Stranded Assets and Thermal Coal An analysis of environment-related risk exposure January 2016 Supported by: Authors: Ben Caldecott | Lucas Kruitwagen | Gerard Dericks | Daniel J. Tulloch | Irem Kok | James Mitchell ISBN: 978-0-9927618-2-0 2 Stranded Assets and Thermal Coal: An analysis of environment-related risk exposure Table of Contents About the Stranded Assets Programme 5 Global Advisory Council 6 About the Authors 7 Acknowledgements 8 Executive Summary 9 Coal-Fired Power Utilities 11 Thermal Coal Miners 18 Coal Processing Technology Companies 21 Scenarios 24 Carbon Capture and Storage 24 Implications for Reporting And Disclosure 24 Company Data Intelligence Service 25 1 Introduction 27 1.1 Coal Value Chain 30 1.2 Scenario Development 32 1.3 Scenario Outlook 33 1.4 Data Availability 40 1.5 Dataset Preparation 41 1.6 ISIN Numbers 42 2 Briefing: Coal Processing Technologies 43 2.1 Technology Summary 43 2.2 Development 46 3 Briefing: Role of CCS 48 3.1 Feasibility Update 48 3.2 Scenario Inclusion 49 3.3 Deployment Update 50 3.4 CCS in the Coal Value Chain 50 3.5 Policy and Legal Developments 51 3.6 Emerging Issues 51 3.7 Opinion 52 4 Policy Summaries 54 4.1 Australia 54 4.2 China 57 4.3 Germany 61 4.4 Indonesia 63 Stranded Assets and Thermal Coal: An analysis of environment-related risk exposure 3 Table of Contents Continued 4.5 India 65 4.6 Japan 67 4.7 Poland 69 4.8 South Africa 71 4.9 United Kingdom 73 4.10 United States 76 5 Coal-Fired Power Utilities 81 5.1 Market Analysis 81 5.2 Investment Risk Hypotheses 91 5.3 Summary of Top 100 Coal-Fired Power Utilities 112 6 Thermal Coal Miners 116 6.1 Market Analysis 117 6.2 Investment Risk Hypotheses 123 6.3 Summary of Top 20 Thermal Coal Mining Companies 131 7 Coal Processing Technology Companies 132 7.1 Assessment of Available Information 132 7.2 Market Analysis 134 7.3 Investment Risk Hypotheses 139 7.4 Summary of CPT Companies 146 8 Indirect Impacts 147 8.1 Transport 147 8.2 Workers and Labour Organisations 147 8.3 Banks and Financial Institutions 148 9 Implications for Disclosure and Reporting 149 9.1 Climate Change Risk Disclosure 149 9.2 Insights from Our Research 150 9.3 Company Data Intelligence Service 151 10 Bibliography 153 Appendix A: Top Coal-Fired Power Utilities Tables 167 Appendix B: Top Thermal Coal Mining Companies Tables 177 Appendix C: Top Coal-Processing Technology Companies Tables 182 4 Stranded Assets and Thermal Coal: An analysis of environment-related risk exposure About the Stranded Assets Programme The Stranded Assets Programme at the University of Oxford’s Smith School of Enterprise and the Environment was established in 2012 to understand environment-related risks driving asset stranding in different sectors and systemically. We research how environment-related risks might emerge and strand assets; how different risks might be interrelated; assess their materiality (in terms of scale, impact, timing, and likelihood); identify who will be affected; and what impacted groups can do to pre-emptively manage and monitor risk. We recognise that the production of high-quality research on environment-related risk factors is a necessary, though insufficient, condition for these factors to be successfully integrated into decision-making. Consequently, we also research the barriers that might prevent integration, whether in financial institutions, companies, governments, or regulators, and develop responses to address them. We also develop the data, analytics, frameworks, and models required to enable integration for these different stakeholders. The programme is based in a world leading university with a global reach and reputation. We are the only academic institution conducting work in a significant and coordinated way on stranded assets. We work with leading practitioners from across the investment chain (e.g. actuaries, asset owners, asset managers, accountants, investment consultants, lawyers), with firms and their management, and with experts from a wide range of related subject areas (e.g. finance, economics, management, geography, anthropology, climate science, law, area studies) within the University of Oxford and beyond. We have created the Stranded Assets Research Network, which brings together researchers, research institutions, and practitioners working on these and related issues internationally to share expertise. We have also created the Stranded Assets Forums, which are a series of private workshops to explore the issues involved. The Global Stranded Assets Advisory Council that guides the programme contains many of the key individuals and organisations involved in developing the emergent stranded assets agenda. The council also has a role in helping to informally co-ordinate and share information on stranded assets work