Cloud Peak Energy executives won’t have to wait for bonuses from their troubled coal company.
The Wyoming firm, one of the state’s largest producers of coal, announced Tuesday that it was ditching gradually-paid retention plans agreed upon in November in favor of lump-sum payments to entice its executive team to stay.
Cloud Peak has rapidly become one of the most vulnerable large players in Wyoming’s Powder River Basin. The employer of nearly 1,000 workers at two Wyoming mines is currently at risk of being delisted from the New York Stock Exchange for sustained low stock prices. One of its recent cost-cutting measures included ending retiree health benefits.
The Gillette-based firm has noted that it is considering multiple options for its future as it struggles to survive in what has become a gradually narrowing market for thermal coal in the United States. The company also carries significant debt.
In addition to an accelerated bonus schedule for executives, Cloud Peak announced Tuesday that it had hired new advisers to explore its options, including a potential sale. The financial advisers chosen by the company, FTI Consulting and investment bank Centerview Partners LLC, are both retained by Westmoreland, the bankrupt coal firm attempting to sell its western mines, including the Kemmerer mine in Wyoming.
A spokesman for Cloud Peak declined to comment on the executive bonuses.
Clark Williams-Derry, a financial adviser for the Sightline Institute – which advocates for a move away from fossil fuels — said Cloud Peak’s announcements Tuesday may signal that leadership doesn’t expect to exist long enough to collect the previous long-term retention bonuses. He was critical of the shifting of incomes toward management considering the company’s likely path.
“Here is a company that is probably going wind up stiffing its investors,” he said. “It’s going to do it’s best to divest itself of its legacy liabilities, while heaping money on the executives.”
The new payments for Cloud Peak executives replace long-term incentive plans and bonuses.
CEO Colin Marshall, for example, will receive a bonus of 150 percent his annual base salary. Chief Financial Officer Heath Hill, Chief Operating Officer Bruce Jones and the general counsel, Bryan Pechersky, will receive bonuses of 115 percent of their salary. Two other executives will receive bonuses equal to 100 percent of their base salary.
Cloud Peak owns the Cordero Rojo and Antelope mines in Wyoming as well as one coal operation in Montana. The Wyoming mines employed 959 people as of December.
Unlike other large players in Wyoming coal country, Cloud Peak did not file for bankruptcy during the coal downturn of 2015 and 2016. The firm had taken on less debt than some of its larger competitors like Arch Coal and Peabody Energy. It survived the downturn, but did not reap the benefit other players in the basin found by stripping away debt via bankruptcy.
Cloud Peak made a number of painful financial decisions, including refinancing and taking on high interest rates that stripped away cash flow. The company’s problems today, which exist against the backdrop of a troubled coal market, are rooted in taking on debt at high interest rates, Williams-Derry said.
“If you are in an ailing industry and you’ve got a lot of debt, there are only so many financial tricks that you can try,” he said.
Cloud Peak has kicked the can down the road until its run out of road, he said.
The difficult coal market has not escaped the notice of nervous Wyoming lawmakers. The industry is a bedrock for the state economy as well as local economies.
A bill currently proposed in the Legislature would cut coal company tax labilities due to the industry’s weakness and its importance in the state.