IS Ambre Energy Economic Woe Raven's canary in the https://www.sightline.org/ambre
REPORT: AMBRE ENERGY UNLIKELY TO SUCCEED WITH U.S. COAL EXPORTING PLANS
Awash in Red Ink, Australian Firm Seen as Having Little Financial Ability to
Deliver on 2 Major Planned Export Terminals in Washington and Oregon.
SEATTLE, WA.///February 13, 2013///Ambre Energy, an Australian company that
is currently touting plans for a pair of controversial coal export terminal
sites in Washington and Oregon, faces mounting financial, regulatory and
other challenges that make it unlikely to deliver on its promises in the
U.S., according to a new report for the nonprofit Sightline Institute.
Available online at https://www.sightline.org/ambre, “Ambre Energy: Caveat
Investor,” the report catalogues a number of money woes for the company,
including money-losing coal mines, large write-offs for failed overseas
ventures, major liabilities for mine cleanup and pensions, troubled assets,
high borrowing costs, and a need for $1 billion in new capital to make its
coal projects financially viable.
Highlights of the report include the following:
* Substantial losses. Since it was founded in 2005, Ambre has racked up more
than $124 million (Australian dollars) in accumulated losses, while taking
in less than $7 million in revenues.
* High borrowing costs. Ambre’s financial records show loans with annual
interest rates of 10 to 12 percent—strikingly high rates at a time when junk
bond yields have fallen below 6 percent.
* Money-losing coal mines: The company’s recently acquired U.S. mining
business has hemorrhaged money, and one of its two mines recently announced
plans to lay off nearly half its work force.
* Massive liabilities. Ambre’s recent U.S. asset purchases come attached
with massive mine acquisition, reclamation, pension, and medical obligations
of at least $240 million.
* Substantial capital needs. Ambre needs roughly $1 billion in additional
financing to move its coal export plans to fruition.
* Failed overseas venture. The government of Queensland, Australia recently
blocked Ambre’s proposed coal-to-liquids venture, forcing Ambre to recognize
a $10.7 million loss.
* Regulatory uncertainty. The company’s coal projects face lengthy and
costly environmental review requirements, permitting uncertainties, and new
questions about its plans to avoid federal royalty payments by selling coal
between its own subsidiaries.
* High-risk business plans. Even if Ambre can manage to bring its coal
terminals online, it will still be exposed to sizable risks from rail and
shipping costs, volatile international coal prices, and competition from
better-established coal exporting rivals on the Pacific Rim.
Alan Durning, executive director, Sightline Institute, said: “Ambre Energy
is a very dicey proposition for investors. State and local governments and
potential business partners should be aware of the severe financial risks
the company carries.”
Clark Williams-Derry, researcher and report author, Sightline Institute,
said: “Ambre Energy barely even qualifies as a bona fide coal company, much
less a powerhouse in the coal export business. The company attempts to
portray itself as well-established multinational coal conglomerate, but its
financial records paint a picture of high-risk startup venture that had
never even produced coal until 2011.”
Tom Sanzillo, finance director, Institute for Energy Economics and Financial
Analysis, said: “Despite projections of robust short- and long-term global
demand for more thermal coal, U.S. coal producers are challenged to find
their permanent niche in the global marketplace. Slower growth in China and
India tighten demand, a condition that favors existing suppliers. Price
signals today do not present the same robust profit scenarios of even six
months ago. Port projects and the mining sector that underwrites them were
once filled with opportunity and optimism, but now face sobering
uncertainty.”