Study: Private capital investment in US coal is over
The surge in thermal coal has been one of the surprises of 2016 with the seaborne price scaling $100 a tonne for the first time since 2012. But domestic prices in the US continued to fall this year and with few export opportunities the rally has bypassed miners inside the country.
According to a new study of private capital in the North American energy sector from industry tracker Preqin, investment in coal has now completely dried up.
Since 2006 investment targeting the energy sector – oil, natural gas, coal and renewables – in North American account for over half the global total.
According to the report 2016 is set to be a record year for oil & gas fundraising in the region, with $33.9bn secured from just 19 funds closed as at October this year, constituting nearly 56% of the global total of funds raised for investment in the sector. That compares to $43.5bn raised by 35 funds last year; also a record year.
Of those unlisted funds currently in the market looking to raise money, the focus on North America is even more significant. Fifty-one North America-focused oil & gas funds are in market, collectively targeting $28.6bn in institutional capital commitments, nearly 3.5x the combined total of funds seeking investments in other regions around the world (17 funds targeting $8.2bn), says Preqin.
While the resilience of oil & gas investment is remarkable given the slide in the price of the commodities over the past three years, private capital and the institutions (foundations, endowment plans, public pension funds and the like) that back them are shunning the coal sector almost entirely.
Of the funds currently in the market raising funds to invest in energy, zero have coal as an investment preference. Things haven’t been great during the last decade either: only 4% of the number of funds closed targeted coal, representing a meagre 2% of capital raised since 2006.
The shift of focus from coal to solar, wind and other renewable projects is clear. According to Preqin data 21% of investment vehicles currently in the market include renewable energy investments alongside their oil & gas acquisitions.
Among the institutions in North America committing money to invest in energy, none have plans to direct funds to coal within the next 12 months, even though 9% have a general preference for coal (versus 50% for renewables).