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Peabody Latest Earnings Takeaways, Swedish Divestiture, Blowback in India …

October 22, 2014

PeabodyIEEFA’s TIM BUCKLEY AND TOM SANZILLO OFFERED EXTENSIVE COMMENTS today on Peabody Energy Corp.’s poor third-quarter numbers.

Remarks by Buckley, IEEFA’s director of energy finance studies, Australasia, and Sanzillo, IEEFA’s finance director, began circulating early this morning in Australia.

Buckley excerpts:

“Despite spurious claims coal is good for humanity, coal mining is proving disastrous for its shareholders. Peabody shares are down 62 percent over the last two years relative to the S&P 500, which is up more than 30 percent in this same period.”

“This is not a healthy company … These losses are partly due to falling revenue from Peabody’s Australian coal business, reflecting stalling global demand and an increasingly dim investment outlook for fossil fuels.”

“These losses are partly due to falling revenue from Peabody’s Australian coal business, reflecting stalling global demand and an increasingly dim investment outlook for fossil fuels.”

Sanzillo excerpts:

“Peabody’s high-margin Australian holdings traditionally balanced out the company’s high-volume, low-margin U.S. holdings.”

“Neither part of the portfolio is working well. The company—and many other U.S. coal producers—face days of reckoning as year-end financial performance caps off another year where company and industry turnaround promises have failed to materialize.”

“Going forward, the company faces a number of sleeper issues in the U.S. Its much-publicized holdings in the $5 billion Prairie State coal plant continue to falter and the fiscal burden on Midwest communities mount. In addition, Washington officials are completing their review of policies on royalty payments on U.S. coal exports.”

Here’s the full press release.

THE SWEDISH GOVERNMENT’S SECOND AP FUND, which manages long-term pension assets, says it will divest its fossil-fuel holdings, which include 12 coal companies and 8 oil-and-natural-gas companies. The investments total 840 million krona, or about $115 million U.S.

Excerpts from the announcement:

“By not investing in a number of companies, we are reducing our exposure to risk constituted by fossil-fuel based energy. This decision will help to protect the Fund’s long-term return on investment.”

“The majority of the turnover generated by the coal-production companies identified in the Fund’s analysis derives from the sale of thermal coal.”

“These companies face considerable climate-related financial risk, due to the negative environmental and health impacts of coal, which affect demand. Furthermore, coal-powered electricity production is subject to competition from gas and renewable energy.”

Here’s the full announcement.

THE GUARDIAN HAS AN OP-ED OF NOTE THIS WEEK UNDER THE HEADLINE, “Take It From Us in India: the World Needs Renewables, not More Australian Exported Coal.”

The column, by Debi Goenka, a founder of Conservation Action Trust and a prominent voice in the fight against the Indian-owned Adani Carmichael coal mine in Queensland, argues that coal-powered electricity is a poor fit across much of India.


“Coal is not the solution to energy poverty. Local renewable energy is. India’s people are best served by renewable energy sources like wind, solar and small-scale hydropower.”

“Australia’s installed electricity capacity in renewable power generation from 2010 to 2014. These homegrown sources put more people to work lighting Indian homes and powering our economy kilowatt for kilowatt than coal-generated energy.”

“Nowhere is the choice more clear than in rural areas that aren’t connected to a power grid.”

Here the full column by Goenka.

Karl Cates
[email protected]
Twitter @ieefa_institute



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