U.S. publicpower and cooperative utilities have proven they can cope with periods of limitedaccess to capital, but there is growing concern as regulations and policies evolveand the pressure to divest from coal increases, Fitch Ratings noted May 9.
Several majorfinancial institutionsand investors, including the WorldBank, Bank of Americaand Citigroup, have alreadypledged to cease or limit funding new coal-fired plants and coal mining projects,while the EPA's Clean Power Plan has made the development of new coal-fired unitsunlikely, Fitch said.
Recently, theCalifornia Insurance Commissioner called for insurance companies doing businessin the state to divest their thermal coal investments, including utilities thatgenerate 30% or more of the energy they produce using coal, regardless of location,Fitch said. Insurance companies have also been required to disclose related fossilfuel investment risks.
Should similarpolicies and restrictions continue, public power systems could be forced to prematurelyshutter existing units or face significant loss of liquidity, possibly causing ahike in operating and debt service cost, the report said. Though end users are expectedto shoulder the costs, Fitch said this will likely result in weaker financial metricsand flexibility, and downward rating pressure.
Coal's partin U.S. electricity generation has declined to 33% in 2015 from 49% in 2006, andthe downward trend is expected to continue, Fitch said.