Citibank still sees coal power a worthy risk
CITIGROUP and Morgan Stanley may still invest in coal-fired power plants and coal technologies after signing an agreement on socalled ‘‘ carbon principles’’ earlier this month with JPMorgan Chase & Co.
‘‘ It doesn’t necessarily preclude us from investing in coal-fired plants, or companies that actually build these plants,’’ J. Nicholas McKee, Citigroup managing director and group head for North American utilities, said at the Cambridge Energy Research Associates conference in Houston.
The guidelines, developed by the three banks in consultation with environmental organisations and power companies, are designed to help lenders wanting to finance energy projects in the US assess the risk of carbon dioxide emissions regulation. They were announced February 4.
‘‘ Coal will be a part of the answer at the end of the day,’’ said David J. Nastro, Morgan Stanley managing director and head of its global power and utility group. ‘‘ We are willing to finance coal even though we’re signatories to these carbon principles. I think the point is that we’ve asked the right questions and are trying to quantify what the impact will be.’’
Governments worldwide are introducing, or considering, limits on emissions from energy, transportation and other industries. Investors are seeking ways to manage a range of new technologies including power from coal derivatives, wind, solar and biomass, or plant material.
The guidelines include a process to examine the risks to lenders of CO
2 emitting technologies, such as coalburning plants. McKee said the banks were trying to clarify some of the risks for investors.
‘‘ Our view in structuring deals is that it’s got to go back to the power purchaser,’’ said Ric Abel, Prudential Capital managing director. ‘‘ So whatever arrangement you have from a power-purchase agreement, you’ve got to have some legislation in there that puts that risk back on the power purchaser. Without that, we wouldn’t move forward.’’ Bloomberg