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Analysts have long predicted the coal industry would be smaller in the future. On Wednesday, the future arrived.

Peabody Energy’s bankruptcy filing was widely expected. But it capped a dramatic descent for the world’s largest private sector coal company. The St. Louis-based firm was worth $20 billion at its peak in 2011. The company was valued at roughly $37 million on Tuesday, its last day on the New York Stock Exchange.

Peabody’s filing means that roughly 75 percent of the coal mined in Wyoming last year was hauled from the earth by firms now in Chapter 11. And it highlighted the challenges facing this mineral-reliant state.

Some 1,150 Wyomingites labor in two 12-hour shifts at Peabody’s North Antelope Rochelle Mine alone. That figure is down from what it was just weeks ago, when the company laid off 235 people at America’s largest coal mine.

Shipments from Peabody’s U.S. mines are down 31 percent, year-over-year, though March. That means less revenue for state coffers. In 2012, coal accounted for 11 percent of all Wyoming revenues.

And the deterioration of coal company finances raises questions about firms’ ability to reclaim their mines. Peabody has $1.15 billion in unsecured reclamation liabilities, including $728 million in Wyoming. The company’s $800 million debtor-in-possession financing package, which will provide money to help the company operate during bankruptcy, includes $200 million for reclamation.

“Is this the future? The projections are this is,” said Robert Godby, an economics professor who studies power markets at the University of Wyoming. “The foreseeable future is coal is going to decline slowly, but it will still be there.”

Most troubling for the coal industry is that Peabody appeared to secure a lifeline in November, when it announced the $385 million sale of three mines in Colorado and New Mexico to Bowie Resource Partners.

The sale was seen as crucial to Peabody’s efforts to raise money and stay out of bankruptcy, at least through 2016. But Bowie was unable to secure financing to complete the deal and it was terminated.

The failed transaction comes against a backdrop of a financial pullback from the coal industry. JPMorgan Chase, Bank of America, Citigroup and Morgan Stanley, among others, have pledged to end funding for coal projects.

“To me, the biggest long-term issue for the U.S. coal industry right now is: Where do you get the capital to maneuver in the way you should,” said Jim Thompson, who heads North American coal research at IHS Energy, a consultancy.

Peabody now follows what has become a well-worn script for Wyoming coal companies. Like Alpha Natural Resources and Arch Coal, which filed for Chapter 11 protection in recent months, Peabody cited decreased demand and weak prices for the decline in its financial health.

Chinese demand for metallurgical steel waned. Cheap natural gas ate into the domestic power generation market. And more stringent environmental regulations squeezed the company further.

“This convergence — of marked reductions in volume and pricing — substantially impacted the company’s revenues and cash flows,” said Amy Schwetz, Peabody Chief Financial Officer in a filing with the U.S. Bankruptcy Court for the Eastern District of Missouri.

Like Arch and Alpha, Peabody will try and attempt to restructure its debts, which stand at slightly more than $10.1 billion. Work will continue at its mines as it navigates Chapter 11 proceedings.

Unlike Alpha, Peabody said it did not anticipate any changes to retiree benefits.

Peabody’s steps will likely strengthen the company in the future, analysts said. The miner could no longer shoulder a substantial debt in a world where natural gas prices are below $2.75 per million British Thermal Units — the price where Powder River Basin coal becomes competitive — or where Chinese demand for metallurgical coal had faltered.

A reorganized company has a better chance at prospering, they noted.

“It’s like having a really bad toothache and having to go to the dentist,” Thompson said. “No one looks forward to going to the dentist, but sometimes events intervene and you say, ‘I can’t deal with the pain.’ That’s how you get it fixed.”

As the lowest-cost coal basin in the country, Powder River Basin will remain an important player in the country’s energy mix in the years to come, he predicted.

But in the meantime Wyoming is likely to feel more pain. Western coal production is projected to fall by 17 percent in 2016, according to the U.S. Energy Information Administration.

If that projection is true, mining firms would need to slash their payrolls by 1,000 this year to maintain healthy employee production ratios, Godby said. Roughly 500 jobs have already been shed thus far in 2016.

“We went through pretty much an unfettered growth stage from the 1970s to 2011. Since 2011 we’ve seen a downward trend that, if anything, has accelerated,” Godby said. “That’s the new reality.”

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Follow energy reporter Benjamin Storrow on Twitter @bstorrow.


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