Investments in the thermal coal industry and financing the construction of coal mining and coal-fired thermal power plants have played a critical role in the growth of the global economy and ensuring the energy security of entire countries for many decades. Coal has many uses, but there are some characteristics that make it particularly important as a mined fuel on a large scale, especially for power generation in thermal power plants.
Investments and financing the construction of in coal mining on a global scale
In particular, the acute gas crisis forced some industrialized countries to think about coal mining, which can temporarily replace Russian natural gas, which was once supposed to serve as a reliable bridge for an ambitious green transition.
The crisis situation in Europe looks set to make major adjustments to the EU’s energy plans and spur further global investment in the mining industry, as well as reconservation, modernization and even construction of new coal-fired power plants.
It is obvious that the constantly growing demand and gas supply interruptions in Europe on the eve of the winter period will stimulate further growth of coal prices.
Moreover, global business is witnessing an unprecedented redistribution of energy resource flows. Thus, the European Union is rapidly increasing coal imports from South Africa and even Australia, while sanctioned Russia is looking for new sales markets outside the EU.
However, it must be recognized that the coal market was under pressure even before the start of the conflict. The difficult geopolitical situation only pushed the world to actively seek more affordable alternatives to natural gas. This alternative has existed for a long time in the form of closed coal-fired thermal power plants, which now need additional funding to bring them back to life.
Bank loans for thermal coal industry and coal-fired TPPs
Recent research shows that commercial banks have committed more than $1.5 trillion in financing to the coal industry between 2019 and 2021. Moreover, banks from the US, UK, Canada, Japan, China and India were responsible for 80% of global investment in the sector.
As a reminder, the Global Coal Exit List includes such world-famous energy giants as RWE AG (Germany), Glencore PLC (Switzerland), Peabody Energy Corp (USA), Eskom Holdings SOC Ltd (South Africa), as well as a number of other companies related to thermal coal.
The world’s largest investment companies, such as Vanguard and Blackrock, also have strong financial interests in the industry. There is every reason to believe that this list will expand against the background of growing demand for coal.
What are the benefits and risks of further bank financing of thermal coal projects?
According to Swiss Re, climate change could reduce global GDP by 11-14% by 2050 compared to a world without climate change. This corresponds to a loss of $23 trillion, which significantly exceeds the scale of the 2008 economic crisis. On the other hand, the abandonment of traditional thermal power plants on the most common and affordable type of fossil fuel will create immediate problems for business.
This would cause huge immediate losses, and would also make the economy vulnerable to natural gas exporting countries trying to blackmail the world with a gas tap. In any case, the demand for investment loans and short-term financing from the coal industry will grow in the near future.
Viola Funding Limited offers financing and construction of coal mining including, investment project in coal-fired thermal power plants.
We finance the construction of coal-fired TPPs, the modernization of thermal power energy, the construction and expansion of coal mines and quarries, and other projects related to thermal coal.
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