Front Porch Blog

Citigroup Cuts Coal Ratings

Two days ago, Citibank downgraded coal stocks “across the board” pointing in significant respects to the industry’s failure to produce timely responses to climate stabilization policy imperatives by, for example, delaying advanced coal technologies with carbon capture and perpetuating its “bad guy” brand.

A day after HSBC cut its rating on the industry, Citigroup followed, downgrading the sector to “Hold.” Analyst John H. Hill said he is concerned about the growing share of power generation that natural gas is taking from coal, and said “prophesies of a new wave of coal-fired generation have vaporized, while clean coal technologies such as IGCC with carbon capture and coal-to-liquids remain a decade away, or more.”

“Our sense is that coal has missed a critical time window, which potentially throws any recovery out-of-phase, with implications that could last for a year or more,” he continued in a note to clients. Elevated stockpiles of coal could make it difficult to negotiate prices with utility companies, he said, and the 2008 election cycle could be bruising for the industry. “Candidates are already stepping up to ‘ban coal,’ while company productivity/margins are likely to be structurally impaired by new regulatory mandates applied to a group perceived as landscape-disfiguring global warming bad-guys,” he wrote.

Click here to read the Associated Press article about Citigroup.





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