Investors Hold Positions In Coal Plants

Investors have not yet abandoned coal-fired power plants despite new environmental regulations and a series of legal setbacks, according to Bloomberg BNA. Instead, they appear confident that coal utilities can weather the storm and adapt to the new marketplace.

Despite profitability challenges presented by Environmental Protection Agency regulations on toxic mercury emissions and a pending cross-state air pollution rule, interviews with industry investors led Bloomberg BNA to conclude that even as the utility industry has fought hard to postpone or kill EPA regulations, it has also been quietly making changes to comply with the new rules.

Tellingly, there’s been a muted response to the recent U.S. Supreme Court decision in favor of the EPA’s proposed cross-state air pollution rule, after years of aggressive opposition. Many utilities have already upgraded pollution control technology to meet mercury rules, allowing them to easily meet the cross-state pollution rule.

“We expect the Supreme Court decision to have a very limited impact on the U.S. coal-fired fleet,” Hugh Wynne, an analyst for Sanford C. Bernstein & Co, told Bloomberg BNA.

On the same day the Supreme Court issued its ruling, investors put an additional $157 million into exchange-traded funds exposed to utilities.

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Moreover, some of the least economic coal generation facilities have been or are already slated for retirement. The remaining plants are better positioned to survive the tough new legal environment.

A bigger test will come when the EPA issues limits on greenhouse gas emissions from existing power plants. That may force many more coal plants to shut down.

Still, for now at least, investors appear to be sanguine about the changes, perhaps because they expect any new, significant EPA limits to take years to work their way through the regulatory process, and then face lawsuits from plant owners.

By Charles Kennedy of Oilprice.com