February 23, 2018 Read More →

Peabody Concedes Era of U.S. Coal Growth Is Over

S&P Global Market Intelligence:

Peabody Energy Corp. is touting a global pure-play coal investment strategy, but the pitch includes an expectation for no new significant greenfield development in the U.S. as the company meets customer demands with existing mines and reserves.

Peabody expects the recent decline in coal use and share of electricity generation in the U.S. to slow as gas prices begin to stabilize over the next five years, Peabody wrote in a Feb. 22 presentation to investors. The company still expects about 40 GW of coal-fired power to be retired over the next five years, driving an average decline in demand of 15 million to 20 million tons per year over each of the next five years.

While Peabody believes that its operations are some of the best-positioned to compete with low-cost natural gas, it also said in a presentation outlining its 2018 priorities that it will “likely avoid significant greenfield development” within the United States while managing life extensions for certain Australian projects.

Other producers may also be hesitant to make significant investments in new thermal coal projects beyond their existing assets in the U.S. as power plant customers continue to retire and the nation’s coal fleet ages.

“We may be seeing [Powder River Basin] mines enter a state of terminal decline, where volume growth is not possible on the current seams without massive investment and/or expansion into new reserves,” said Steve Piper, director of energy research for S&P Global Market Intelligence. “But as we saw last year, none of the producers seem eager to acquire new leases because they don’t have faith the market will be there.”

More ($): Nation’s largest coal miner will likely avoid major greenfield projects in US

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