Largest Coal Producer in Bankruptcy April 13, 2016

We did not leave the stone age because we ran out of stones.

There was never a war on coal anymore than there was a war on typewriters.

Guardian:

Peabody Energy, the world’s largest privately owned coal producer, has filed for US bankruptcy protection in the wake of a sharp fall in coal prices that left it unable to service a recent debt-fuelled expansion into Australia. The company listed both assets and liabilities in the range of $10bn (£7bn) to $50bn, according to a court filing on Wednesday. Peabody’s chapter 11 bankruptcy filing ranks among the largest in the commodities sector since energy and metals prices began to fall in the middle of 2014 as once fast-growing markets such as China and Brazil began to slow. Peabody’s debt troubles date back to its $5.1bn leveraged buyout of Australia’s Macarthur in 2011, a coveted asset at the time meant to position it as a supplier of metallurgical coal for Asian steel mills. But as demand for metallurgical coal fell, particularly in China, Peabody’s financial woes intensified. It made a $700m writedown on its Australian metallurgical coal assets last year. Producers accounting for about 45% of US coal output have filed for bankruptcy in the current industry downturn, based on 2014 government figures. “This was a difficult decision, but it is the right path forward for Peabody,” the chief executive, Glenn Kellow, said in a statement. “This process enables us to strengthen liquidity and reduce debt, build upon the significant operational achievements we’ve made in recent years and lay the foundation for long-term stability and success in the future.”

Wall Street Journal:

Peabody’s debt troubles date back to its $5.1bn leveraged buyout of Australia’s Macarthur in 2011, a coveted asset at the time meant to position it as a supplier of metallurgical coal for Asian steel mills. But as demand for metallurgical coal fell, particularly in China, Peabody’s financial woes intensified. It made a $700m writedown on its Australian metallurgical coal assets last year. Producers accounting for about 45% of US coal output have filed for bankruptcy in the current industry downturn, based on 2014 government figures. “This was a difficult decision, but it is the right path forward for Peabody,” the chief executive, Glenn Kellow, said in a statement. “This process enables us to strengthen liquidity and reduce debt, build upon the significant operational achievements we’ve made in recent years and lay the foundation for long-term stability and success in the future.”

Washington Post:

“The biggest coal giant has fallen, and Peabody Energy’s bankruptcy should serve as a wake-up call to anyone promising that coal’s glory days will return,’ said Mary Anne Hitt, director of the Sierra Club’s Beyond Coal campaign, in a statement. “As Peabody grapples with the reality that the world is turning away from coal, it’s essential that it doesn’t turn away from its obligations to workers, communities, and the environment.” It is hard to separate the reversals of fortune in the coal industry with a growing push to address climate change — epitomized by the December 2015 Paris climate agreement, a global signal that the world intends to move, over the long term, away from fossil fuels. Yet a more immediate reason appears to be the natural-gas boom, which has brought coal a sudden and cheap competitor long before U.S. climate regulations, in the form of the Clean Power Plan, are scheduled to go into effect.