June 11, 2013
A special edition with more of a focus on the USA. Don't worry, still plenty of information on the Middle Kingdom if you scroll down far enough. The Chinese electric companies are pushing back on the import regulations.
USA
According to the latest data from the Energy Information Administration, coal has been reclaiming some — though not all — of its market share in 2013
An Australian energy company has cleared a key hurdle for a terminal on the Oregon side of the Columbia River that would ship coal from the Great Plains to Asia. The Oregon Department of Environmental Quality on Friday issued draft permits regulating coal dust at the Coyote Island Terminal LLC at the Port of Morrow in Boardman
The Wizard of Oz:
Is it just me, or does Ambre Energy, the Australian company at the center of several of these export coal terminal projects, a bit of a mystery? I just saw it called a "coal giant" in one article and yet when you pull back the proverbial curtain there is nothing there. According to Ambre's Financial Report appears to have AUD 4 million in revenue, 160 million in assets and 20 million in cash. I haven't found a parent company. So, a single Australian company with almost no revenue and minimal capital is behind all this port hubbub and, as you will see below, seems to running wild in Montana seeking handouts, causing legal troubles for its partners and gaming BLM regulations:
An Australian company seeking to take control of a Montana coal mine and boost exports to Asia is in discussions with state officials about a potential $10 million loan from an economic development trust, representatives of the state and Ambre Energy said Friday.
The possibility of state assistance for Ambre Energy comes as the company's attempt to take over the Decker coal mine near the Wyoming border was delayed in early May for unspecified reasons. Ambre co-owns the mine with Cloud Peak Energy but is seeking full control in a deal worth up to $64 million.
May 8, 2013: A proposed deal on a Montana coal mine that supporters said would boost Asian exports of the fuel via the West Coast has stalled, according to court documents that show the companies involved are renegotiating terms of the sale
July 2012 -Last week, Cloud Peak Energy sued Ambre in U.S. District Court in Montana, alleging that Ambre's export plans for the Decker mine were developed without Cloud Peak's approval and asking the court to remove Ambre as the mine's manager. . . Since buying a half-share in the mine last November, Ambre has engaged in "various self-dealing transactions" designed to give Ambre a "disproportionate share" of profits on Asian sales, the complaint says.
When the U.S. Bureau of Land Management (BLM) asked for “feedback” on a proposal to lease 500 acres of coal-bearing land to the Decker West mine, the first question that came to mind was –what is the proposal exactly? You can't read the proposal because Ambre stamped their proposal "Confidential" In order to read the application that BLM wants you to comment on, you need to file a Freedom of Information Act (FOIA) request. BLM will then ask Ambre to justify its confidentiality claims. When Ambre responds, BLM will determine if it meets the legal standard for confidentiality.
AAR Smartbrief missed the George Will Sunday op-ed on Positive Train Control and yet managed to included this bit below by the Executive Director of the International Climate Science Coalition (he's a mechanical engineer, just ask him).
Tom Harris's (Mechanical Engineer) stripped-down polemic is that Democrats are weak leaders therefore you should support coal. As polemic it gets B+, as logical argument get's F+. The "+" is for chutzpah and a disorienting use of counter-intuition. It goes like this: If you believe that climate change is happening (which Harris himself does not believe) you should, unlike the Democrats, promote coal use in order to cope with the bad effects of climate change. He goes on to say that failing to support coal, as the Democrats he lists fail to do, is to be like a hapless boat captain -- because when your boat is sinking you must be able to make the hard choices to save the ship. He then just asserts that we should like coal. I guess you have to be a Mechanical Engineer to understand; I was left wondering whether our ship was sinking or not.
USA - PATRIOT COAL TO CUT BENEFITS
Peabody, America's largest coal company has, via a corporate spin-off in 2007, escaped a $1.6BN obligation to 10,000 former employees. Mine workers will now own 35% of a bankrupt company they never heard of (Patriot Coal) and will receive a Medicaid sign-up form and a lifetime supply of cough drops. If you were a union member and knew your contract was too good to be true when you negotiated it, this is how it ends for you. If you didn't know, it also ends this way for you. Maybe you can chalk it up to a poor evaluation of "counterparty risk" and ask for a bailout. If you were an executive in Patriot, you must share a $7 million bonus.
Patriot healthcare ruling underlines dire state of US coal FT By Neil Munshi
The St Louis-based group is now free to modify its agreement with retirees of the United Mine Workers of America union in order to reduce $1.6bn of healthcare liabilities. Instead, it may create a trust for the UMWA that will provide less generous healthcare benefits and will include a 35 per cent stake in a reorganised Patriot, profit sharing up to $300m and an initial cash contribution of $15m. . . . "If you can in fact spin off . . . your legacy obligations on to that entity and then walk away without any legal obligations for it . . . and if you can make the case that this wasn’t a pretext for getting out of these obligations, it’s going to completely undermine what it means to get into contractual obligations in the workplace.”
