Peabody Energy Corp., the U.S.’s biggest coal miner, Wednesday posted a going-concern notice in a regulatory filing, warning of possible bankruptcy.
A chapter 11 filing by Peabody, which operates 26 mines in the U.S. and Australia, would be the latest in a wave of bankruptcies to hit top American coal producers, including Arch Coal Inc., Alpha Natural Resources, Inc., Patriot Coal Corp. and Walter Energy, Inc., as they wrestle with low energy prices, new regulations, and the conversion of coal-fired power plants to natural gas.
Punctuating Peabody’s woes, the Energy Information Administration Wednesday said that 2016 “will be the first year that natural gas-fired generation exceeds coal generation.”
The EIA said Americans would get 33% of their electricity from gas in 2016, and 32% from coal. As recently as 2008, coal fed half of U.S. electricity consumption.
The weakening demand is hurting markets. Coal prices have fallen 62% since 2011, and 18% in the past year, according to the EIA.
That drop is crushing companies like Peabody. The company has now lost money in nine straight quarters, and in 2015 posted a $2 billion deficit. As of Dec. 31, it had $6.3 billion in debt and $261.3 million in cash. Peabody, whose biggest mining operations are in Wyoming, has also been weighed down by its ill-timed acquisition of Australia’s Macarthur Coal Ltd. for $5.1 billion in 2011. Prices have been declining ever since.
Company shares, which have already lost more 95% of their value in the past 12 months, fell 44% in midday trading. Peabody’s share price has fallen to under $2.50 from more than $1,300 in 2008.
On Wednesday, Peabody pointed to uncertainty around global coal fundamentals, economic growth concerns of some major coal-importing nations and the potential for additional regulatory requirements on coal producers as reasons for its notice.
Because of operating problems and other financial problems, “we may not have sufficient liquidity to sustain operations and to continue as a going concern,” the St. Louis-based miner said in a filing with the SEC. “We may need to voluntarily seek protection under chapter 11 of the U.S. bankruptcy code.”
Peabody said it had delayed an interest-rate payment on two loans, triggering a 30-day grace period. If the payments aren’t made within 30 days, an event of default would be declared.
The company also said it expects that a metric of profitability will fall below a contractual level, triggering a default at the end of the month of its revolving credit facility. Last month, Peabody said it would draw down the balance of its $1.65 billion revolving credit facility.
By: John W. Miller and Austen Hufford (WSJ).
Photo: AP.
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