Funding may become easier for coal power

US President Donald Trump’s expressed support for coal, oil and gas might lift restrictions on the ability of multilateral investment guarantee agencies like the World Bank to back projects such as coal-fired power stations, Xcoal Energy Resources CEO Ernie Thrasher said on Wednesday.

Although the World Bank approved a $3.75bn loan to Eskom in 2010 to build the Medupi power station, it was conditional on $750,000 being used to finance renewable energy. In 2013, the World Bank decided it would finance coal-fired power only in “rare circumstances”.

Thrasher said at a panel discussion on securing finance for mining from partnerships and offtake agreements that the previous Obama administration’s stance had affected developing countries that needed low-cost power to develop their economies. Trump’s friendlier policies towards fossil fuels might also encourage the US to resume support for clean coal technologies in which China was now more advanced.

Thrasher said traditional banking finance for mining had dried up and not yet resumed, so the main sources of finance were private equity funds. The funds wanted to see an offtake contract in place to guarantee revenue, particularly in Africa, where the risk profile was perceived to be higher.

Graeme Robertson, chairman and CEO of Intra Energy Corporation, said the greatest opportunities for energy projects in Africa outside SA were in East Africa, Ghana, Senegal and the Ivory Coast.

One of the problems for financing in developing countries was that accounting standards often did not meet the requirements of international banks, Robertson said. But as Asian markets matured, capital was seeking better returns and was attracted to Africa.

Sariel Polatinsky, global head of copper for Noble Group, said that for traders seeking energy resources and minerals, Africa was an important region. Traders were willing to finance mining projects but wanted a turnaround of up to 24 months on capital, which made them different from banks. Offtake agreements were key for traders. In certain countries in which financing was expensive for small to mid-tier miners, traders could help and bridge the gap between mining and marketing because of their logistical expertise.