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Published on January 10th, 2014 | by Guest Contributor

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Goldman Sachs Sells Its Stake In Coal Terminal



Originally published on ThinkProgress.
By Ari Phillips.

The Gateway Pacific Terminal, near Bellingham, Washington, is poised to become the West Coast’s biggest coal export project — but it will no longer have the backing of New York-based, international banking behemoth Goldman Sachs.

On Tuesday, Goldman Sachs sold its stock back to the companies proposing to build the terminal, which would transport 48 million tons of coal from Wyoming to Asia annually.

Goldman Sachs had a 49 percent stake in the Gateway Pacific project before dropping out. A wealthy Mexican businessman, Fernando Chico Pardo, stepped in to make a large financial investment and take over Goldman Sachs’ stock. The company proposing the project is SSA Marine, whose parent company is Carrix, Inc.

“Goldman Sachs’ stepping away from coal export is yet another sign from Wall Street that coal export is a losing investment,” Crina Hoyer, the executive director of Bellingham-based RE Sources for Sustainable Communities said in a press release. “We already know that local Main Street businesses would feel the negative impacts from coal export, and communities across the region are saying no to this bad deal because of health, climate, environmental and economic impacts. We can do better than coal export both in Bellingham and the Northwest.”

Last fall the terminal was part of a contentious local election in which environmentalists and climate activists outspent major coal interests in an effort to elect local officials who would not approve the terminal. The $250,000 spent by these groups paid off when all four of the candidates it supported won handily, meaning the terminal will face skeptical and detailed analysis from the 7-member council when seeking permits.

Goldman Sachs published a research paper titled, “The window for thermal coal investment is closing” last summer, which ClimateProgress’s Joe Romm called a “must read” citing excerpts such as, “We believe that thermal coal’s current position atop the fuel mix for global power generation will be gradually eroded by the following structural trends:”

“1) environmental regulations that discourage coal-fired generation, 2) strong competition from gas and renewable energy and 3) improvements in energy efficiency. The prospect of weaker demand growth (we believe seaborne demand could peak in 2020) and seaborne prices near marginal production costs suggest that most thermal coal growth projects will struggle to earn a positive return for their owners.

Goldman Sachs departure does not necessarily indicate that the Gateway Pacific Terminal is doomed, however, and may have been rooted more in procedural frustration. According to an article by Floyd J. McKay, professor of journalism emeritus at Western Washington University, “Goldman may have become impatient with the length of proceedings to secure permits for the $664 million project; intense public opposition, particularly along the thousand-mile rail line from Wyoming, has caused public agencies to call for an intense and lengthy environmental review.”

SSA Marine tried to put a positive spin on the move by Goldman Sachs in a press release welcoming the new investor, Mr. Chico, aboard.

Aside from the Gateway Pacific Terminal, three of six coal export projects in Washington and Oregon have been abandoned, illustrating the financial and logistical challenges of bringing coal from interior America to energy-hungry Asian markets. This hunger has mostly been provided by China, but with that country facing an increasingly dire air pollution situation and shifting investment to cleaner energy sources like natural gas and renewables; the window for exporting coal to China is likely already closing.

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  • Bob_Wallace

    Not only is China capping coal use but Australia is getting desperate to find new markets as their own use falls.

    Looks to me as if we are seeing the beginning of the great coal crash. Demand dropping, suppliers desperately seeking markets. Short sighted investors making bad decisions.

    Prices will drop some but the cost of shipping is likely to stay where it is or rise. It will not get cheaper to mine. Coal will be able to hang onto a part of their market share by cutting costs, there’s not that much they can cut.

    Look for announcements of mine closures going forward. (Into better times.)

  • Dill Weed

    Herman Scheer… stranded investments.

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