Is A Game-Changing Deal About To Emerge For This Hated Commodity? by Dave Forest, Pierce Points
The investment picture keeps getting bleaker for the world’s most hated commodity.
Coal.
This week saw another slew of investors officially back away from coal funding. Led by South Africa’s FutureGrowth — the country’s largest specialist fixed-income money manager.
FutureGrowth said Tuesday that based on its investing principles it could no longer fund “dirty” coal projects. A sentiment that was echoed this week by Boston University, which said it will divest all holdings in coal and oil sands.
[drizzle]But the rush to dump coal investments does have a silver lining for those groups remaining in this space. Namely: there’s a lot less competition for good assets.
Such an opening appears to be luring some big players into potential coal deals. With reports emerging in India this week that the country’s biggest coal player may be about to take a major leap into foreign assets.
That firm is Coal India, the nation’s largest producer. With local press quoting the company’s chairman as saying the firm is close to acquiring coal assets in Indonesia.
Chairman Suthirtha Bhattacharya said, “We are in touch with government companies there to see whether we can get access to coal licence.”
This follows on previously announced plans by Coal India to look at assets in major producing nations like Indonesia, South Africa and Australia. With this week’s announcement being the first sign of concrete deals brewing as part of this strategic plan.
If a deal does emerge on Indonesian assets, it would be a big shot in the arm for coal. Showing that even while many buyers are fleeing the market, long-term players are still intent on paying up for good projects.
Such a situation could be a win-win — with Coal India likely to get favorable deal terms amid the current slump in the Indonesian coal sector. Watch for announcements from the firm or from players in the Indonesia coal sector on specific acquisitions over the coming months.
Here’s to being the last man standing,
Dave Forest
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