Citibank still sees coal power a wor­thy risk

The Weekend Australian - Travel - - Resources -

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

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