An environmental institute is raising concerns about the financial viability of a plan to export coal from Longview to China.
Ambre Energy, the Australian coal company behind a huge coal-export terminal at Longview, “barely even qualifies as a bona fide coal company, much less a powerhouse in the coal export business.” That's according to a Sightline Institute study released Wednesday. The 17-page report was scathing in its description of Ambre’s record of losses in its present coal mines. Not to mention skeptical that the firm can produce the financing and expertise to operate an export terminal shipping up to 44 million tons a year to Asia.
“The company attempts to portray itself as a well-established multinational coal conglomerate, but its financial records paint a picture of a high-risk startup venture that had never even produced coal until 2011,” Clark Williams-Derry, Sightline researcher and the report’s author, told reporters in a telephone news conference.
Williams-Derry and Tom Sanzillo of the Institute for Energy Economics and Financial Analysis stressed that all coal companies are facing difficulties because of the loss of American markets and the softening of Asian demand. “Slower growth in China and India tighten demand, a condition that favors existing suppliers,” Sanzillo noted.
Sightline researchers say that local stakeholders need to know how risky the export business is — particularly Ambre — before approving any coal project. Sightline, an opponent of coal, has written previously about Ambre.
“This type of negativity from an anti-coal organization is not unexpected,” Ambre spokeswoman Liz Fuller said.
Ambre is the largest corporate force behind the proposed Millennium Bulk Terminals project in Longview, which would operate on the site of a former aluminum plant. Coal giant Arch Coal owns 38 percent of the Millennium project, which has already begun working on clean-up of the old plant site. Ambre, owner of 62 percent of the Millennium project, is a relatively new entry into coal mining and without any background in running an export terminal.
Sightline researchers cited Ambre’s history of financial problems in Australia: The company lost a coal-mining venture in 2012, posted a $24 million loss for 2011 and was described by its auditor as in danger of depleting its cash reserves. "There exists significant uncertainty whether [Ambre] and its controlled entities would be able to continue as a going concern," the auditor told The Australian last April.
Sightline credits Denver-based Resource Capital Funds with rescuing Ambre from its 2011 losses, with a massive infusion of funds from RCF’s Ross Bhappu. Looking at likely costs of its mining and terminal ventures, Sightline projects that Ambre will need an additional $1 billion in capital “to move its business plan towards completion.”
Ambre spokeswoman Liz Fuller frames things differently. Ambre, she says, has “developed quickly from humble beginnings to become an important player in its sector.” She pointed to a contract with two South Korean utilities to deliver up to 5 million tons a year of Powder River Basin Coal. Ambre operates two mines in the Basin, and would ship the coal through Longview or Saint Helens, Ore., where it is also proposing an export terminal. Some of the coal would be transferred from rail to barge at Boardman, Ore., on the Columbia River, for shipment to the export terminals.
Taken as a whole, the Sightline report plus documentation of Ambre’s fiscal problems and the volatility of the Powder River coal export points to a venture that would seem to be betting the farm (or, in this case, the firm) on Millennium. Huge costs to run the environmental gauntlet, build the terminal and associated river barges will test the pockets of Ross Bhappu and other investors.
However, if Millennium ends up as the only West Coast coal terminal on American soil, it could become a giant vacuum, sucking coal from a beleaguered Powder River Basin. It is, in some respects, an example of “If we build it, they will come,” and the stakes are huge.
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