Bankers pour cold water on red hot coal



*

Coal miners struggling to fund expansion plans

*

Thermal coal costs more than coking coal after price surge

*

Most Western bankers pulling back from coal industry

By Sarah McFarlane and Clara Denina

LONDON, Nov 24 (Reuters) - It's the best of times, it's the worst of times. At least when it comes to mining coal.

After years of decline, demand for the polluting fossil fuel has surged this year as Europe scrambles to replace Russian gas, and coal miners are making money hand over fist.

With coal prices hitting record highs, companies would normally expand their operations, but projects are being left on the table as most Western banks stand by climate pledges to restrict lending to the sector, according to a dozen mining company executives and investors.

"If you are a business with a bank right now it's easier. If you want to build a new mine, forget it, that has become impossible," said Gerhard Ziems, chief financial officer at Australian coal miner Coronado Global Resources Inc CRN.AX .

Demand for the fossil fuel is so strong some miners say they are selling coking coal used by steelmakers to electricity companies instead. The lower-value thermal coal used in power plants traded above coking coal for the first time ever in June.

"It's a crazy situation," said Coronado's Ziems, likening it to silver trading at a higher price than gold.

Benchmark Australian Newcastle thermal coal was languishing at about $50 a tonne at the start of 2020 before climbing to above $150 tonne at the start of 2022. It then surged to a record high above $400 a tonne in September as countries desperately sought alternatives to Russian gas.

But with Western banks under pressure from shareholders to show action on climate change, coal executives say they are having to scout for alternative funding to take advantage of the favourable backdrop, via public markets, pre-sale finance, trading houses, private equity firms and investment funds.

CLOSED DOORS

For some, it's even just a question of finding a lender for basic financial services.

Shortly after North American miner Bens Creek Group BENB.L listed on London's AIM in October last year, Lloyds Banking Group LLOY.L withdrew its banking services from the company due to a change in policies regarding coal.

Lloyds said in February it would stop financing miners that generate more than 5% of their revenue from thermal coal by the end of this year, and would no longer provide general purpose banking to new coking coal customers.

It took the managers of Bens Creek months, and dozens of rejections, before they managed to open a bank account at the State Bank of India's SBI.NS branch in Britain, chief executive Adam Wilson told Reuters.

"Nobody had these issues five years ago," he said.

Lloyds declined to comment on individual client relationships.

It's a similar story for Minergy Limited MIN.BT , a startup listed in Botswana looking to fund its expansion plans.

"We are exploring all the options at this stage, but commercial banking is not necessarily available," said Minergy Chief Executive Morne du Plessis.

The company is now looking to reduce its debt and fund its project to double annual mining capacity to about 3 million tonnes by selling additional shares, as well as listing on the London Stock Exchange next year.

Du Plessis said Minergy had struggled to secure simple banking services, such as overdrafts or loans to purchase vehicles. "Because we are in coal, because we are a startup business, they wouldn't even consider that," he said.

CHINA EXCEPTION

Despite the pressure on Western lenders, global investments in coal supply are expected to rise by about 10% this year to $116 billion, with China leading the way, the International Energy Agency said.

Mainly thanks to China, coal investment this year is expected to be in line with 2015, the year governments signed the Paris climate accord which aims to keep global warming well below 2 degrees Celsius compared with pre-industrial levels.

Analysts say, however, that China consumes most of the coal it mines, so increased production in the country is unlikely to have much of an impact on the amount of coal traded on the global market - or its current high price.

With funding hard to come by from Western banks, coal miners outside China have turned more to equity markets this year.

As of Nov. 11, they had raised $2.2 billion via public markets, up from $1.3 billion in same period of of 2021 and the highest for the period since 2017, Refinitiv data showed.

But analysts said the fund raisings have not been enough to offset the billions of dollars of Western bank lending that has disappeared over the last couple of years.

Environmental lobby group Reclaim Finance says 96 banks now have policies to restrict financial services to the coal sector.

The biggest Western lender to coal miners in 2020 was Deutsche Bank DBKGn.DE with $538 million followed by Citi C.N on $300 million. By 2021, that had dropped to $255 million for Deutsche and $218 million for Citi, according to data compiled by Reclaim Finance.

"With regard to thermal coal mining, any transaction in coal mining requires an enhanced environmental risk review," a Deutsche spokesperson said, adding that the bank was updating its coal policy.

Now, companies that depend on coal for more than 50% of their revenue must show credible diversification plans to get financing from Deutsche. Firms without such plans will be phased out of the bank's portfolio by 2025, the spokesperson said.

Citi declined to comment.

