Geo Energy Group

Coal is powering the energy transition more than we’d like to admit https://lnkd.in/gb7qMJP2

Data Centers to Boost Coal Demand, Benefiting Miners: Moody's In a recent report, Moody’s Investors Service highlighted the potential for data centers to significantly extend the coal demand, thereby benefiting miners. As the world increasingly relies on data centers to power its digital infrastructure, the growing energy consumption associated with these facilities is expected to drive a sustained increase in coal consumption. The growing demand for data centers is expected to significantly impact the coal mining industry. While the increased use of coal to power data centers raises concerns about environmental impacts, the economic benefits to coal miners will likely outweigh these concerns in the short term. As the world continues to become more digital, the demand for data centers will likely grow, further driving demand for coal. Https://https://lnkd.in/gAfedtKW

China’s Coal Imports Jumped to a Record High in September Chinese imports of coal surged to a monthly high in September, driven by increased consumption and falling international coal prices. China imported last month a total of 47.59 million metric tons of coal, a 13% increase from September 2023, data from the country’s General Administration of Customs showed on Monday. Coal-fired power generation has returned to growth in China in recent weeks, while coal demand from the chemicals sector has also been boosting consumption, analysts have told Reuters. Amid increasing demand and a drop in international prices, China imported the record-high volume of coal in September as foreign supply was cheaper than domestically mined coal. The Asian benchmark of coal prices, at Newcastle in Australia, were falling for most of last month. The lowest level in September, at $136.46 per metric ton on September 23, was a 7% decline from the August high of $147.13 per ton, according to Reuters’s estimates. China saw in August the first increase in coal-fired power generation in four months as coal remains a vital part of the system despite soaring output from clean energy sources and a growing share of renewables in the electricity mix. China’s electricity output from thermal sources – which are predominantly coal-fired – increased by 3.7% in August compared to the same month last year, according to official Chinese data cited by Reuters columnist Clyde Russell. While China is pursuing rapid expansion of its renewable energy capacity, it isn’t ditching coal. The world’s second-largest economy leads in global renewable investments and installations and has a dominant role in many of the clean energy supply chains, including solar equipment, lithium processing, and mining and processing of other critical battery metals. But China also continues to expand its coal-fired power fleet as its electricity demand grows, to ensure energy security and stable electricity supply, especially in peak demand periods. https://lnkd.in/gXkgMqHv

KGI: Company Update: Geo Energy Resources Ltd We maintain an OUTPERFORM rating with a target price of S$0.68, based on a discounted cash flow (DCF) valuation using a weighted average cost of capital (WACC) of 13.5%. Navigating challenges with strategic investments. Dividend policy holds firm despite market challenges. Geo Energy reported a 14% YoY decline in net profit to US$24.2mn for 1H24, primarily due to a reduction in coal prices. Despite this, the company maintained its commitment to shareholders by declaring an interim dividend of S$0.002 per share, representing a payout ratio of 11.4%. Production volumes totaled 2.8 Mt, mainly from the SDJ and TBR mines, while the TRA mine contributed 0.3 Mt. Stable coal sales of 3.2 Mt and a resilient cost model supported a healthy cash profit margin of 23%. Accelerated growth through infrastructure investment and diversification Geo Energy recently signed a US$150mn EPC contract with CCCC First Harbor Consultants and Norinco International Cooperation to develop a 92 km hauling road and jetty in South Sumatera and Jambi Province, Indonesia. This infrastructure will boost PT Triaryani (TRA) mine’s transport capacity to 40-50 Mt per year, with 25 Mt allocated for TRA. The project’s deferred payment mechanism minimizes upfront cash outlay, allowing the infrastructure to generate revenue before payments begin. Upon completion in early 2026, not only will this development scale up production to 25 Mt annually but also it results in significant logistical cost savings, potentially generating US$400-500 mn in annual EBITDA. The project also diversifies Geo Energy’s revenue stream as an infrastructure provider. 1H24 financials update: Navigating price pressures with cost efficiency Despite maintaining stable coal sales of 3.2 Mt in 1H24, Geo Energy’s revenue declined by 29% YoY to US$169.4mn, primarily due to lower ICI4 coal prices, averaging US$56.13 per tonne compared to US$70.46 in 1H23. Higher general and administrative expenses of US$6.2mn and finance costs amounting to US$9.9mn also impacted its financials, following the acquisition of PT Golden Eagle Energy Tbk. Production was adversely affected by unfavorable weather conditions in the first half of the year. However, cash profit per tonne remained robust at US$11.94, reflecting its cost-efficient model where cash costs decrease in line with lower ICI4 prices. Geo Energy declared a second interim dividend of S$0.002 per share, matching the 1Q24 dividend and representing an 11.4% payout ratio, and remains committed to assessing its year-end performance for final dividend declaration. Risks Global coal price volatility, evolving energy landscapes, weather uncertainties, and potential execution risks affecting production. https://lnkd.in/eN2gR2u3

India’s coal imports rise to 90.5 MT amid surge in power demand India's coal imports during the April-July period of the current fiscal (FY25) increased 0.9% to reach 90.51 million tonnes (mt) compared with 89.68mt in same period last fiscal, the coal ministry said on Wednesday. https://lnkd.in/gPRvVqzj

Coal's Resurgence Challenges Global Energy Transition Global coal consumption and production hit record levels in 2023, with China leading the way in both consumption and production. The Asia-Pacific region, particularly China and India, is driving the surge in coal demand, offsetting declines in other regions. Despite efforts to transition to cleaner energy sources, coal remains a dominant player in the global energy mix, raising concerns about climate change and environmental impact. https://lnkd.in/ggvMpmVc

