Guest essay by Eric Worrall
If you want to borrow money from ANZ (Australia and New Zealand Banking Group), you better present your carbon offset plan along with your financial records, otherwise regardless of the health of your financials, your application for a loan might be rejected.
Banks Don’t Want to Lend to Australia’s Coal Miners Any More
October 28 2020, 6:31 PM October 29 2020, 5:05 AM (Bloomberg) —
Financing options open to Australia’s coal operators dwindled further after another of the country’s largest banks said it would end almost all investment in thermal mines and power stations by 2030.
The move by Australia and New Zealand Banking Group Ltd. will add to the increasing difficulty miners face in funding new operations or expanding their existing assets in the nation, the world’s second-biggest exporter of thermal coal.
Financial institutions across the globe are bowing to pressure from shareholders and lobby groups to avoid investments in the fuel. Meanwhile, Australia’s mining lobby forecasts a booming market, on Tuesday saying that it expects Asian demand to rise 35% over the next decade.
…Read more: https://www.bloombergquint.com/onweb/coal-financing-squeezed-in-australia-as-anz-announces-exit-plan
If anything the mining lobby’s estimate of 35% growth in coal sales could be conservative.
One major Chinese initiative to clean up big city pollution could actually lead to more coal being burnt. A lot more. Instead of burning coal in the geographical vicinity of cities, the Chinese want to use coal gasification to convert coal into gas.
If this initiative succeeds, Chinese cities will have much cleaner air, because the bulk of the air pollution from burning coal will be emitted during the coal gasification process, at locations far away from the big cities. But China’s coal use would surge.
With coal gasification, slightly over half the coal processed into gas is immediately converted to CO2 to drive the coal gasification process. Coal gasification involves combining steam and coal at high pressure and temperature so the water in the steam catches fire. One of the products of this burn is methane which can be piped to end users, but a lot of CO2 is also produced during the coal gasification process. Half of the coal combines with the oxygen in the H2O steam, the other half combines with hydrogen to form methane, the desired end product.
So a simple back of the ticket calculation suggests that if China converts all their direct coal burning industrial processes to instead burn coal gasification gas, and they want to maintain the same net energy supply for end users, Chinese coal consumption would have to double to compensate for the approximately 50% of coal lost during the coal gas process.
Obviously there are other factors, such as China’s drive to grow their nuclear fleet, which might displace some of the expected growth in coal, and even a nation of engineers like China might take a long time to convert all their coal plants to burn coal gas. But it seems unlikely coal will disappear anytime soon.
ANZ this year reported a 42% plunge in profits. Granted all banks have been hit hard by fallout from the Covid crisis, but you have to wonder about ANZ management’s apparent lack of focus on shareholder value. Choosing to spurn a reliable, profitable major businesses sector with good growth prospects in the midst of a plunging market. Perhaps ANZ shareholders should ask a few relevant questions at the next AGM.
Correction (EW): Nick pointed out my estimate of 50% losses of coal energy content is incorrect.
On review 20% – 40% may be more accurate, but its a difficult number to pin down. In combined coal gassifier plants, gassification substantially increases the efficiency of the plant compared to just burning the coal directly, but this does not appear to be what the Chinese are attempting to do. They appear to want to pipe the syngas into homes and businesses, to replace domestic and industrial coal burning, to reduce air pollution. They appear to be happy to accept an energy efficiency penalty in return for the benefits of cleaner air.