weather extremes, which we're already getting a taste of now. Storms, droughts, and flooding are expected to become more frequent and severe as the climate warms; sea levels are rising, swamping low-lying lands. The Pentagon sees climate change as a national security threat.
Scientists have calculated that in order to avoid the worst impacts of climate change, as much as two-thirds of known fossil fuel reserves need to stay in the ground. We need to invest in cleaner sources of energy, free from carbon pollution--not pour more resources into drilling our way toward climate disaster.
If universities and other institutions are still afraid to divest, despite the facts, it suggests to me that the worry is really about breaking faith with the oil and gas industry and its very deep pockets. If fossil fuel interests are really so deeply entwined in our educational--not to mention political and financial institutions--then the movement to divest becomes even more important. We must start to disentangle ourselves from this polluting industry that has such a hold on our lives--and our futures.
Thousands are rallying around the world for Global Divestment Day today, calling on universities and other institutions to break their financial ties to the fossil fuel industry. It's not only a financially sound decision, but a morally sound one, too. Universities in particular are the institutions we trust to shape our future--not sacrifice it.
From bad to worse for US coal companies
US Natural Resources Defense Council
9 February 2015
The No.2 US coal company, Arch, announced last week it lost over $500 million* last year. Arch recently suspended dividend payments to its investors . TheStreet Ratings team listed Arch as a sell, and gave it a rating score of 'D,' noting:
The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, weak operating cash flow, poor profit margins, generally disappointing historical performance in the stock itself and generally high debt management risk.
Two weeks ago, the nation's largest coal firm, Peabody Energy, announced it lost $787 million last year and cut its dividend 97% to 25 cents. Peabody's operating cash flows of $337 million were smaller than its interest payments of $414 million. Greg Boyce resigned as CEO in late January around the time S&P downgraded its outlook for the firm to "negative."
No.3 Alpha Natural Resources hit a 52-week low last week of $0.88 a share. The company's stock is down 79 per cent over the last year. On New Year's Eve, its president resigned. Alpha currently has a ratings score of "D-" and recommendation of "sell" from analysts.
In the past five years, shares in Peabody have lost 87 per cent of their value, shares of Alpha have lost 98 per cent of their value, and shares of Arch have lost 96 per cent of their value.
To most folks, that looks like a trend. In fact, when you pair the trajectories of the S&P 500 and the top five coal stocks , it looks like a divining rod with the coal stocks headed towards sunk.
Curt Woodworth, an analyst at Nomura, told The Financial Times last week "I think you're going to see multiple bankruptcies in US coal over the next 12-18 months." "The outlook isn't good: the outlook is getting worse."
Natural gas prices have played a large role in this, as has the plummeting cost of oil. But markets have also stopped buying coal companies' rosy pictures of blossoming overseas markets, particularly in Asia.
My colleague Clark Williams-Derry at the Sightline Institute makes this crystal clear in his recent blog post, as have other analysts who see a grim picture for coal – both nationally and internationally – going forward.
According to The Financial Times, Matt Preston, an analyst at Wood Mackenzie, said that there was a "worldwide malaise" in coal demand. "China is the biggest single importer, so if China is declining the whole world is going to feel it," he said. "But all around the world, the industry is challenged."
Besides cheap natural gas and oil, and increased market penetration of renewables like wind, solar and energy efficiency , new health public health pollution limits have also factored into coal's shrinking market share. Measures by the Environmental Protection Agency to limit air toxics like mercury as well as carbon pollution and the pollutants that cause smog have played a role in cutting coal's market share.
(And we need those protections! The Obama Administration is putting in place a rational approach to climate change and public health, based on sound science and economics, as well as a moral obligation to our protect our children and their future. Let your voice be heard!)
Industry executives and their allies say the Obama Administration is waging a "war on coal" with these protections, and lay the blame for their woes at the White House door.
But that's politics, not economics. The news last week just shows us how market economics are pushing King Coal further and further down from his throne.
*All dollar figures in USD
Theo Spencer is a senior advocate at NRDC's Climate Center in New York. Reprinted with permission from the US Natural Resources Defense Council.
U.S. 'clean coal' project demise shows EPA plan's weakness: lawyers
By Valerie Volcovici and Ayesha Rascoe
12 February 2015
WASHINGTON - The U.S. government's move to suspend a trouble-plagued $1.65 billion carbon capture and storage (CCS) project this month may have bolstered legal challenges to proposed environmental regulations on power plant carbon emissions, several legal experts said.
The FutureGen project in Illinois would have been the first U.S. commercial-scale, near-zero emission coal plant to use technologies to capture carbon dioxide from major industrial plants and store it safely underground. This approach could sharply reduce carbon dioxide emissions and curb global warming.
Under the Clean Air Act, Environmental Protection Agency (EPA) standards must be based upon the "best system of emission reduction" using technology that has been "adequately demonstrated." Some legal experts said this week the Department of Energy's abandonment of the project proves the technology failed to meet those criteria.
