Coal, the commodity that no-one wants to talk about, is staging a comeback as investment banks warm to the profits from improving prices and a new mine in Australia, being built to meet Indian demand, is nearing completion.

The $2 billion Carmichael mine has been the focus of decade-long protests by environmental campaigners, but India’s Adani Group has overcome all objections to be on the verge of extracting first coal from the 150-foot deep open-pit mine.

Government approvals, which had been slow coming, have been completed with the final hurdle cleared with the signing last week of a royalty agreement with the State of Queensland in a move designed to make the mine less of a political issues at an upcoming election.

First shipments of coal from the Carmichael mine to India are expected next year, growing to an initial annual target of 10 million tonnes.

Carmichael is not the only significant event in a material which investors have shunned because of its poor environmental record as a major source of carbon pollution.

BHP Coal Spin-Off

Other developments in coal include the publication of a series of research reports which have shifted coal from the bottom of investment preferences to the top, and speculation that a major new coal business could be created with the spin-off by BHP Group of it’s coal division as a separate stock-exchange listed company.

Citi said last month that BHP might find it difficult to sell surplus coal assets to a trade buyer so it can focus on high-grade metallurgical, or coking coal, which commands a much higher price than thermal, or electricity-producing coal.

“We think the coal assets will end up being spun out to BHP shareholders as per South 32,” Citi

By Tanisha Heiberg

JOHANNESBURG, Oct 8 (Reuters)South African power utility Eskom is still seeking funding for its shift from coal to greener fuels, but hopes to announce a deal at next year’s COP26 climate conference after talks with lenders including the World Bank, its chief executive said on Thursday.

Eskom, which generates 90% of South Africa’s power, has a 488 billion rand ($29.3 billion) debt burden and has imposed intermittent blackouts, denting economic growth and hurting investment.

The utility is in talks over funding with local and international developmental finance institutions, including the World Bank, and has received letters of support in principle, Andre de Ruyter told Reuters on the sidelines of the Joburg Indaba mining conference.

“There are both many local and international development finance institutions that are prepared to offer entities such as Eskom with funding linked to accelerated decarbonisation,” said de Ruyter.

Eskom is still engaging on how those transactions would be structured, but hopes to make an announcement at the COP26 climate summit to be held in Glasgow in November 2021, he said.

Eskom is modelling options to repurpose its aging power stations into renewable or gas power plants and use vacant mining land for wind or solar farms, said De Ruyter.

Up to 12,000 megawatts (MW) of Eskom’s installed capacity will need to be decommissioned in the next decade, according to South Africa’s energy plan.

“We would be able to reduce the interest burden while also contributing to an improved emission profile and ultimately also creating jobs as we erect these renewable plants,” said De Ruyter.

“If we simply pull the plug on the old coal-fired power stations that have reached the end of their design life… then we will leave those communities in the lurch and that is not what we

Texas-based power provider Vistra will retire its entire fleet of coal plants in Illinois and Ohio by 2027 as part of its plan to reinvent itself as a renewable energy and battery company.

Together, the coal plants slated for closure account for 6.8 gigawatts of generation capacity — equal to around 15% of Illinois’ total power capacity. Five of the seven coal plants Vistra named are in Illinois.

A major power producer and retailer, Vistra had acquired several of the plants in 2018 after merging with energy company Dynegy. But like scores of other power companies before it, Vistra has struggled to make the coal plants profitable amid a surge in supply of natural gas, falling electricity prices, and newly competitive wind and solar farms. It also faced tightening environmental restrictions that would have forced onerous new investments to reign in pollutants.

The scheduled closures are only the latest in a long string of them. Since 2016 Vistra and its subsidiaries have closed or announced the closure of 19 coal plants totaling more than 16 gigawatts across Texas, Pennsylvania, Ohio, Illinois, and Massachusetts.

Some of the earlier closures occurred because plants ran afoul of environmental rules. In November 2019 a federal judge ordered two units in Bartonville, Illinois, to close by 2022, part of a lawsuit alleging violations of the Clean Air Act, according to Bloomberg Law. And in August 2019 Vistra said it would close four plants in Illinois to meet the requirements of Illinois’ Multi-Pollutant Standard, which limits allowed emissions of sulfur dioxide and other air pollutants.

Vistra owns a large portion, but not all, of Illinois’ coal power plants. Three others are owned by power company NRG. The municipally-owned City, Water, Light and Power (CWLP) owns the Dallman Power Plant downstate. And the Southern Illinois Power Cooperative

While most stocks underwent a correction in September, beaten-down coal companies were among the few that actually saw strong performance. The coal ETF (KOL) rose about 5% with names such as Arch Resources (ARCH) rising a staggering 33%.

Most of the gains have been in metallurgical coal producers that supply coal to steelmakers. There has been an uptick in demand for met coal from China which has caused prices and sales volumes to rise. Thermal coal (used for power) has been a bit weaker but has also seen an uptick in prices and sales volumes.

Interestingly, Alliance Resource Partners (ARLP) has been left out of the rally. The company produces both thermal and metallurgical coal. The stock is trading at nearly its lowest price ever despite recently seeing an uptick in sales and prices. The company is no doubt in a difficult position after seeing sales decline over 50% Y/Y last quarter.

That said, the company had a positive demand outlook for Q3, and recent events in the coal market indicate that demand is indeed rising. Natural gas prices are higher which should boost competitive demand. China recently looked to increase coal imports due to a shortage, which was made worse by a mine collapse and corruption probe. If this continues to cause coal prices to rise internationally, ARLP’s export business should see greater profitability and demand.

A Closer Look at ARLP’s Valuation

ARLP has declined about 15% on generally positive news this month. Of course, with the equity market as a whole seeing higher volatility this month many investors may be selling ARLP in order to shore up liquidity. Though the company historically pays an extremely strong dividend that would equate to a yield of 50%, it is currently suspended as the company uses cash flow to reduce debt