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As coal demand drops, so do funding sources

Bill Rau deals in rubies and Rembrandts, and if you told him a year ago he’d be traveling to England to buy an old lump of coal, he would have called you crazy.

Then he saw it — a “monumental specimen” excavated from an Italian mine in the 1890s.

“I had to buy it,” he thought. “This is a museum piece that was not in a museum.”

Mr. Rau, CEO of M.S. Rau Antiques in New Orleans, said there’s been strong interest in the piece — listed on the company’s website for $34,500 — though none from the coal industry.

“This would have been a glorious thing to put in an office,” he said. “[But] coal people aren’t feeling terribly wealthy at the moment.”

Demand for the commodity has been dropping as competing fuels become less expensive. And in the past few weeks, coal companies have seen major banks turning their backs on the industry in public.

News that Morgan Stanley, Wells Fargo, Citigroup and Bank of America had all released coal lending policies that pledge to decrease credit availability to the sector met with much fanfare a few week ago around the time of the Paris Climate Conference, where world leaders met to hammer out an agreement on keeping global temperature at manageable levels.

“2015: The year banking’s behemoths went green,” announced a headline on Mineweb.com.

That sentiment, that coal’s best days are behind it, feeds into the allure of Mr. Rau’s slab of coal, he said.

It’s about the presentation. His specimen is enshrined in a custom-built wooden case, which Mr. Rau imagines could sell empty for $25,000. It is inscribed to commemorate the mine where it was unearthed, Ribolla, and the age of the rock, 300 million years.

Until the mining company was sold in the 1960s, the show piece greeted visitors to its lobby in Tuscany. Then it was sold to an English antiques dealer, where Mr. Rau found it.

The price tag is also about what the piece represents — a time when coal was king, “which was, I guess, probably until last week,” Mr. Rau joked, pouring a bit of salt on the wounds of the cash-strapped, environmentally unpopular fossil fuel.

Related: Coal losing foothold over Pittsburgh region’s river traffic.

Even as financial support for coal seems to have taken a beating — as governments and major commercial banks announce they will limit funding for coal extraction and combustion activities — the fine print likely isn’t as forbidding as the headlines.

At least eight global banks have policies guiding their support of coal mining and power projects, but analysts say that’s more a sign of coal’s economic pickle than an environmental statement.

“I doubt their board of directors cares that much about the environment,” said Spencer Cutter, an equity analyst at Bloomberg Intelligence.

“I wonder if the banks are saying one of the reasons we’re pulling back from coal is environmental — and that may be the case in certain cases — but at the same time banks are economically driven. I think they may just be trying to use that as a way to rationalize — ‘Hey, the coal sector’s going down the tube and we want to get out,'” he said.

Wells Fargo said as much in its policy. The bank cited cheaper fuels, environmental compliance costs and increased energy efficiency pushing coal generation out of business. “Our understanding of the risk factors existing in this industry has influenced our credit and capital markets decisions.”

That doesn’t mean Wells Fargo is out of the coal game entirely. It was a leading underwriter of $700 million in bonds for Cecil-based Consol Energy Inc. and Cloud Peak Energy this year.

The unifying theme in all these coal policies is added scrutiny in risk assessment and senior level approval of loans to the industry, although some banks have made specific pledges.

Morgan Stanley and Goldman Sachs, for example, said they won’t fund mountaintop removal mining and won’t give money to companies that do a lot of it. They also won’t finance new coal power plants in the U.S. and other developed nations, although those aren’t being built anyway because of tightening environmental regulations and competition from cheap natural gas.

Earlier this year, Goldman Sachs was an underwriter of a bond issue for Murray Energy Corp., the largest privately owned coal company in the U.S., headquartered in Ohio.

Citigroup said it would continue to decrease its coal financing activity, but didn’t rule anything out. Funding for projects would require senior approval, the bank said, and would be based on “due diligence” and the coal company’s environmental, safety, and corporate governance performance, as well as human rights.

“They should have been doing that for the last 20 years,” Mr. Cutter said. “That shouldn’t be anything new but a heightened focus.”

Citigroup is the leading bank providing financing for Alpha Natural Resources’ bankruptcy reorganization.

(c)2015 the Pittsburgh Post-Gazette

This article was written by Anya Litvak from Pittsburgh Post-Gazette and was legally licensed through the NewsCred publisher network.