CONSOL Executes Several Value-Enhancing Transactions
CONSOL Energy Inc. (NYSE: CEIX) and CONSOL Coal Resources LP (NYSE: CCR) today provided an update on several transactions that were executed during the last several months.
Since July 1, 2020, CONSOL has taken steps to bolster its financial flexibility and liquidity and create value through multiple transactions that included sales of land and mineral assets, gas wells, and coal reserves outside of its active operations. In aggregate, CEIX and CCR expect to generate miscellaneous income and gains on sale of assets in the second half of 2020 totaling $60-$70 million and $9-$10 million, respectively, related to these transactions. Both companies continue to work on several additional opportunities as well to further improve their balance sheets.
CONSOL believes these transactions enable it to enhance liquidity and bolster financial flexibility. These transactions also allow CEIX to accelerate its strategy of de-leveraging its balance sheet through open market repurchases, and they position the company well to take advantage of a potential coal market recovery.
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US East Coast Thermal Coal Exports Rise in August
Thermal coal exports out of the US East Coast rose slightly in August to 719,518 mt, from 716,435 mt in July, despite exports out of Norfolk, Virginia, falling to a four-month low, according to US Census Bureau data.
Exports from the Baltimore Census district increased to 508,626 mt in August, up from 415,065 mt in July, but down from 533,408 mt in the year-ago month, according to the data released Oct. 6. However, exports out of the Norfolk Census district declined to a four-month low 210,892 mt, down from 301,370 mt in July, but up from 189,366 mt in August 2019.
The majority of the exports from Baltimore, or 378,568 mt, went to India, up from 75,000 mt in July and 210,900 mt in the year-ago month. It was the most NAPP coal shipped to India from Baltimore since 435,458 mt in April. An additional 130,000 mt of thermal coal went to the Dominican Republic in August, down from 180,000 mt in July.
In August, 70,000 mt of coal was shipped to Morocco from Norfolk, while 60,000 mt went to the Dominican Republic, compared with 65,000 mt and zero in July, respectively. Another 35,088 mt and 33,857 mt went to Brazil and the Netherlands in August, respectively, down from 53,606 mt and 40,348 mt in the previous month.
Cumulative exports out of Baltimore through the first eight months of the year are at 5.27 million mt, down from 7.26 million mt, while exports through August from Norfolk are up on the year at 2.29 million mt, from 1.81 million mt a year earlier.
According to a September report from Norfolk-based shipping agency T. Parker Host, Consol Coal Resources exported 365,427 mt of Northern Appalachia coal in August, compared with zero in July. Coal marketers Xcoal and Javelin Commodities exported 254,728 mt and 199,711 mt of thermal coal off the East Coast, respectively, compared with 124,631 mt and 77,744 mt in July, according to the report.
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White House Candidates Set Divergent Trajectories for Energy, Commodity Sectors
Stakes are high across the U.S. energy and commodities sectors as President Donald Trump and Democratic nominee Joe Biden vie to shape energy, climate and trade policy for the next four years.
Biden has called for a swift pivot to clean energy, while Trump has made the case for the country's abundant fossil fuel resources.
The winner will control regulations that could stymie or accelerate growth across energy sectors and markets, and help to direct investment. Trade policy also looms large in the election stakes — particularly for oil, natural gas, petrochemicals and metals — after Trump's trade policies have reshaped commodity flows.
Power Sector
Biden has proposed an aggressive plan to boost clean energy and reduce emissions to combat global warming, while Trump gives little attention to the issue in his "energy dominance" agenda emphasizing fossil fuel-fired generation.
Under Biden, green energy developers could expand market share if climate impacts are heavily weighted. Biden's four-year, $2 trillion climate plan calls for carbon-free electricity by 2035 and makes infrastructure and clean energy investments core to an economic recovery package. Biden's position appears to make room for gas-fired generation but otherwise looks to accelerate retirements of fossil fuels.
Trump's agenda centers on regulatory rollbacks aimed at achieving energy independence. His backers credit first-term rollbacks with keeping energy prices low, and refraining from further regulations to speed retirement of low-cost coal plants. Trump's core priorities mention infrastructure improvements and bolstering cybersecurity defenses.
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Missing the Mark, Again
This column has often highlighted The New York Times’ aggressive attempts to deify the prior administration, overlook facts and vilify coal. And The Times' latest piece on the industry, the challenges it’s facing and the administration’s response, is no exception.
The Times was hardly the first outlet this election cycle to cover the subject, but it is likely the most prominent outlet to promote editorial comment as reporting.
The piece cherry picks data to further a narrative that the Trump administration has failed to deliver for miners, going as far to suggest that the industry fared better under the Obama administration. It’s an absurd conclusion, not least of which because coal employment data is very clear that before the pandemic, the Trump administration was able to halt a dramatic decline in coal employment that came during the Obama years.
When President Obama took office in 2008, mining employment stood at 134,000. At the end of his second term it plummeted to 81,000 – a nearly 40 percent decline. A loss of more than 50,000 American jobs under the Obama administration might not merit mention by The Times, but for countless communities upended by those losses, the pain was searingly real.
The closure of mines and the loss of tens-of-thousands of mining jobs under the Obama administration was directly related to polices designed to dismantle the industry.
Want proof? Under the Trump administration we’ve seen an almost impossible reversal prior to the pandemic. At the start of this administration, coal employment stood at just under 82,000. At the end of 2019, instead of the tens-of-thousands of jobs lost every year under the Obama administration, employment held at that same level: 82,000. Given The Times’ insistence that “It wasn’t Obama, it was the markets!” one might wonder how coal would have fared over the last four years under a Clinton administration had the election results been different.
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Coal-Fired Power May See Rebound in U.S. & China in 2021
Coal-fired power certainly has long-term challenges to viability, but some short-term -and not so short-term- boosts may be on the horizon.
Reuters recently reported that energy security and economic fears is driving the mammoth Chinese energy industry back toward new coal-fired generation projects. One of those includes the $1.9 billion, 4-GW coal power project in Qingyang.
The U.S. electricity sector, meanwhile, may see a near-term, possibly temporary, rise in coal-fired generation. According to the federal Energy Information Administration’s most recent Short Term Energy Outlook, the coal-fired share of U.S. generation mix could return to 24 percent in 2021, the same portion it held in 2019.
The resource fell from 24 percent to an expected 20 percent this year, as cheaper and more efficient gas-fired and renewable generation came online. Next year, though, coal will jump up somewhat while electricity demand declines slightly and the steady increase of gas-fired generation is pushed back for at least one year, according to the EIA.
The Short Team Energy Outlook predicts that total coal production this year will be 525 million short tons, down 26 percent from last year. In 2021, however, the EIA says, coal production should increase to 625 million short tons as power generators respond to anticipated higher natural gas prices.
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