Recent economic trends, including an abundance of cheaper natural gas, are forcing some energy companies to abandon coal, according to Mike Hicks, director of the Center for Business and Economic Research at Ball State University.
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Peabody also has contributed more than $250 million in the past five years to the Abandoned Mine Land funds to pay for the restoration of lands mined by other companies, Sutton said.
Peabody is the largest privately owned coal mining company in the world, and its bankruptcy is only the latest of its competitors to file for bankruptcy since previous year, joining Alpha Natural Resources Inc., Patriot Coal Corp. and Arch Coal Inc.
One of the largest coal producers in the USA announced it filed for voluntary Chapter 11 bankruptcy protection.
“It is the debtors’ belief that the relief provided by chapter 11 will enable them to continue to restructure their debt and operations while riding out the storm that has beset the coal industry”, Peabody CFO Amy Schwetz said in a court document.
The decision by Peabody is of little surprise to the market, which has predicted the miner’s likely bankruptcy since the start of the year. “We begin today to build a highly successful global leader for tomorrow”, CEO Glenn Kellow said in a statement.
Today, Peabody carries a heavy debt burden. The amount of electricity generated from natural gas in the U.S.is expected to surpass power generated from coal for the first time in 2016, and no new coal-fired power plants are on the drawing board in the U.S. It grew into a juggernaut in the US coal industry, producing coal for customers in 25 countries and employing 7,600 people. Recently, Peabody had been attempting to sell off mines in New Mexico and Colorado in order to stay afloat, but the company’s statement notes that those planned sales have been terminated.
“What we’re seeing is the producers that haven’t undergone some sort of restructuring are actually at a disadvantage as they compete with producers that emerge with cleaner balance sheets and better cost structures”, he said.
In addition to plummeting coal prices, the company cited weakness in China’s economy, overproduction of domestic shale gas and ongoing regulatory challenges as reasons for its declining prospects.
Peabody said it had secured $800 million in bankruptcy financing from a group that includes secured and unsecured creditors to maintain operations.
St. Louis-based Peabody Energy will keep operating mines like Bear Run in Sullivan County, for now. “Peabody has a new management team, outstanding workforce, unmatched asset base and strong underlying operational performance that represent a key driver in the company’s future success”.
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Also, as required under New York Stock Exchange regulations, trading in shares of the company stock on the NYSE is expected to be suspended immediately.
