"This Is Not A Problem With A Fix" - Cloud Peak Energy Bet Big On Coal; Heading For Chapter 11

[hatrack]

EDIT

Today’s coal industry is very different from when Cloud Peak formed as a spinoff from mining giant Rio Tinto Group more than a decade ago. U.S. production and consumption have both declined by more than a third, and the fuel that made up almost half of the U.S. power mix at the time is expected to supply less than 25 percent this year, according to the U.S. Energy Information Administration.

While Cloud Peak remained exclusively focused on thermal coal for power plants, rivals like Peabody Energy Corp. and Arch Coal Inc. took on debt, in part to expand production of metallurgical coal, the kind used in steelmaking. For a while, it seemed Cloud Peak chose wisely. Peabody and Arch filed for bankruptcy in 2016, buried in debt as prices slumped. That same year, Cloud Peak reported a $21.8 million profit. Now the tables are turned.

Since emerging from Chapter 11, Peabody and Arch have kept their balance sheets healthy and are posting strong results. That’s thanks in part to demand for metallurgical coal, which has doubled in price since 2016 to become a crucial source of revenue for miners. Cloud Peak, however, hasn’t shared in it.

The other boom Cloud Peak has largely missed is exports, which were up 91 percent last year from 2016, according to the EIA. That’s been a boon for miners in the Appalachians and the Illinois Basin. But Cloud Peak’s massive strip mines on the grassy plains of the Powder River Basin of Wyoming and Montana are hundreds of miles from the ocean, with the Rocky Mountains in between. The company does have a deal to ship coal from a terminal in Vancouver, and exported about 11 percent of its output in the third quarter. But the long haul from its mines eats into profits. And Washington, Oregon and California have all blocked efforts to ship coal from the U.S. West Coast, limiting Cloud Peak’s options.

EDIT

https://www.bloomberg.com/news/articles/2019-03-16/the-coal-miner-who-bet-everything-on-u-s-power-markets-and-lost

[True Blue American]

1. I have to give DeWine credit

He has $ 5 million in his budget to clean up the mines. Kasich cut funds.