Australia’s Ambre Energy has big plans to open two coal train export terminals in Washington and Oregon, but does it have the financial wherewithal to pull it off?
Maybe not, according a report from the non-profit Sightline Institute. The report “Ambre Energy: Caveat Investor,” catalogs a number of financial 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.
Alan Durning, Sightline’s executive director, says: “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.”
Here are some bullet points to ponder from the report:
- Minuscule revenues: Ambre has collected only $6.6 million in worldwide revenues over the past seven years.
- Massive losses: Meanwhile, it has accumulated $124 million in losses on its balance sheets.
- Failed Australian venture: The firm recently admitted that it lost $10.9 million on a failed coal project in Australia.
- Huge liabilities: It is on the hook for hundreds of millions of dollars for mine reclamation and site cleanup, retiree medical and pension benefits, and costs arising from a recent legal settlement.
- Troubled assets: Ambre may see little value from some of its assets, including a $65 million bond cash holding dedicated for mine reclamation, and $19 million in shale oil development costs.
- High borrowing costs: The company has taken out multi-million dollar loans with annual interest rates of at least 10 percent, and a “balloon” loan charging 12 percent interest.
- Massive capital needs: Ambre needs to raise about $1 billion to bring its coal export plans to fruition.
Ambre, which began operations in 2005, is one of the highest-profile players in the U.S. coal export arena. It is planning two controversial export terminal projects on the Columbia River in Longview, Washington and Port Morrow, Oregon.
But the highly strident coal export debate in the PNW “has largely overlooked a curious fact: Ambre Energy barely qualifies as a coal company. The company’s annual reports reveal that the Australian-based venture has never made a profit, and has virtually no track record in mining or selling coal, either in the U.S. or abroad,” the Sightline report says.
The PNW coal export debate, which is undergoing an extensive environmental review process, is awash in economic uncertainty and questionable projections. “Price signals today do not present the same robust profit scenarios of even six months ago,” says Tom Sanzillo, finance director, Institute for Energy Economics and Financial Analysis. “Port projects and the mining sector that underwrites them were once filled with opportunity and optimism, but now face sobering uncertainty.”
And with one of the major players in the PNW coal export scenario on apparently shaky financial ground and out to make a killing on U.S. coal exports, there is even less reason to go forward with it.
[Image: Coal train 2013 by Gord McKenna via Flickr cc]