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As Coal's Future Grows Bleaker, Banks Pull Financing
Topic Started: Mar 21 2016, 02:20 AM (10 Views)
Webster
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New York Times: As Coal's Future Grows Bleaker, Banks Pull Financing

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Tens of thousands of miners were on strike and coal prices were skyrocketing in October 1902. Afraid of unrest, President Theodore Roosevelt sought the help of John Pierpont Morgan.

The powerful banker, who held great sway over the coal industry, brokered a deal with the miners that ended the strike.

“My dear sir,” the president wrote to Mr. Morgan. “Let me thank you for the service you have rendered the whole people.”

America’s coal industry is now facing another dark hour, but this time there are few financiers willing to save it.

Mr. Morgan’s bank, now JPMorgan Chase, announced two weeks ago that it would no longer finance new coal-fired power plants in the United States or other wealthy nations. The retreat follows similar announcements by Bank of America, Citigroup and Morgan Stanley that they are, in one way or another, backing away from coal.

While coal has been declining over the last several years, Wall Street’s broad retreat is an ominous sign for the industry.

“There are always going to be periods of boom and bust,” said Chiza Vitta, a metals and mining analyst with the credit rating firm Standard & Poor’s. “But what is happening in coal is a downward shift that is permanent.”

Continue reading the main story
On Wednesday the world’s largest private-sector coal company, Peabody Energy, said that it might have to file for bankruptcy protection, following a path already taken by three of the nation’s other large coal companies.

Peabody has been trying to sell three of its mines in Colorado and New Mexico to raise cash. But the sale to Bowie Resource Partners appears to have stalled amid the difficult financing environment. Bowie did not comment. A Peabody spokesman said the company “stands ready to complete the sale of assets to Bowie.”

Coal, like railroads, steel and other engines of the nation’s industrial expansion in the 19th and early 20th centuries, helped drive Wall Street’s profits for generations. More than a century later, the coal industry is in a free fall and the banks are pulling away.

“Given the state of the coal industry today, I think Mr. Morgan himself might make the same decision,” said Jean Strouse, a biographer of the banker.

Some banks say they are trying to do their part to curtail climate change by moving away from coal projects and financing ventures that produce less carbon. But bankers also say there is a more basic reason for the shift: Lending to coal companies is too risky and could ultimately prove unprofitable.

Coal companies are being squeezed by competition from less expensive energy sources like natural gas and by stiffer regulations — pressures that show no signs of letting up.

-Read more: http://www.nytimes.com/2016/03/21/business/dealbook/as-coals-future-grows-murkier-banks-pull-financing.html?_r=0
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