Coal investments going against the tide

13 Apr, 2018 - 00:04 0 Views
Coal investments going against the tide Aliko Dangote

eBusiness Weekly

Kudzanai Sharara Taking Stock
So, Aliko Dangote’s people, geologists in particular, are back in the country to renew the billionaire’s interest in a coal venture which they will utilise towards their targeted investment in a power plant in Zimbabwe.

This also comes at a time when Zimbabwe Stock Exchange-listed entity RioZim says it has attracted five investors who are interested in partnering the miner in its multi-billion dollar Sengwa thermal power project.

RioZim chief executive officer Bheki Nkomo says there is increased investor appetite for the project and the mining concern is currently engaged in discussions with potential investors. Another miner Karo Resources as part of its investments is also looking at investing in a 600-megawatt thermal power station.

Government is also not taking a back seat and on his recent visit to China, President Emmerson Mnangagwa reportedly struck a $1 billion deal for the refurbishment of the Hwange Thermal Power Station. This deal is in addition to many other power projects that are on the cards.

If all these projects come to fruition, then no doubt, the country will generate more power than its requirements. Of course there is the potential to export, with RioZim currently engaged in discussions with various regional off-takers who are part of the Southern African Power Pool (SAPP) for purposes of concluding Power Purchasing Agreements (PPAs). But Africa can only take so much, with countries like Mozambique, DRC probably generating more than enough to meet their requirements and already exporting to others.

Given that power, will in the years ahead, be in abundance, it is likely to become a matter of who is producing cheaper and who is doing it cleaner. Coal’s dominance as the fuel of choice for generating electricity is facing serious threats from two fronts, the move towards clean energy and the decline in the cost of alternative power in the form of renewable energy.

Mass production is cutting solar and wind costs much faster than expected, and both financial markets and power planners worldwide are taking notice.

The third challenge is probably the fact that finding money to build coal plants is getting harder driven in part by some major investors such as pension funds and multinational insurance companies — even the World Bank — that have pledged to stay away from coal projects because of their air pollution and climate impacts.

The International Energy Agency has already declared that coal has since entered a period of stagnation with demand declining at a level last seen in the early 1990s.

Talk of climate change has meant that developed nations are anxious about coal’s role in causing pollution.

In France, President Macron has promised to close all coal-fired power plants by 2021, with Britain and Italy due to follow four years later.

In the US, coal has since been overtaken by gas as the preferred source of power while Canada has since stopped producing power from coal.

Combined, India and China have shelved more than 500 gigawatts of coal projects that were once on the drawing board in an effort to clear polluted skies that have had dramatic negative health impacts.

The world’s big mining companies are also turning their backs on coal. While RioZim is looking generating power from coal, its former parent, Rio Tinto, is offloading its coal assets. There are many other players such as Anglo American and BHP Billiton that have also let go some of their coal assets.

French giant Engie SA recently announced it’s closing coal-fired power plants in Chile at the same time AES Corp. of the US and Enel SpA of Italy have pledged to stop building them. The moves speak to the numerous steps companies and nations are taking to convert to clean energy away from coal.

Opinion is, however, still divided, with Glencore, the world’s third-largest miner, still looking for coal assets having bought $1,7 billion worth of coal assets from Rio Tinto recently. Around one-third of Glencore’s earnings in 2017 came from coal and it is still seen as a buyer of quality assets. Japan and Germany are also still strong proponents of coal power generation and are still opening coal mines.

There are many other pockets of growth across the globe with new plants expected to go up in southeast Asia, Turkey and Pakistan.

In China the amount of coal that was mined increased about 3 percent in 2017.

The growth reflects the stance by China’s leaders that coal will remain a key piece of its ongoing economic expansion, even as renewable energy is becoming prominent.

Only time will tell on whether coal investors are living on borrowed time or the commodity will remain essential to energy generation into the foreseeable future.

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