Southeast Asia steps up coal imports South-East Asia, with countries such as Vietnam and the Philippines, should see its coal imports grow, while Chinese demand stabilizes. According to the Indonesian Coal Miners Association (ICMA), coal imports from China and India could  peak by 2025, marking a turning point for the global market. Against this backdrop, Southeast Asian countries are becoming increasingly attractive markets for exporters. Coal imports from these countries are set to grow at an average annual rate of almost 3%, reaching 170.9 million metric tons in 2030, compared with 140.9 million tons in 2023. Vietnam, in particular, stands out for its growing need for electricity, which stimulates demand for coal. Vietnam and the Philippines: Key markets in evolution Vietnam, under the management of state-owned Vinacomin, plans to import 66 million tonnes of coal by the end of the year, up from 47.8 million tonnes in 2023. The company anticipates a peak in imports by 2035 of 86 million tonnes per year, mainly to power its power plants. The Philippines is following a similar trend, with a 7.6% increase in imports in the first eight months of 2024. Increased coal consumption does not necessarily imply an expansion of installed coal-fired power plant capacity. Countries such as Malaysia and Indonesia are focusing on making greater use of existing infrastructure to meet electricity demand. In Malaysia, data centers and other industrial sectors are notable drivers of coal consumption. China and India Keep Consumption High Thermal coal imports into China could rise by 6.3% in 2024 to 391 million tonnes. In India, import growth forecasts also remain at high levels, underpinned by constant energy needs. Asia’s coal market is therefore at a crossroads, with new players rising to prominence while the world’s biggest consumers stabilize their demand. This dynamic offers opportunities for exporters to redirect their commercial strategies towards new growth markets, while maintaining significant volumes to China and India. Outlook for Coal Exporters The situation in Southeast Asia shows continued interest in coal as an energy source, not least for its ability to provide affordable power. In Indonesia, the young power plant infrastructure suggests stable long-term demand. Nickel processing plants, which play a role in the electric vehicle industry, also contribute to coal consumption for power generation. Low levels of renewable energy integration in Malaysia, the Philippines and Indonesia indicate that coal will remain a key component of their energy mix. International discussions on financing the energy transition, including the phasing out of coal-fired power plants, have not yet led to concrete action. This is holding back rapid changeover to other energy sources. https://lnkd.in/gnw9tvDK

China's August coal output up on more power, chemical demand China's coal output rose 2.8% in August from a year earlier, statistics bureau data showed on Saturday, on higher thermal power generation and robust chemical industry demand. The world's largest coal producer mined 396.55 million metric tons of the fuel last month, according to the National Bureau of Statistics data on Saturday. That was also up from July's 390.37 million tons. July was the hottest month on record for China, and the heat waves continued into August, driving up power demand as homes and businesses turned on their air conditioning. Along with moderating hydropower output, that pushed China's thermal power generation back to growth last month. Thermal power generation, which is mostly from coal in China, rose 3.7% from a year ago to 614.9 billion kilowatt-hours (kWh). Hydropower output rose 10.7%, compared with July's 36.2% growth. In addition to the power sector, demand from the coal-to-chemicals industry is robust according to analysts. Limited by safety inspections earlier in the year, output for the period from January to August fell 0.3% from the year earlier to 3.05 billion tons, the statistics bureau data showed. https://lnkd.in/gtvvsWjQ

GEO Energy: Insider Purchases Mr Philip Hendry, Group Chief Operating Officer - 500,000 shares Mr Adam Tan Sheng Hua, Group Chief Financial Officer - 50,000 shares Mr Lu King Seng, Business Development Director - 50,000 shares The above ordinary share purchases, by the Group’s key management, were independently undertaken on 10 September 2024 at S$0.24 per share via market transactions. https://lnkd.in/gXgrF_C7

China has more than 1 billion tons/year of new coal mines in pipeline: report CHINA accounts for more than half of the world’s pipeline of new coal mines, risking a significant increase in methane emissions, a new study published on Tuesday showed. China is developing enough new mines to produce 1.28 billion metric tons of coal each year, said the report by US-based Global Energy Monitor (GEM) which included large mines with at least 1 million tons of annual capacity as of April. It said 35 per cent of that capacity is already under construction, meaning a surge in production is expected in three to five years. “Expanding coal production capacity is currently a national policy priority and a political task. State-owned enterprises, which dominate the sector, are often mandated to fulfil this objective,” said GEM project manager Dorothy Mei. China’s system of long-term contracts guarantees the profitability of coal companies, Mei added. China’s existing mines have made it responsible for 70 per cent of global coal mine methane emissions from similar sized large mines, and if all the proposed projects are completed, this would rise to 75 per cent, the report said. “The surge in new production starkly contrasts with China’s dual carbon neutrality targets,” it said. Methane emissions come from activities such as energy production, agriculture, and landfill and are short-lived in the atmosphere but much more potent than carbon dioxide as a greenhouse gas. They have driven about a third of the rise in global temperatures since the Industrial Revolution. China’s pipeline accounts for more than half of mines under development globally, and includes projects under all stages of development, including those proposed, permitted as well as already under construction. By comparison, China’s existing current large-scale coal mine capacity is 3.88 billion tons per year, the report found, which is nearly half the global total. China, the world’s largest producer and consumer of the fossil fuel, mined a total 4.66 billion tons of coal in 2023, a record high, data from its statistics bureau showed. REUTERS https://lnkd.in/eUzmA-Pe