Asia's coal developers feeling left out by cold shoulder from banks

A worker shovels coal in a supply truck at a yard on the outskirts of Ahmedabad

By Melanie Burton and Fransiska Nangoy

NUSA DUA, Indonesia (Reuters) - Developers of coal mines and coal-fired power plants in Asia are facing difficulties growing their businesses as global financial institutions refuse to back their projects to avoid criticism over climate change, industry participants said on Tuesday.

That is intensifying pressure on an industry struggling to build new markets amid competition from alternative power generation sources, delegates to the Coaltrans conference in Indonesia said.

"Coal power plant financing is very challenging," said Dharma Djojonegoro, Deputy Chief Executive Officer of Indonesia's PT Adaro Power, the power generation unit of the country's second-largest coal miner PT Adaro Energy.

"European banks have said they don't want to finance coal projects for a while, Japanese followed and now Singapore. About 85% of the market now don't want to finance coal power plants," he said.

More than 100 major financial institutions have divested from thermal coal projects by February, along with more than 20 significant insurers, according to the Institute of Energy Economics and Financial Analysis.

"Chinese banks so far are still available, but not all banks, so you have to try them one by one," Djojonegoro added.

Indonesia is planning to add 35 gigawatt of power capacity by 2024 of which 54% will come from coal-fired plants. A majority of financing has been secured for the first phase of development, but not all, said an industry analyst who declined to be named because it was against company policy.

The lack of funding may delay plants in other markets where thermal coal demand is expected to grow, including India and Vietnam, which are depending on low-cost coal-fired power to support their developing manufacturing sectors.

"Certainly for the coal-fired power sector it's already clear there is no investment coming from European banks, U.S. banks, or Australian banks," said Sacha Winzenried, a partner with PricewaterhouseCoopers in Jakarta.

"There still seems to be some interest from Asian banks, China, Japan and Korea to a certain extent, although I believe they are going to start to pull back as well."

Japan’s Mizuho Financial Group Inc and Mitsubishi UFJ Financial Group both said last month they would tighten their financing policies for coal-fired power projects to tackle global climate change.

For miners, the withdrawal of financing is also threatening new thermal coal supply, particularly for smaller companies.

"Banks are increasingly reluctant to fund coal-related projects, especially the new projects. This will be a challenge to supply in the medium term since new projects are having difficulty to get started," said Dileep Srivastava, a director at Bumi Resources, Indonesia's largest coal miner.

(Reporting by Melanie Burton and Fransiska Nangoy; editing by Christian Schmollinger)