August 11, 2020 Read More →

Peabody $1.42 billion write-off shows coal mines have little value left

The Energy Mix:

The decision by coal giant Peabody Energy to cut the declared value of the United States’ biggest coal mine by US$1.42 billion is an acknowledgement that “thermal coal mines in the U.S. have little value anymore and not much of a future,” the Institute for Energy Economics and Financial Analysis (IEEFA) writes in an assessment of the August 5 announcement.

The decision by the world’s biggest privately-held coal producer reduces the asset value of the North Antelope Rochelle mine in Wyoming’s Powder River Basin by 22%, IEEFA writes. It was the biggest loss the company had ever reported, on a mine that accounted for about 12% of U.S. coal production last year, Bloomberg reports.

Three years ago, Peabody emerged from bankruptcy after offloading about half of its $10.1-billion debt load, IEEFA recalls. At the time, CEO Glenn Kellow claimed the company was “well positioned to create substantial value for shareholders and other stakeholders over time.” Since then, the company’s stock value has fallen from $27.25 on April 4, 2017 to $2.90 on August 5, 2020—a “comeback” that cost shareholders nearly 90% of what they’d invested in the company. 

But while “an orderly retreat would make sense,” adds data analyst Seth Feaster, “the  growing probability is that the collapse of U.S. coal mining will be disorderly, resulting in bankruptcies that end in liquidation, abrupt mine closures, the abandonment of cleanup obligations, and possibly the financial collapse of some bonding companies that are supposed to be the backstop for those liabilities,” as what was once a slow-moving financial catastrophe gains momentum.

[Staff Report]

More: Peabody’s Massive $1.42-Billion Write-Off Shows ‘New Reality In U.S. Coal Mining’

Posted in: IEEFA In the News

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