Largest Coal Producer in Bankruptcy

April 13, 2016

stones2

We did not leave the stone age because we ran out of stones.

There was never a war on coal anymore than there was a war on typewriters.

Guardian:

Peabody Energy, the world’s largest privately owned coal producer, has filed for US bankruptcy protection in the wake of a sharp fall in coal prices that left it unable to service a recent debt-fuelled expansion into Australia.

The company listed both assets and liabilities in the range of $10bn (£7bn) to $50bn, according to a court filing on Wednesday.

Peabody’s chapter 11 bankruptcy filing ranks among the largest in the commodities sector since energy and metals prices began to fall in the middle of 2014 as once fast-growing markets such as China and Brazil began to slow.

Peabody’s debt troubles date back to its $5.1bn leveraged buyout of Australia’s Macarthur in 2011, a coveted asset at the time meant to position it as a supplier of metallurgical coal for Asian steel mills.

But as demand for metallurgical coal fell, particularly in China, Peabody’s financial woes intensified. It made a $700m writedown on its Australian metallurgical coal assets last year.

Producers accounting for about 45% of US coal output have filed for bankruptcy in the current industry downturn, based on 2014 government figures.

“This was a difficult decision, but it is the right path forward for Peabody,” the chief executive, Glenn Kellow, said in a statement. “This process enables us to strengthen liquidity and reduce debt, build upon the significant operational achievements we’ve made in recent years and lay the foundation for long-term stability and success in the future.”

Wall Street Journal:

Peabody’s debt troubles date back to its $5.1bn leveraged buyout of Australia’s Macarthur in 2011, a coveted asset at the time meant to position it as a supplier of metallurgical coal for Asian steel mills.

But as demand for metallurgical coal fell, particularly in China, Peabody’s financial woes intensified. It made a $700m writedown on its Australian metallurgical coal assets last year.

Producers accounting for about 45% of US coal output have filed for bankruptcy in the current industry downturn, based on 2014 government figures.

“This was a difficult decision, but it is the right path forward for Peabody,” the chief executive, Glenn Kellow, said in a statement. “This process enables us to strengthen liquidity and reduce debt, build upon the significant operational achievements we’ve made in recent years and lay the foundation for long-term stability and success in the future.”

Washington Post:

“The biggest coal giant has fallen, and Peabody Energy’s bankruptcy should serve as a wake-up call to anyone promising that coal’s glory days will return,’ said Mary Anne Hitt, director of the Sierra Club’s Beyond Coal campaign, in a statement. “As Peabody grapples with the reality that the world is turning away from coal, it’s essential that it doesn’t turn away from its obligations to workers, communities, and the environment.”

It is hard to separate the reversals of fortune in the coal industry with a growing push to address climate change — epitomized by the December 2015 Paris climate agreement, a global signal that the world intends to move, over the long term, away from fossil fuels. Yet a more immediate reason appears to be the natural-gas boom, which has brought coal a sudden and cheap competitor long before U.S. climate regulations, in the form of the Clean Power Plan, are scheduled to go into effect.

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17 Responses to “Largest Coal Producer in Bankruptcy”

  1. Gary Evans Says:

    How come they didn’t see a downturn in the Chinese economy coming? Bad business management.

    And to think that the coal industry awarded the CEO of Peabody Coal a prize for sustainability in 2015:

    http://www.aims.rwth-aachen.de/wp-content/uploads/2015/01/Coal-International-Nov_Dec_2015.pdf

    • dumboldguy Says:

      How come they didn’t see the bursting of the dot.com bubble the real estate bubble, the beanie baby bubble, or the tulip bubble (way back in 1637)? That’s just a few of the “downturns” that “they” missed, “they” being the economists that “forecast nine of the last five recessions”.

      It’s not so much bad business management as the fact that economics is bad science that is not based in fact but in “projections”. The myriad of jokes about economics and economists is proof of that.

      Q: Why has astrology been invented?
      A: So that economics could be an accurate science.

      Q: Why did God create economists?
      A: In order to make weather forecasters look good.

      And the awarding of a prize to a coal CEO by the coal industry is not surprising. Those who live in a delusional world do such things to maintain the delusion. Kind of like a herd of pigs giving an annual award to the best flyer among them.

      • markle2k Says:

        “And the awarding of a prize to a coal CEO by the coal industry is not surprising. Those who live in a delusional world do such things to maintain the delusion. Kind of like a herd of pigs giving an annual award to the best flyer among them.”

        An ultimately posthumous award.

  2. pendantry Says:

    This is excellent news.

    Meanwhile…

    There was never a war on coal anymore than there was a war on typewriters.

    Wait, there has been a war on typewriters, maybe you missed it. The free market fundamentalists continue to maintain that QWERTY must be superior to Dvorak because the latter hasn’t superseded the former (spot the circular argument). Their ideology won’t allow them to accept — nor even see — an anti-competitive concept such as ‘product inertia’. I have little doubt that this blindness will result in serious thrashing around by the fossoil beast as it fails to admit its inevitable end. Witness the positive words of Peabody’s chief executive: clearly, ‘bankruptcy’ isn’t synonymous with ‘the end of the line’ in his reality.

  3. Magma Says:

    This shouldn’t be left in a vacuum; three of the top four U.S. coal mining companies have failed in the past year. The following companies (ranked in order of size and with their percentage of 2014 U.S. coal production shown) have filed for bankruptcy protection over the past year.

    1 Peabody Energy Corp 19.0%
    2 Arch Coal Inc 13.6%
    4 Alpha Natural Resources 8.0%
    12 Patriot Coal Corporation 2.0%
    17 Walter Energy Incorporated 0.9%

    Not exactly the signature of a healthy industry.

  4. dumboldguy Says:

    Although this appears twice in the post, it won’t hurt to repeat it again to demonstrate how delusional the coal folks are—-“This process enables us to….build upon the significant operational achievements we’ve made in recent years and lay the foundation for long-term stability and success in the future.”

    Operational achievements?? Lay the foundation for long-term stability and success in the future???

    Words fail me.

    • markle2k Says:

      Down in the WaPo comments there’s a guy who is predicting the Phoenix-like rise of “King Coal” when the shale gas revolution peters out… in a couple decades.

  5. skeptictmac57 Says:

    Well, at least here in the U.S. we still have our Fahrenheit scale. I can feel pretty comfortable at 75F, but I would be very chilly at 24C. 😉

    • SmarterThanYourAverageBear Says:

      It’s going to be 21C here to morrow – guess I better get my fur coat and mukluks out 😉

  6. webej Says:

    Unmentioned is the fate of the coal-miners’ pensions. This is one of the liabilities they will try to shed.

    • Lionel Smith Says:

      Coal miners pensions, sadly yes but many financial institutions that service pensions on a global scale will take a hit.

      I hear that the futures in wheelbarrows (a la Weimar) will be looking good with guillotines being favoured not long after when the people choke on the PR cake.

    • Andy Lee Robinson Says:

      not to mention climate reparations to humanity and the natural world, and restoration of the barren wastelands they left behind.


  7. Note that in that current Indian Heatwave and drought, major coal fired generators had to be shut down for lack of water from the Ganges.
    Happened also in Europe last heatwave

    A red flag for all thermal power generation including gas, and nuclear.

    India is going Solar, 2 new plants are cheaper than coal with imort costs factored in.
    Not looking good for ADANI

  8. indy222 Says:

    Pardon me while I have a good long cry over their sad, sad financial situ- OK, I’m done.


  9. Oh common,

    I think we STILL use stones, a LOT of stones… (this is not the defense that we should use coal)…

    best,

    Alex


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