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WORLD NEWS - November 2016


North Korea Rejects UN Sanctions on Coal Exports

The United Nations Security Council has unanimously imposed sanctions on North Korea, placing a cap on the country’s coal exports in response to its nuclear tests. The new resolution demands that North Korea “abandon all nuclear weapons and existing nuclear programs” and takes aim at the state’s exports of coal, its top external revenue source. Under Resolution 2321, North Korea will be restricted from exporting more than 7.5 million metric tons (mt) of coal next year, a 62% reduction from 2015.

North Korea’s Ministry of Foreign Affairs said late last month it rejects the latest sanctions, saying they are denying its sovereignty and right to survival. The resolution could cost the regime $700 million.


Alberta Proposes Deal to Close Coal-fired Power Plants

The Alberta government might pay three coal power producers more than $1 billion over the next 14 years to compensate them for shutting down their plants early as part of its climate change agenda, the Calgary Herald reported. The province is nearing the end of negotiations over contract disputes that led to a controversial lawsuit, reaching three agreements with companies, two of which are tentative. Talks with a fourth player, Calgary-based public utility Enmax, are ongoing.

The deals are the latest in a series of changes the government has made to Alberta’s energy landscape to cut greenhouse gas emissions and produce cleaner power. The government’s climate change plan aims to shut down all coal-fired plants in Alberta by 2030, but six newer facilities were previously allowed to operate until as late as 2061, leading their owners to call for compensation. The province will pay TransAlta Corp., ATCO Ltd. and Capital Power Corp., which each own stakes in the plants, a total of $97 million annually over 14 years, beginning in 2017, for a total cost of almost $1.36 billion.

In related news, government officials said they also made progress resolving a dispute over power purchase arrangements. Enmax, Capital Power, TransCanada Corp. and AltaGas Ltd. walked away from the power agreements when the province increased the carbon levy on large industrial emitters, citing an opt-out clause that allows them to terminate the deals when a change in law makes the power pacts unprofitable. If the government is unable to work out a deal, Albertans could be on the hook for $2 billion.


Canada’s Government Tells Provinces to Phase Out Coal

Ottawa plans to phase out coal-fired power ahead of schedule, which primarily includes Nova Scotia, New Brunswick and Saskatchewan, according to the Financial Times. Federal Environment and Climate Change Minister Catherine McKenna announced that coal-fired power plants in the country now must shut down or install technology to eliminate their emissions by 2030.The goal is to move Canada’s electric grids toward 90% renewable or non-emitting sources by 2030, up from 80% now. Ottawa’s move follows a similar plan in Alberta, announced last year by the province.

Previously, federal regulations required coal power plants to shut down after operating for 50 years. Saskatchewan Premier Brad Wall accused Ottawa of ignoring commitments to collaborating with the provinces on climate change policies. “The federal government has now violated that commitment for a second time by making its second major policy announcement in advance of the first minister’s meeting in December — the announcement last month of a national carbon tax and now this announcement of an accelerated phase out of coal-fired electrical generation,” Wall said.

Saskatchewan has three coal-fired power plants, which provide 40% of the province’s electricity. Nova Scotia is home to four coal-fired generating stations. New Brunswick relies on one coal-fired plant.


China Stands Firm on Cutting Excess Steel, Coal Capacity

The Chinese government has reiterated its firm stance on cutting excess steel and coal capacity in response to an emerging backlash from producers prompted by recent price hikes, Xinhua reported. China had retired 45 million metric tons (mt) of steel and 250 million mt of coal production capacity by the end of October, meeting its full-year goals ahead of schedule.

But problems have also emerged, especially with some companies seeking to add capacity as an unexpected demand-supply gap pushes up prices of steel and coal products. The steel and coal industries are plagued by overcapacity and the government’s resolution is unwavering, said Xu Kunlin, deputy secretary general of the National Development and Reform, at a November 30 press conference.


Japanese Partner With Tata on AI for Coal-fired Power

Japan’s Mitsubishi Heavy Industries and Hitachi will join forces with India’s Tata Group to develop an artificial intelligence (AI)-based system for efficiently regulating coal-fired thermal power plants, the Nikkei Asian Review reported. The system will allow for the most efficient use of coal, regardless of the kind or quality. The companies hope to sell the system, along with a database, primarily in southeast Asia.

