July 4, 2019
Issue 281  |  View Past Issues

Editor's Note

Chubb has become the first major insurance company operating in the US market to unveil a policy restricting its support for new thermal coal mines and power plants. The spate of recent announcements by insurance companies has also piqued the interest of the credit ratings company, Moody’s. In a new report, Moody’s argues that not only will coal plant insurance and investment restrictions not hurt the finances of insurance companies, it will probably improve them. There have been other developments on the finance front too, with the German development bank KfW revising its policy to rule out support for coal mining and power, albeit without reversing its existing support for a new lignite plant in Greece.

In China, perhaps as a sign that a shake-out of debt-laden coal power companies is finally beginning, a subsidiary of the power giant Datong has been forced into bankruptcy. The Australian Government’s resources agency forecasts a tough time for the global thermal coal market, with both prices and volumes of thermal coal falling over the next few years. Declining European thermal coal imports has also hit Russian coal exporters hard; they are now eyeing the already oversupplied Asian market. In Vietnam, a review of the country’s power development plans has found new coal plants are facing opposition from the public and regional officials.

Coal-related scandals continue to unfold with leaked internal documents from the Brazilian construction company Odebrecht spurring renewed calls for a proper investigation of payments related to a new coal plant in the Dominican Republic. In Chile, a subsidiary of the US-headquartered AES has been fined US$4.7 million for misleading the electricity market regulator over its troubled Guacolda coal plant. In South Korea, the Export–Import Bank of Korea is under pressure over its support for international coal projects such as those in Indonesia.

Bob Burton


Eskom is killing South Africans with its China-level pollution

Eskom’s 12 coal power plants in Mpumalanga province impose a huge health impact on residents, write Antony Sguazzin and Londell Phumi Ramalepe in Bloomberg.

Top News

Chinese ambassador leaves door open for exit from Lamu project in Kenya: In a meeting with the NGO group DeCOALize, China’s Ambassador to Kenya, Wu Peng, indicated that if the Kenyan Government didn’t want to proceed with the project, officials would be prepared to discuss PowerChina’s potential withdrawal from the project. However, Peng claimed that even though the Industrial and Commercial Bank of China is proposing to fund the 1050 megawatt (MW) plant, the project is not a government-to-government deal but a private deal. “We are committed to reduce coal usage in the world,” Peng said. A draft resolution of UNESCO’s World Heritage Committee meeting has called for work on the Lamu coal project to be halted pending the submission of environment assessment documents to the committee. (The Star, China in Africa, Natural Justice)

Leaked Odebrecht documents raises fresh questions over Dominican Republic coal plant: Leaked internal documents from the Brazilian construction firm Odebrecht have revealed over US$39 million in previously secret payments between December 2013 and December 2014 associated with the 770 MW Punta Catalina coal plant in the Dominican Republic. In December 2016 Odebrecht admitted that it had paid US$92 million in bribes in the Dominican Republic but the recipients weren’t disclosed. However, two government-initiated investigations cleared the project of any wrongdoing. The new documents have revealed 62 payments totalling over US$39 million which were listed in an Odebrecht records as related to a “Planta Termo”, or “Thermoelectric Plant”. Civil society groups in the Dominican Republic accuse President Danilo Medina of failing to properly investigate the payments associated with the plant, which is in the final stages of construction. (International Consortium of Investigative Journalists, International Consortium of Investigative Journalists)

Chilean subsidiary of AES fined US$4.7 million for misleading regulators: A Latin American subsidiary of the US-headquartered AES Corporation has been fined 3.2 billion pesos (US$4.7 million) by Chile’s power regulator, the SEC. The fine was levied against Guacolda Energia, a subsidiary of AES Genera, for providing “unjustifiably erroneous information to the grid coordinator” and also for hindering an audit by the SEC. AES Genera has just over 3000 MW of coal capacity in its portfolio including the 706 MW Guacolda coal plant. Fitch Ratings recently downgraded Guacolda Energia’s credit rating to negative as one-quarter of the plant’s supply contracts will expire next year. Fitch Ratings estimates the company will have difficulty finding new customers as major industrial customers, such as mining companies, are shifting to source their power needs from cheaper renewables. (BNAmerica's, SEC [Spanish])

South Korean Eximbank under pressure over Indonesian bribe scandal: The Export–Import Bank of Korea is under pressure from environmental groups to end financial support for international coal projects, in particular its 600 billion won (US$517 million) loan for the Cirebon-2 plant in Indonesia. The former regent of Cirebon, Sunjaya Purwadisastra, has been charged with allegedly receiving 6.5 billion rupiah (US$460,000) from Hyundai Engineering & Construction for the allocation of land for the plant. In May Hyundai admitted paying the regent, via a broker, in the hope of quelling public protests against the construction of the plant. If Sunjaya is convicted in the case, the Japan Bank for International Cooperation — which is also supporting the project — has indicated it may reconsider its continued support for the project. (Korea Herald)

