Wyoming’s Cloud Peak Energy, one of the state’s largest coal producers, eliminated 15 salaried positions last week including most of its government affairs team, the company confirmed Monday to the Star-Tribune.
All affected employees were offered severance packages.
The Gillette-based firm owns the Antelope and Cordero Rojo mines in Campbell County, the nonoperational Youngs Creek mine in Sheridan County and the Spring Creek mine in Montana. It has struggled more than some of the other large coal producers in Wyoming to face the narrowing coal market since the downturn due, in part, to debt.
In a note sent to employees last week, the company explained that the reduction of positions was in response to challenges in the current coal market, noting the company’s recent decision to hire advisers who will considers options for Cloud Peak’s immediate future, like selling the firm.
“This reduction is part of our ongoing efforts to adjust our company to challenging industry conditions and the smaller size of our business,” the note states. “Along with our recently announced engagement of outside advisers, we believe these steps — although difficult — are necessary to help position our company for the future.”
The cuts will reduce the company’s government affairs activities — lobbying efforts from Cheyenne to D.C. — and eliminate most of the expenses in that department. Public affairs positions will be reduced, with remaining staff focused on local operations, according to the note.
Cloud Peak’s employee political action committee will be closed soon “as the remaining funds are contributed,” the note states.
The company’s press office did not immediately comment on emailed questions asking for more details on the layoffs.
Layoffs at Cloud Peak are not the first sign of distress from the firm. Cloud Peak’s Altman Z-score, a rating used to determine risk of bankruptcy, is in the distress zone. In November, the company announced that it would lighten its balance sheet by cutting retired employees’ health care benefits. Late that month, the company announced it had hired consultants to consider a range of options for the company’s future, including sale. By December, the New York Stock Exchange had warned the firm that its consistently low stock price would result in a delisting if not improved. Most recently, the company eliminated corporate bonuses that were to be paid out over a period of years and replaced them with lump-sum retention payments to be handed out immediately.
Cloud Peak was the only large publicly traded coal firm in Wyoming that did not buckle during the coal downturn. Unlike neighbors Peabody Energy, Alpha Natural Resources and Arch Coal, Cloud Peak had not invested in the metallurgical coal boom that busted in 2015. But while it had not gotten itself into that particular trouble, Cloud Peak did not then benefit from the balance sheet cleansing of bankruptcy. It held on to its debt.
The ongoing pressures on Cloud Peak, and others in the coal industry, are the reduced number of customers to buy their coal, cheap competition in the power sector from natural gas and renewables, and the near-elimination of the long-term coal contracts with the power industry that producers once depended on.
A record number of coal-fired power plant closures occurred in 2015, with last year recording the second-highest number of retirements. A number of the plant closures in recent years had been recent buyers of Cloud Peak’s coal, including two Texas plants that announced closure in 2017, and a large coal-fired plant in Wisconsin that closed the same year.