A number of banks including ANZ ANZ.AX , Bank of Montreal BMO.TO , Barclays BARC.L , BNP Paribas BNPP.PA , Commonwealth Bank CBA.AX , Santander SAN.MC , Standard Chartered STAN.L , RBC RY.TO and UniCredit CRDI.MI financed coal miners in 2020 but did not in 2021, the Reclaim Finance data showed.

ALL TALK

Minergy's du Plessis said since coal prices surged, there have been more conversations over potential sources of cash, from equity investors to debt refinancing proposals to trade finance.

"There is an openness to discuss this because coal is now a buzzword, so the conversation is easier. Has anything materialised? No it hasn't," he said.

Bens Creek listed shares partly because of the lack of appetite from banks to support any expansion of coal mining, chief executive Wilson said.

The company is set to double production to about 1 million tonnes next year, though Wilson does not expect current high prices to boost coal output much globally, as the development of new mines and the infrastructure they need such as railways is unlikely given the uncertain long-term outlook for coal.

Some investors snapping up shares in coal company fund raisings and listings agree that long-term plans are becoming a thing of the past for miners, but they say the short-term returns are attractive.

"Historically, coal mining CEOs did not want to return cash to shareholders, they used it to expand output or buy competitors," said Jonathan Barrett, chief investment officer at Luminus Management, which owns shares in U.S. coal miner Arch Resources Inc ARCH.N .

"But in the last year or two they have realised that the best way for them to create value for shareholders is to return the cash as opposed to expanding, because it's a much better and lower risk use of capital," he said.

Barrett and his business partner Robert Felice launched the Iris TIME fund in October backed by wealthy families to focus on unfashionable sectors with attractive cash flows, such as coal.

Big dividends and share buyback programmes in the industry mean that in some instances you could make back your entire capital investment in about two years, Barrett said.

"Most of these guys are generating cash hand over fist and they are trying to reduce their reliance on banks, because they have seen how quickly banks are turning on the industry."
Reporting by Sarah McFarlane and Clara Denina; Editing by Veronica Brown and David Clarke

면책조항: XM Group 회사는 체결 전용 서비스와 온라인 거래 플랫폼에 대한 접근을 제공하여, 개인이 웹사이트에서 또는 웹사이트를 통해 이용 가능한 콘텐츠를 보거나 사용할 수 있도록 허용합니다. 이에 대해 변경하거나 확장할 의도는 없습니다. 이러한 접근 및 사용에는 다음 사항이 항상 적용됩니다: (i) 이용 약관, (ii) 위험 경고, (iii) 완전 면책조항. 따라서, 이러한 콘텐츠는 일반적인 정보에 불과합니다. 특히, 온라인 거래 플랫폼의 콘텐츠는 금융 시장에서의 거래에 대한 권유나 제안이 아닙니다. 금융 시장에서의 거래는 자본에 상당한 위험을 수반합니다.

온라인 거래 플랫폼에 공개된 모든 자료는 교육/정보 목적으로만 제공되며, 금융, 투자세 또는 거래 조언 및 권고, 거래 가격 기록, 금융 상품 또는 원치 않는 금융 프로모션의 거래 제안 또는 권유를 포함하지 않으며, 포함해서도 안됩니다.

이 웹사이트에 포함된 모든 의견, 뉴스, 리서치, 분석, 가격, 기타 정보 또는 제3자 사이트에 대한 링크와 같이 XM이 준비하는 콘텐츠 뿐만 아니라, 제3자 콘텐츠는 일반 시장 논평으로서 "현재" 기준으로 제공되며, 투자 조언으로 여겨지지 않습니다. 모든 콘텐츠가 투자 리서치로 해석되는 경우, 투자 리서치의 독립성을 촉진하기 위해 고안된 법적 요건에 따라 콘텐츠가 의도되지 않았으며, 준비되지 않았다는 점을 인지하고 동의해야 합니다. 따라서, 관련 법률 및 규정에 따른 마케팅 커뮤니케이션이라고 간주됩니다. 여기에서 접근할 수 있는 앞서 언급한 정보에 대한 비독립 투자 리서치 및 위험 경고 알림을 읽고, 이해하시기 바랍니다.

우리는 웹사이트에서 최고의 경험을 전해드리기 위해 쿠키를 사용하고 있습니다. 자세히 읽거나 쿠키 설정을 변경하세요.

리스크 경고: 고객님의 자본이 위험에 노출 될 수 있습니다. 레버리지 상품은 모든 분들에게 적합하지 않을수 있습니다. 당사의 리스크 공시를 참고하시기 바랍니다.