Miller/Howard Investments
Miller/Howard Commentary
Trump's Impact on Financial Policy: How does "America First" impact your portfolio?
Part 3: Coal Will Continue to Decline, Regardless of Politics
Michael Roomberg, CFA, Portfolio Manager/Research Analyst
Part 1: A Review of the Markets Since Election Day
Part 2: Our Views on Oil and Gas Industry Regulation
Part 3: Coal Will Continue to Decline, Regardless of Politics
Part 4: LNG Exports Provide Trade and Job Growth Opportunities
Part 5: Outlook on Automation, Geopolitics, and Energy


Nathan Dean: Michael, when Donald Trump announced they were going to pull out of the Paris Accord, I read some reports from energy analysts saying it may not be that big of a deal on the coal industry. Can you give us your outlook of this mentality, and does it have an impact?

Michael Roomberg: There's not a single analyst on Wall Street that's changed, even a rounding error of a number, in relation to their forecast for the expectation for coal, oil, and gas as a result of pulling out of the agreement. I think, to Henry's point, it is more about a global leadership issue.

To speaking to coal, I've said this in the past. At current gas prices, clean coal is a fiction. There's one plant that's being built right now by Southern Company, called the Kemper Plant. And that plant is three years, I'm sorry, six years into a three-year construction project. It's three billion dollars over-budget, and can't make any money at sub-five dollar natural gas prices. Well, natural gas prices haven't been above five dollars in 10 years. So the wisdom of going back in that direction seems pretty misguided, in our opinion.

If you just look from a jobs perspective, a policy perspective, there's three and a half times more people employed in the oil and gas industry than there are in the coal industry. In fact, there's 50,000 people employed in coal. There's about 70,000 employed at Arby's. So the ranking of coal in the continuum of importance is, I think, is probably going to decline. If we think about, most of these things, most of the decisions, are made at the state level. And so, the regulators at the state level all have their own individual objectives, and it's unlikely that they're going to comport with the federal government's policy. But at the end of the day, I think that no investor is going to put a large capital investment that may have a seven to 10 year payback period, simple cash on cash return, in a coal plant when you have an administration that, at its longest, is only going to be here for seven years. So I just don't see that as being a major factor.


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