The joint development project is being undertaken by Mitsubishi Hitachi Power Systems, the combined thermal power units of the two Japanese companies, and Tata Consultancy Services, the Indian group’s core unit.

Feasibility studies are already under way at a coal-fired thermal power plant owned by a utility in southeast Asia. The new system will use AI to adjust how the various parts of a power plant cooperate, helping them create the optimal temperatures for different kinds of coal to burn. It will be compatible with control systems not made by Mitsubishi Hitachi Power Systems.


Anglo Completes Sale of Callide Mine in Australia

Anglo American completed the sale of its wholly owned interest in the Callide thermal coal mine in Queensland, Australia, to Batchfire Resources Pty Ltd., following the announcement of the share sale agreement on January 20.

Callide consists of an open-cut thermal coal mine and associated processing infrastructure that produced 7.9 million metric tons (mt) of coal in 2015 (and 5.5 million mt in the first nine months of 2016), the majority of which was sold to two adjacent power stations under long-term contracts. The terms of the transaction remain confidential.


Dwindling Demand, Surplus Force India to Defer Coal Block Auction

In light of a demand shortage and resultant glut in the domestic market, the Indian government was unlikely to go ahead with the next round of coal block auctions to private investors, at least not within the next three months.

Earlier in the year, India’s Ministry of Coal had targeted completing another round of the coal block auction for commercial mining, inviting bids from private investors by December, but ministry officials said, “nothing on this front was likely in the immediate future.”

According to the secretary, Ministry of Coal, Anil Swarup, “There has been a paradigm shift in the problem — from a phase of supply shortage to a phase of demand shortage — and this demand shortage was due to a plant load factor of not more than 59-60%.”

Since last year when the auction route was made mandatory for the allocation of the coal blocks, the Ministry of Coal had allotted 31 blocks to successful bidders, and another 44 were given to government mining and end-user companies on a preferential basis.

According to a statement issued by Swarup, 13 of the coal blocks auctioned were operational, adding 20 million metric tons (mt) to the total coal availability, while the rest were expected to commence production by March 31, 2017. However, all the coal blocks were allocated to government mining companies or thermal power generators, and the next round of proposed auction would have been the maiden one exclusively for private miners for commercial production and merchant sales. India’s coal production was rising at a fast clip of 9% per year, notching 536 million mt in 2015-2016.


New Power Plant Coming to Colombia

New Colombia Resources said it is in talks to build a 300-megawatt (MW) thermal coal-fired power plant in Guaduas, Colombia, near its reserve base northeast of Bogota.

Its subsidiary, Compañía Minera San Jose Ltda., is in negotiations with a foreign entity for the plant’s construction and has secured a $200 million letter of intent from a Chinese construction firm to join a consortium that could finance the development the plant as well as the operation that will feed it.

“New Colombia Resources Director Erasmo Almanza received a report from the consortium partner on the status of negotiations of the installation of the thermal coal power plant in Guaduas,” the company said October 19. “The report states there have been meetings with the financing team seeking the best financing option for the project and have modified the volume of power generation to optimize material inventory with time.”

The company’s coal reserves are estimated to be 70% metallurgical and 30% thermal. The news is especially notable, officials said, because it will have a market for its thermal product while developing met opportunities in the face of rising prices.


Peabody Enters Agreement to Sell Metropolitan Mine

On November 2, Peabody Energy announced that one of its Australian subsidiaries had entered into a definitive agreement to sell the Metropolitan mine in New South Wales, Australia, and its associated 16.67% interest in the Port Kembla Coal Terminal to a subsidiary of South32 Ltd. for $200 million in cash. The sale is expected to release Peabody of approximately A$20 million in financial assurances, in the form of bank guarantees and cash, that will be replaced by South32 upon completion.

“This sale supports our actions to strengthen the Australian portfolio, which remains core to Peabody, and is consistent with the strategy outlined in our business plan,” said President and Chief Executive Officer Glenn Kellow.

South32 Chief Executive Officer Graham Kerr said, “The Metropolitan Colliery is a natural fit within our portfolio and the acquisition is consistent with our strategy to invest in high-quality mining operations where we can create value. The mine’s recently upgraded infrastructure and close proximity to Illawarra Metallurgical Coal will enable us to further optimize performance and unlock unique blending and resource synergies.”

The transaction is expected to close in the first quarter of 2017, subject to clearance by the Australian Competition and Consumer Commission.