FutureGen's demise is further evidence that EPA's standard for new power plants is not legally defensible, said Jeff Holmstead, of Bracewell and Giuliani, which represents energy -industry clients looking to challenge the proposed regulations, a cornerstone of the Obama administration's climate-change strategy.
"It's sort of another nail in the coffin of EPA's proposal," said Holmstead, who headed EPA's office of Air and Radiation during the George W. Bush administration.
Asked about the FutureGen project at a Senate hearing on Wednesday, the EPA's air pollution head Janet McCabe dismissed comments that CCS is not viable and pointed to a project launched in October in Canada as proof that it can work to scale.
The agency had previously pointed to FutureGen, as well as Southern Co's long-delayed Kemper project in Mississippi as beacons for nascent CCS technologies, the varied ways to capture carbon waste from sources such as power plants and transport it to storage sites.
FutureGen was a collaboration between the DOE and coal companies that aimed to show that producing coal-fired electricity under strict carbon emission curbs was possible.
But FutureGen was beset by delays and management problems from its 2003 start, as well as disputes over where to sequester the captured carbon.
When it became clear that FutureGen would not meet its private sector financing target, the DOE suspended the project on Feb. 3 to avoid about $1 billion in financing commitments.
Brian Potts, an energy attorney at Foley & Lardner, said the EPA's mention of CCS as a viable technology in the new power plant emissions standard puts the proposed rule at risk of being overturned.
This would then delay what he said was the more important EPA proposal for existing plants, which would lead to a 30 percent carbon emission cut by 2030.
But the EPA likely anticipates the challenge, some lawyers said. The agency issued its new source standards in two parts, with one rule focused on new plants and a second governing modified and reconstructed plants.
The standards for modified plants exclude requirements for CCS, said Thomas Lorenzen, a lawyer at Dorsey & Whitney pointed out. The EPA has said that if either of the new source rules were to be vacated by a court, the other rule would remain in effect, he noted.
"They may feel they can proceed with the CCS (rules) even though there are legal risks," because they believe the rules for modified plants would act as a back-up if the other provisions are thrown out, said Lorenzen, a former assistant chief for the Justice Department who supervised the federal government's legal defense of EPA's rules from 2004 to 2013.
But Kipp Coddington, who represents energy companies at law firm Kazmarek Mowrey Cloud and Laseter, said the EPA had put the development of carbon capture at risk by getting "ahead of the technology's development."
He equated the EPA's expectations from the short list of CCS projects under development to being "at Kitty Hawk with the Wright Brothers and their wood frame plane with an audience waiting for a 747."
(Reporting by Valerie Volcovici and Ayesha Rascoe; Editing by Richard Chang)
PNC Bank reduces financing for coal mining projects involving mountaintop removal
Joining JP Morgan, Wells Fargo and others, the Pittsburgh-based bank says it will stop financing coal companies that rely on environmentally damaging mountaintop removal for more than a quarter of their production
3 March 2015
PNC Bank has said it will no longer finance coal companies that rely on mountaintop removal for more than 25% of their production.
The bank in 2010 stopped financing companies that engage in the controversial practice for more than 50% of their production. But the new policy, which came out as part of the Pittsburgh, Pennsylvania-based bank’s corporate responsibility report (pdf) Monday, means that the largest US coal producers will no longer be able to get credit from the bank, experts say.
“Driven by environmental and health concerns, as well as our risk appetite, we introduced a mountaintop removal (MTR) financing policy in late 2010 and subsequently enhanced that policy in 2014,” the report says.
Under the new policy, deals with mountaintop removal companies will represent less than 0.25% of PNC’s total financing commitments, down from less than 0.5% last year, a company spokesperson said.
The move follows years of campaigning from environmental organizations that have pressured banks to move away from financing mountaintop removal mining. The controversial mining method is especially used in the Appalachian Mountains in the eastern United States.
The technique – which involves removing mountaintops to expose coal seams and then disposing of that earth by filling in adjacent valleys – yields dust and waste that can pollute or cover up surrounding water, break up forests, slow tree and plant growth and create social, economic and heritage challenges, according to the Environmental Protection Agency.
Banks under pressure
PNC is the latest in a line of banks to phase out mountaintop removal financing. At the end of 2014, JP Morgan, Wells Fargo, BNP Paribas, Goldman Sachs, RBS and UBS had all pledged to move away from financing such projects.
But other banks have resisted: Morgan Stanley, Barclays, Bank of America and Deutsche Bank, among others, are still involved in financing mountaintop removal coal mining.
The PNC news comes after five years of Pennsylvania protests over the bank’s involvement in mountaintop removal.
“The bank has endured a huge amount of reputational pressure from a wide range of customers and movements on campuses,” said Amanda Starbuck, climate and energy program director at the Rainforest Action Network, one of several nonprofits that have long pressured banks to stop financing fossil fuel and coal companies.
