A special report in The American Prospect examined the tumultuous history of a string of private equity investors in coal-fired power plant Longview Power. The article says, “The coal plant’s roller-coaster history is a testament to the enduring appeal of fossil fuel assets, and to the limits of private equity firms’ ESG investing. At a time when public money managers are divesting from dirty forms of energy like coal, private equity firms are swooping in to pick up the pieces.”
The American Prospect, February 14, 2022: Private Equity’s Favorite Failing Coal Plant
Longview is one example of many coal plants where private equity firms have swept in to squeeze profits out of a declining industry. PESP has examined private equity’s appetite for coal, including examples like the Gavin coal plant owned by Blackstone and Arclight.
The American Prospect reported, “Not only are private equity firms snapping up divested coal assets, they are doing so even when those assets are troubled and unprofitable. These firms don’t have shareholders who can mount an ESG campaign against them, nor do they need to focus on achieving immediate returns.”
The article traces KKR’s venture with Longview, sweeping it up after its first bankruptcy only to lose millions as the plant collapsed under the weight of its debt and declining demand into its second bankruptcy in 2020. PESP reported on KKR’s failed bet on Longview in our 2021 research on the firm’s exposure to risky fossil fuels.
“You have utilities under pressure from ratepayers or state regulators to reduce their carbon footprint, so they sell the assets,” Alyssa Giachino told The American Prospect, a researcher at the Private Equity Stakeholder Project. “So they may sell them on the cheap, and private equity has a hard time turning down cheap deals.” The Longview plant was always a private project, but in many other cases private equity firms have purchased power plants and mines from public entities at cut-rate prices.
“The list of coal plants coming up for retirement or decommissioning grows every year—too slowly, but it’s growing,” Giachino says. “It’s possible that the risk-takers are betting that the few coal plants left are going to have to create more of the burden. It’s a cynical bet that coal is going to keep being in the mix even though it’s to all of our detriment.”