September 30, 2020 Read More →

Judge rejects Peabody, Arch plan for coal mining joint venture in Powder River Basin

Wyoming Public Media:

A federal judge has ruled against a proposed joint venture between the two largest coal producers in the nation. District Judge Sarah Pitlyk found that consolidating seven of Arch Resources Inc. and Peabody Energy Corp’s mines in the Powder River Basin and Colorado wouldn’t bode well for the region’s market.

The move leaves questions for future consolidation in the Powder River Basin, and Arch Resources which has taken steps to move away from thermal markets.

The court decision comes in support of a previous complaint made by the Federal Trade Commission last February. “The FTC has shown that there is a reasonable probability that the proposed joint venture will substantially impair competition in the market for Southern Powder River Basin coal and that the equities weigh in favor of injunctive relief,” Pitlyk wrote.

The companies won’t appeal the federal court’s decision given the significant investment required.

In June of 2019, Peabody and Arch announced their intent of joining forces in hopes of saving $820 million over the course of a decade. The goal was to adjust as coal markets continued to struggle against increasingly competitive natural gas and renewables. Under the plan, Peabody would have become the majority of the economic interest. In a presentation, Arch said it would use its thermal revenue to fund its metallurgical investments. The company officially changed their name from Arch Coal to Arch Resources in May.

Benjamin Nelson, VP Senior Credit Officer and lead coal analyst at Moody’s Investors Service said, “We expect the Powder River Basin coal production region will remain under significant pressure in 2021 and at least a few coal mines in the region could close in the early 2020s.”

[Cooper McKim]

More: Cost-cutting coal venture rejected, leaves questions for PRB competition

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