That's the spin-off company of Peabody Energy, the country's biggest coal producer, that was larded up with 40 percent of its parent company's healthcare liabilities and just 13 percent of its assets back in 2007. A year later, Patriot saddled itself with even more obligations when it bought Magnum Coal, itself a subsidiary of Arch Coal, the nation's second-largest coal company. The end result of all this financial chicanery was Patriot getting stuck holding the bag of retiree health benefits for 22,000 people -- 90 percent of whom never worked a day for Patriot, but rather for Peabody or Arch.
Speaking of innovations corporate structure, MLPs might coming to coal mining. This could be lots of fun for rich investors who like cash flow and tax lawyers who like cap-ex puzzles.
CHINA
China's top five utilities have formally protested a government proposal to ban imports of low-grade coal that could jack up their costs, a move that could derail domestic miners' efforts to boost demand for their coal.
Wood Mackenzie say China's thermal coal demand will reach nearly 7 BTPA by 2030; Tuesday, 04 June 13
"It is very unlikely that demand for thermal coal in China will peak before 2030," states Mr. William Durbin, Wood Mackenzie’s Beijing-based President of Global Markets. "Why? Because China’s aggressive investment program for nuclear, natural gas and renewables capacity is centred in the coastal region while coal-fired capacity grows in the central and western provinces. Indeed, there are also a plethora of coal-intensive conversion projects being built or planned that are significantly adding to demand.”
Impacts From The Proposed Chinese Coal Import Ban Seeking Alpha
Significantly, PRB coal's caloric content averages around 8,500 Btu/lbs - slightly above the cut-off of 8,200 But/lbs. This is, no doubt, by design as China would be more than happy to diversify its supply with volumes from the PRB if a large-scale export terminal is to be built in the Pacific Northwest
China is unlikely to implement a proposed ban on imports of lower-quality coal, according to three mining companies in Indonesia, the world’s biggest exporter of the power-station fuel.
The NDRC, Environmental Bureau and the Natural Resources bureau have put out a draft Defend Air Pollution Action plan that would cap the increase in coal burning in the Beijing, Tianjin, Hebei area to its current level. The NDRC Energy Research Institute initial estimates (Jiang Kejuan) that accomplishing this would take more than RMB 100BN investment and would lead to increased demand for natural gas power plants, gas turbines, residential gas pipeline distribution, new boilers and heat exchangers. He also think to really make a difference coal consumption will have to decrease, not just hold flat.
"The opening of an office in China is a natural next step as we raise our stake in the seaborne coal trade," said Arch Executive Vice President and Chief Operating Officer Paul A. Lang. "In particular, a Beijing office will be advantageous as we expand our metallurgical coal portfolio with the addition of high-vol A product from our new Leer mine.
They have hired Zhang Shijie who, according the the english-language internet was a 13th-century Chinese admiral and government official during the Mongol invasion of China. Where will his kids to school and will the school have a pollution dome?
Environmental & Other News
According to the German Institute for International and Security Affairs, climate policy makers must move the goal-post come up with a new global target to cap temperature gains because the current goal is no longer feasible. Limiting the increase in temperature to 2 degrees Celsius since industrialisation is unrealistic because emissions continue to rise and a new global climate deal won’t take effect until 2020.
Don't forget that Cassandra was right.
Question: If China's population of 1.3 billion approaches the lifestyle we Americans pioneered, how will that impact the environment beyond China’s own borders?
How do you say Anthropocene in Chinese? Anthropocene is the geologic epoch in which which human activity creates a decline in plant and animal variety, changes the climate and disperses trace elements to the remotest parts of the planet. It's the one we live in. Have you seen the Great Pacific Garbage Patch?
Four months after abandoning it Mozambique coal project, Anglo American has announced that it is going to sell its 18-month old Gulfstream G550 $50m private aircraft. The G550 can carry 8 passengers 6,750 miles at a long-range cruise speed of Mach 0.80. Performance features suitable for quick exit from nations undergoing collapse.
Bumi, a coal mining company with mines in Indonesia, and listed on the London Stock Exchange, has revealed that as much as $200 million is missing at its main subsidiary, when it released its financial results for 2012 that had been much-delayed.
$200 million will buy you five G550 private jets . . . but watch out for those maintenance and operating costs unless you can bury that in the corporate G&A section.
And finally, from a time when coal was still a marvel comes today's extraneous culture link to awesome interactive photos of the old Beijing city wall and the main gates - the gates mostly gone but the distinctive neighborhoods that grew up around them are still there, and you can see the train tracks on South wall and Hatamen - where it is rumored one could watch public hanging as recently as thirty years ago. Why did we get rid of public hangings anyway? If we could just learn to hang the right people . . .