On the Blogs: ‘The Emergence of a Class of Fossil Fuel Assets That May Never Again Be Economic’

first_img FacebookTwitterLinkedInEmailPrint分享David Fickling for Bloomberg News:As the planet’s climate shifts, lots of things we never expected to happen so quickly have started to occur. Each one of the last 11 months through March, for example, has been the hottest on record for that time of year, according to the U.S.’s National Oceanic and Atmospheric Administration.Here’s another thing many didn’t expect to see so soon: the emergence of a class of fossil fuel assets that may never again be economic.More than half the assets in the global coal industry are now held by companies that are either in bankruptcy proceedings or don’t earn enough money to pay their interest bills, according to data compiled by Bloomberg. In the U.S., only three of 12 large coal miners traded on public markets escape that ignominious club, separate data show. It’s not true to say no one saw this coming. What’s remarkable is how quickly the forecasts of analysts have come round to match those of activists. Coal “has undergone a long-term structural decline, with little prospect for near-term recovery,” Moody’s analysts led by Anna Zubets-Anderson wrote in a note last week. Of the four major U.S. coal regions, only the Illinois basin has good long-term prospects, they said. Central Appalachia will “cease to be a major coal producing region,” while the Northern Appalachian and Powder River basins will decline too because of competition from gas.To be sure, there are some significant differences between what’s happening and the stranded-assets road map forecast by most climate campaigners. Coal isn’t dying off because of truly coordinated global action on carbon emissions, but because of a more ad hoc collection of regulations and incentives, and because of the rapid fall in natural gas and renewable energy prices.In addition, that $412 billion in assets held by publicly traded coal companies contains barely a ton of unmined rock – the “assets” focused on by climate activists. Mining companies generally don’t factor mineral reserves into their balance sheets, so the assets in Gadfly’s analysis are mostly inventories, cash and invoices, and the machinery used to wash, process and load coal onto trains. If anything, they’re the tip of the iceberg.What could improve coal’s prospects? Chapter 11 is often regarded as a blessing in disguise if it leads to the elimination of debt and the consolidation of unprofitable industries. Just look at North American airlines, which posted more profit last year than in the previous 10 combined after decades spent lurching from bankruptcy to bankruptcy.Companies that could be shuttered are numerous, but the question is whether any restructuring of obligations will be enough to restore profits. Of the $162 billion of assets owned by non-bankrupt coal companies with interest cover below 1, just $35 billion was held by firms that posted Ebit margins above 5 percent in the most recent year. Because those margins are before interest, these companies are barely profitable even ahead of debt questions coming into play. Should any of them fall into bankruptcy, their best hope of restructuring will require sloughing off environmental, employee and supply-chain liabilities, as well as cutting borrowings.Rebuilding North America’s airline industry was also made easier by the fact that demand for air travel keeps rising. That’s not the case with coal. Indeed, consumption by the two biggest consumers – China and the U.S. – is in long-term decline (it’s already fallen close to zero at times in the U.K., the country whose deposits helped ignite the industrial revolution). If supply is to chase that fall in demand, the only route back to profitability will surely pass through a huge number of pit closures. Coal’s season in hell has barely begun.Full item: Coal’s Stranded Assets On the Blogs: ‘The Emergence of a Class of Fossil Fuel Assets That May Never Again Be Economic’last_img read more

Reddan blow for Ireland

first_imgIreland’s substitute scrum-half Eoin Reddan has been ruled out for three months after suffering a broken leg in the 13-13 RBS 6 Nations draw with France. Reddan fell awkwardly beneath a tackle in the final minute of a compelling match at the Aviva Stadium and was administered oxygen before being carried off. Ireland’s injury-depleted ranks were swelled even further by a number of other casualties with lock Donnacha Ryan damaging his shoulder and centre Luke Marshall sustaining concussion. Both are doubts to face Italy next Saturday, while flanker Peter O’Mahony, scrum-half Conor Murray, centre Brian O’Driscoll and wing Fergus McFadden also picked up a variety of knocks. Already missing were lock Paul O’Connell, wings Tommy Bowe and Craig Gilroy, centre Gordon D’Arcy, flanker Stephen Ferris and fly-half Jonathan Sexton. Head coach Declan Kidney, however, refused to complain about Ireland’s misfortune. “We took a conscious decision that we wouldn’t complain about things. Other people are worse off than we are, plus it’s such an insult to the lads coming on and having a huge go,” Kidney said. “We’re frustrated, but there are lads coming in who have no experience at this level under their belts and are doing such a good job for us. “On any given day Paul O’Connell, Tommy Bowe, Stephen Ferris and Jonathan Sexton would be in the running for a Lions spot. “I’ve never experienced an injury run like this, but you work your way through and I spoke to (captain) Jamie Heaslip about it and we agreed not complain.” center_img Press Associationlast_img read more