In 2011, Starbuck flew over a mountaintop removal site in Kentucky with a PNC Bank executive so the executive could see firsthand what the bank was financing. The nonprofit also has attending shareholder meetings and community meetings in the state, and has worked with banks to recommend policy changes, she said.
Coal grows less profitable
Aside from activism, banks may also be moving away from mountaintop-removal financing because of the risks to their bottom lines.
“Coal mining is becoming less and less profitable,” says Ingrid Lakey, a board member of the Earth Quaker Action Team, a group that has also campaigned in favor of a stricter PNC policy.
In 2012, Patriot Coal filed for bankruptcy protection on the back of decreasing demand and low coal prices.
Additionally, some mining companies have had to pay penalties for extensive environmental damage. Alpha Natural Resources, the second largest coal miner in the US, last year agreed to pay $27.5m in fines for toxic discharges from its mines. The company also had to set aside $200m for wastewater treatment.
With this week’s announcement, PNC bank has slipped down the list of coal-financiers.
Will banks at the top of the list follow suit?
RAN Slams Citigroup Over Greenwashing
18 February 2015
RAN press release
Citigroup’s new clean energy commitment fails to reduce fossil fuel exposure
In response to the announcement today of Citigroup’s five-year sustainability strategy and ten-year sustainability financing commitment, Rainforest Action Network (RAN) Climate and Energy Program Director Amanda Starbuck issued the following statement:
“The number one financier of coal power in the U.S. wants people to look the other way while it bankrolls climate chaos and destruction. Citigroup’s announcement of a new clean energy target today, absent a similarly ambitious commitment to reducing fossil fuel exposure, amounts to greenwashing, plain and simple. Citi was the number one lender and underwriter of coal-fired power in 2013, and the same year it also financed $434 million for mountaintop removal coal mining, which is poisoning communities in Appalachia. It’s misleading for Citi to leverage its green investments as a PR opportunity while shirking its responsibility to communities and to the climate. There’s no green energy on a dead planet.”
Citigroup announced a $100 billion clean energy target today as its ten-year sustainability financing commitment and five-year sustainability strategy, but made no promises to reduce its exposure to fossil fuels, despite being the number one financier of coal-fired power in the United States, with a 23.6 percent market share and over $6.4 billion in lending and underwriting for coal power in 2013 alone, according to “Extreme Investments, Extreme Consequences,” the 2014 coal finance report card released by Rainforest Action Network, BankTrack, and the Sierra Club.
Contact: Claire Sandberg, 646-641-6431, claire[at]ran.org
It’s Time for a Public Investigation of Adani’s Australian Coal Scheme
6 February 2015
A blockbuster of an article is out today describing some highly questionable associations and dealings around Adana’s long-running scheme to turn the Galilee Basin of northern Queensland into a coal mine.
The article, published this morning in the Sydney Morning Herald and reprinted in more than 100 papers across Australia, describes a “complex corporate structure” around Adani that seems designed specifically to avoid public scrutiny.
Here’s a passage that cuts to the chase: “Its use of offshore, low-tax jurisdictions in relation to its Australian operations, and the apparent uncertainty about ownership of the Abbot Point Port lease, raise questions about the ability of the public to scrutinize a project of such huge economic and environmental significance.”
Clearly, it’s time that the authorities look deeply into what’s going on and how this deal came to pass. This will require a formal inquiry (or inquiries) to ensure that financial markets are being provided accurate information about the company’s proposed coal mine, rail and port projects in Queensland.
At IEEFA, we’ve previously raised serious questions about the viability of the Adani scheme, and the assertions reported today go to the very heart of our continued analysis of Adani’s operations here and overseas. They create stronger doubts than ever about the financial viability of the project, its corporate transparency and strategic logic in the face of the structural decline of seaborne thermal coal markets.
As IEEFA has previously documented, Galilee coal project proposals are highly unlikely to proceed without the support of the four Australian bank majors, plus some of the nine leading global investment banks. While export-Import banks like the Korean Export-Import Bank could be material players, given that their focus is more risk-tolerant towards greenfield projects, but even export-import banks will be involved only if there is a clear strategic national benefit.
These reports today should be a loud warning for any investors and financiers until an investigation has been carefully undertaken and completed. A very serious set of questions needs to be answered.
Our research has shown also that the Adani proposal is not commercially viable without government support, contrary to Adani’s claim after last week’s Queensland election that it could develop the project solely with private money. The obvious question that neither the company nor the outgoing government seem capable of answering is why subsidies were being offered to begin with.
Regulators need to investigate every aspect of today’s news reports to ensure all appropriate disclosures, sources of equity and debt funding, advice to potential investors plus notices to stock exchanges and corporate regulators here and overseas were carried out in accordance with the laws that govern such matters.
Tim Buckley is IEEFA’s director of energy finance studies, Australia