Financiers Back Away From Coal Ventures, See No Clear Future
U.S. coal industry is facing yet another worst time as global demand decreases and more are resorting to less polluting renewable energy. Only but a few financiers are inclined to save it. Coal companies are being crushed by competition from inexpensive energy resources such as natural gas and stricter regulations.
Two weeks ago, JPMorgan Chase made it public that it would no longer fund new coal-fired power plants in other wealthy nations or the U.S. Other banks that follow suit are Citigroup, Morgan Stanley and Bank of America, all of which are withdrawing their support from coal.
Some banks inform that they are doing their part to reduce climate change by backing away from coal projects and funding less-carbon producing ventures. Another reason that hinders them to continue financing coal projects is the risk and the effort that could turn out to be fruitless, as reported by The New York Times.
Last Friday, Oregon passed a bill that it will discontinue any coal-generated electricity by 2035 and was the first state to prohibit the use of coal completely. The U.S. Energy Information Administration recently reported that last year's retired electricity 80% coal-powered. EIA forecast U.S. coal output will be reduced this year which is the greatest drop in a yearly percentage since 1958.
It is up to the utilities and power producers if those plants will keep on burning coals or not. Out of the 523 coal plants in operation for the last five years, more than 200 have already shut down and others will soon be closing down too, according to the News Week report.
On Wednesday, Peabody Energy announced that it may file bankruptcy indicating the end of time for listed U.S. corporate coal firms. Peabody which is the largest coal miner in the U.S. will sooner or later file Chapter 11 following Alpha Natural Resources, Arch Coal Inc., Patriot Coal Corporation and Walter Energy Inc.
U.S. coal miners are dealing with high debt levels, drop in steel production, new environmental regulations and the switching of coal-powered plants to use natural gas instead made bountiful by shale drilling, based on The Wall Street Journal report.
One by one, coal companies go bankrupt and files Chapter 11 to protect their business from creditors while they under restructuring. The latest firm that could possibly file is the Peabody Energy. Most banks will no longer support or finance companies that ventures into coal projects as they are risky and tends to be unprofitable.