internationally. Stranded Assets and Thermal Coal: An analysis of environment-related risk exposure 5 Global Advisory Council The Stranded Assets Programme is led by Ben Caldecott and its work is guided by the Global Stranded Assets Advisory Council chaired by Professor Gordon L. Clark, Director of the Oxford Smith School. The Council is also a high-level forum for work on stranded assets to be co-ordinated internationally. Members are: Jane Ambachtsheer, Partner and Global Head of Responsible Investment, Mercer Investment Rob Bailey, Research Director, Energy, Environment and Resources, Chatham House Vicki Bakhshi, Head of Governance & Sustainable Investment, BMO Global Asset Management (EMEA) Morgan Bazilian, Affiliate Professor, The Royal Institute of Technology of Sweden Robin Bidwell, Group President, ERM David Blood, Co-Founder and Senior Partner, Generation IM Yvo de Boer, Director-General, Global Green Growth Institute Susan Burns, Founder and CEO, Global Footprint Network James Cameron, Chairman, Overseas Development Institute Diana Fox Carney, Director of Strategy and Engagement, Institute for Public Policy Research Mike Clark, Institute and Faculty of Actuaries, also Director, Responsible Investment, Russell Investments Rowan Douglas, CEO, Capital, Science & Policy Practice and Chairman, Willis Research Network, Willis Group Professor Robert Eccles, Professor of Management Practice, Harvard Business School Jessica Fries, Executive Chairman, The Prince’s Accounting for Sustainability Project (A4S) Professor Charles Godfray, Director, Oxford Martin Programme on the Future of Food Ben Goldsmith, CEO, Menhaden Capital Connie Hedegaard, Chair, KR Foundation, and former European Commissioner for Climate Action Thomas Heller, Executive Director, Climate Policy Initiative Anthony Hobley, CEO, Carbon Tracker Initiative Catherine Howarth, CEO, ShareAction Michael Jacobs, Senior Advisor, IDDRI Zoe Knight, Head, Climate Change Centre of Excellence, HSBC Bernice Lee, Director, Climate Change and Resource Initiatives, World Economic Forum Bob Litterman, Senior Partner and Chairman of Risk Committee, Kepos Capital Mindy Lubber, President, Ceres Nick Mabey, CEO, E3G Richard Mattison, CEO, Trucost David Nussbaum, CEO, WWF-UK Stephanie Pfeifer, CEO, Institutional Investors Group on Climate Change Julian Poulter, Executive Director, Asset Owners Disclosure Project Fiona Reynolds, Managing Director, UN Principles for Responsible Investment Nick Robins, Co-Director, UNEP Inquiry into a Sustainable Financial System Paul Simpson, CEO, Carbon Disclosure Project Andrew Steer, President and CEO, World Resources Institute James Thornton, CEO, ClientEarth Simon Upton, Director, Environment Directorate, OECD Steve Waygood, Chief Responsible Investment Officer, Aviva Investors Peter Wheeler, Executive Vice President, The Nature Conservancy (TNC) Michael Wilkins, Managing Director, Infrastructure Finance Ratings, Standard & Poor’s Baroness Worthington, Director, Sandbag Simon Zadek, Co-Director, UNEP Inquiry into a Sustainable Financial System Dimitri Zenghelis, Principal Research Fellow, Grantham Institute, London School of Economics 6 Stranded Assets and Thermal Coal: An analysis of environment-related risk exposure About the Authors Ben Caldecott is the Founder and Director of the Stranded Assets Programme. He is concurrently an Adviser to The Prince of Wales’s Accounting for Sustainability Project and an Academic Visitor at the Bank of England. Lucas Kruitwagen is a Research Assistant in the Stranded Assets Programme. He is also a Visiting Researcher at Imperial College London where his MSc thesis won the research prize. He holds a BEng from McGill University where he was a Loran Scholar. Gerard Dericks is a Postdoctoral Research Fellow in the Stranded Assets Programme. Prior to joining the Smith School he was an analyst at Property Market Analysis LLP and research consultant for Policy Exchange in London. He holds a PhD and MSc from the London School of Economics and a BA from Ritsumeikan University. Daniel J. Tulloch is a Research Associate on the Stranded Assets Programme. Daniel recently submitted his PhD in finance at the University of Otago, New Zealand. He also holds an MSc in International Accounting and Financial Management from the University of East Anglia, Norwich. Irem Kok is a Research Assistant for the Stranded Assets Programme. She is a doctoral candidate and a Clarendon Scholar at the University of Oxford. She holds a BA in Philosophy and Economics, an MA in Political Science from Bogazici University, and an MSc from the University of Oxford with a Weidenfeld-Hoffmann Scholarship. James Mitchell is a Researcher at the Stranded Assets Programme. He is concurrently a Senior Associate at the Carbon War Room, where he leads