Report reveals Australian coal ash legacy: A report by Environmental Justice Australia (EJA) estimates that about 400 million tonnes of coal ash in dams around Australia are poorly regulated. It estimates the remaining fleet of coal plants generates between 10 and 12 million tonnes of coal ash a year and that the coal ash dams at the Eraring, Vales Point, and Loy Yang power stations are “exceptionally” poorly constructed and need to be relocated. EJA argues poor regulation has led to air pollution from dried-out dumps and contamination of groundwater and river systems. The report recommends the development of national guidelines for coal ash storage, a requirement for best practice rehabilitation plans and sufficient bonds to ensure that the costs of proper rehabilitation can be covered. EJA also recommends proper public information about each coal ash site, the rehabilitation plans, environmental modelling and monitoring data. (Guardian, Newcastle Herald)

Leader of Russian NGO seeks asylum in Germany: Alexandra Koroleva, from the Russian NGO Ecodefense, has sought asylum in Germany after Russia’s Justice Ministry filed five charges against her for non-payment of fines imposed for failing to comply with the 2012 law requiring any non-profit receiving foreign funding or involved in “political activities” to register as a “foreign agent.” Koroleva faces up to 10 years in prison if found guilty of the charges. Ecodefense, Russia’s oldest environment group, has played a pivotal role in opposing a nuclear plant proposed near Kaliningrad and in documenting the impacts of the country’s coal industry. (Bellona, Urgewald)


Colombia: Communities in La Guajira province, which hosts Cerrejon mine, have blockaded highways to protest against lack of water supply and inadequate government support for roads and health.

India: Court orders industrialist Naveen Jindal and four others with Jindal Steel and Power to be charged over the allocation of the Urtan North coal block in Madhya Pradesh.

Germany: 500 protestors calling for faster coal plant phase-out encircled the Reichstag.

Japan: Japanese power utilities experiment with buying lower-grade coal from NSW Hunter Valley.

Kyrgyzstan: Parliament strips ex-president of immunity as charges are expected to be laid over the reconstruction of the Bishkek power plant and coal supplies for it.

Myanmar: Village leader opposing coal-fired cement plant denied bail after being charged by police.

South Africa: Eskom has commissioned the fourth 800 MW unit at the troubled Medupi plant.

US: Blackjewel Mining, the owner of two mines in Wyoming, files for bankruptcy as demand for Powder River Basin coal slides.

US: The clean-up of coal spilled from the derailment of 36 wagons in Virginia’s Great Dismal Swamp National Wildlife Refuge is expected to take weeks.

US: The City of Garland has notified the Texas grid regulator it will shut the 470 MW Gibbons Creek Generating Station in October 2019, the 291st US coal closure.

Companies + Markets

Moody’s sees potential benefits for insurers exiting thermal coal coverage: The credit ratings agency Moody’s argues that diversified insurance companies declining to provide coverage for thermal coal mining and power plants are unlikely to see any “meaningful loss of business”. On the upside, Moody’s says that companies ending or restricting support for thermal coal could “benefit from reduced exposure to potential environmental liability risks.” Moody’s also stated that it expects “more insurers to follow suit” as regulatory and public attention on insurance companies’ support for fossil fuel companies “intensifies". (Business Insurance, Moody’s)

Chubb restricts coal insurance but leaves loopholes: The major US insurer Chubb has announced it will not sell insurance for new coal plants or sell new policies to companies that derive more than 30 per cent of their revenues from thermal coal mining. However, Chubb’s policy includes a loophole that allows for exceptions to be made up to 2022 for projects “in regions that do not have practical near-term alternative energy sources” and where commitments are made to reduce dependence on coal. Under the policy, insurance coverage will be phased out by 2022 for companies with existing coal plants and over the 30 per cent of revenue threshold. Chubb is the first major insurer in the US market to announce restrictions on coal lending, a move which will increase pressure on AIG, Travelers and Liberty. The NGO coalition Insure Our Future welcomed Chubb’s move but urged it to strengthen its policy and bring it into line with the Paris Agreement. (Guardian, Insure Our Future, Chubb)

German bank rules out support for coal but leaves loophole for Greek project: Germany’s state-owned development bank, KfW, has ruled out providing financial support for the exploration or development of coal mines, coal-related transport infrastructure or coal power plants. However, the new policy does not affect the bank’s support for the proposed 660 MW Ptolemaida V plant in Greece. KfW is the only investor supporting PPC’s lignite plant, which is currently under construction, but which will require an exemption from European Union rules banning capacity payments for new coal plants. (Bloomberg, KfW)

