Is the Smart Money Bailing on Northwest Coal Exports? Goldman Sachs Sells Stake in SSA Marine

Wed, 2014-01-08 09:12Guest
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Is the Smart Money Bailing on Northwest Coal Exports? Goldman Sachs Sells Stake in SSA Marine

This is a guest post by Eric de Place, originally published at Sightline Daily.

The news is everywhere: finance titan Goldman Sachs is selling off its stake in SSA Marine, the would-be coal exporter of Whatcom County. (To be precise, Goldman Sachs Infrastructure Partners, a subsidiary of the big firm, is selling its stake in FRS Capital Corp and Carrix, the parent companies that house SSA.) Many see the move as a major bet against the economic viability of Northwest coal export schemes.

Though it is important to remember that SSA Marine is a big company with a range of port terminal holdings around the globe, there is evidence for believing that the sale is connected to worries about coal.

As usual, Crosscut’s Floyd McKay has some of the best coverage:

Goldman Sachs last July posted a warning for investors that coal exports would decline in future years. Tuesday’s announcement prompted a prominent coal opponent, Crina Hoyer of ReSources for Sustainable Communities, to say, “Goldman Sachs’ stepping away from coal export is yet another sign from Wall Street that coal export is a losing investment.”

Just as interesting as Goldman bailing out is that a billionaire Mexican investor, Fernando Chico Pardo, is stepping up to buy the 49 percent equity stake Goldman is unloading. Pardo is a longtime partner of oligarch Carlos Slim, one of the richest people on earth and the dominant player in numerous economic sectors of Mexico.

 

At this point, no one really knows why Goldman is taking its leave, though it seems reasonable to conclude that Wall Street no longer sees SSA Marine providing a sufficient return on investment, or that Goldman is concerned about affiliating with the politics of dirty coal, or some combination of both.

As McKay explains:

Goldman may have become impatient with the length of proceedings to secure permits for the $664 million project; intense public opposition, particularly along the thousand-mile rail line from Wyoming, has caused public agencies to call for an intense and lengthy environmental review. Additionally, November’s election in Whatcom County put a new majority on the county’s governing board that is at least skeptical of the coal port and certain to pose detailed questions when asked to approve permits.

Regardless, it is important to keep in mind what Goldman Sachs' departure really means for the Gateway Pacific coal terminal and SSA Marine. It is not a knockout punch. If anything, it’s more like taping a “kick me” sign to it—a signal that the smart money on Wall Street doesn’t think very highly of the firm.

Yet at the same time, Pardo will bring an infusion of new capital that very well may bolster the firm’s operations. And as a longtime major player in the Mexican economy (who has occasionally been dogged by allegations of wrongdoing), he may well be more inured to public criticism of his investments than was Goldman Sachs.

Like other coal export proposals, there is little doubt at this point that Gateway Pacific is facing a series of hurdles, any one of which could bump the project out of the running. It is reasonable to think that Goldman’s departure is, at minimum, an indication that Wall Street is losing confidence that Whatcom County will host a profitable coal terminal.

- by Eric de Place, Sightline Institute

Image credit: Coal loading terminal via Shutterstock.

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Oil by rail

In 2009, Matt Taibbi wrote a piece in Rolling Stone in which he described the investment bank Goldman Sachs as “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” 

Apparently tar sands oil smells like money. And thus the vampire squid has found another target. As Reuters reported on August 29:

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