Russian coal exports to Europe hit by low prices: An economic forecaster with Gazprombank, Airat Khalikov, estimates that with the price of coal in the European market at US$47 per tonne, Russian coal exporters are now losing money. Khalikov estimates the average cost of coal from the Kuzbass, which produces a majority of Russian thermal coal, is US$50–55 per tonne delivered to Baltic ports. With declining European coal power generation, low prices are expected to continue. As a result, Maxim Khudalov from the ratings agency ACRA expects major coal exporters such as SUEK and UMMC’s subsidiary Kuzbassrarezugol to pursue increased sales into the Asian market. With increased rail capacity and the devaluation of the ruble against the US dollar, exporters will be able to compete against Australian and US exporters. (Vedomosti [Russian])

Vietnamese coal projects face formidable hurdles: An update by Vietnam’s Ministry of Industry and Trade (MIT) on the implementation of the country’s seventh power development plan has found that one of the reasons for delays in the construction of proposed coal plants is opposition from local officials and the public, especially in the country’s south. MIT also warned that engineering companies, such as those which worked on the 1200 MW Thai Binh 2 for PetroVietnam and the 4320 MW Long Phu Power Centre, “have limited financial and technical capacity as well as experience in project implementation.” MIT proposes increased emphasis on energy efficiency, along with increased growth in rooftop solar, in order to reduce peak demand, especially in the country’s south. (Vietnam Ministry of Industry and Trade)

Australian government agency projects coal decline: The Australian Government’s Department of Industry, Innovation and Science (DIIS) forecasts a decline in coal imports from “most developed countries” with the global seaborne thermal coal market falling by 19 million tonnes to 1121 million tonnes in 2021. It estimates the Newcastle benchmark price for thermal coal will fall from US$105 a tonne in 2018 to US$70 a tonne in 2021. DIIS estimates thermal coal exports from South Africa will remain flat while volumes from Indonesia, Colombia and the US are likely to decline marginally. It estimates a slight increase in exports from Russia. DIIS estimates Australian thermal coal exports could grow by 14 million tonnes by 2021. (Department of Industry and Resources)

Eskom rescue plan negotiations continue: The finalisation of South Africa’s next power development plan has been stalled while the National Economic Development and Labour Council reviews the draft. Unions are concerned about job losses associated with the closure of old, highly polluting and expensive-to-run units. In his June 20 State of the Nation Address, President Cyril Ramaphosa announced a Special Appropriation Bill would be tabled soon to provide 230 billion rand (US$16.3 billion) to relieve financial stress on the utility over the next decade. However, managing the utility’s 440 billion rand (US$31 billion) debt is likely to require further measures including increased generation from low-cost renewables, old plant closures, staff cuts, further price rises and additional government financial support. One proposal under consideration is the creation of a separate entity to hold the old coal plants and, with access to discounted climate change mitigation finance, close them down and replace them with new renewables capacity. (Bloomberg, Fin24, Bloomberg)

Chinese power company declared bankrupt: A subsidiary of Datang International Power Generation, which operated the 660 MW Liancheng-2 plant in Gansu province, has been declared bankrupt after missing a US$2.39 million loan repayment. The Liancheng-2 plant, which was commissioned in 2004–2005, was closed in April 2018 as a result of a power generation glut. It was also reported that the chairman of the subsidiary company, Ying Xuejun, was removed from his position. Datang is the second-largest power generator in China. In December 2018 Datang Baoding Huayuan Thermal Power was declared bankrupt after it was forced to close two 125 MW units, which were commissioned in 2003, to comply with anti-pollution controls. The bankruptcies are viewed as a possible indication that Chinese regulators are willing to allow power generators to collapse as a way of signalling that failing companies will not necessarily be bailed out. (CNBC, CX Live)

High carbon price helps force German lignite unit offline: EnBW has taken the 900 MW S unit at its lignite-fired Lippendorf power station offline stating that current market conditions “do not permit economic operations”. Factors affecting EnBW’s decision include the cost of carbon emissions, which have more than doubled over the last year to €27 (US$30) per tonne, a decline in demand and wholesale power prices below €35 (US$40) per megawatt hour (MWh). Another factor affecting the decision to take the unit offline is the cost of the fuel supply — the Lippendorf plant is the only major lignite unit supplied by a third-party mining company, the EPH-owned Mibrag. The unit was commissioned in 2000. (Platts)


Unearthing Australia’s toxic coal ash legacy, Environmental Justice Australia, June 2019. (Pdf)

This 64-page report reveals the magnitude of the environmental legacy associated with coal ash dams at Australia’s coal power stations.

Fossil Fuel Industry Documents Archive, University of California San Francisco.

The University of California San Francisco has expanded its online archive of internal industry documents to include coal and other fossil fuel companies, industry associations and think tanks denying climate science and delaying policy action.