World’s largest private coal mining company is mired in debt after failing to anticipate price downturn
By Megan Darby
Peabody Energy, the world’s largest private coal miner, has filed for bankruptcy protection in the US.
Worth almost US$20 billion in 2011, the firm’s debts ballooned over the past five years as it expanded while coal prices crashed.
It cited a weak Chinese economy, competition from shale gas and “ongoing regulatory challenges” – a nod to climate protections – as factors.
“This was a difficult decision, but it is the right path forward for Peabody. We begin today to build a highly successful global leader for tomorrow,” said Peabody CEO Glenn Kellow in a statement.
It follows a string of US producers going bust, including the second largest, Arch Coal.
Climate campaigners and analysts warned the sector to prepare for a prolonged downturn as economies turn to cleaner forms of energy.
“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.
Its leadership had failed to adjust to shifts in the energy market, said Tom Sanzillo, director of finance at the Institute for Energy Economics and Financial Analysis (IEEFA).
“The coal industry is not dead, but it faces a time now in which is must innovate in ways that it has not done before. That means smaller markets and fewer mines.”
There was little sympathy from Bill McKibben, co-founder of 350.org. “This is a company that wilfully and deliberately sought to delay, dismantle or destruct climate action,” he said.
“Perhaps if they had spent more time and money diversifying their business rather than on lobbying against climate action and sowing the seeds of doubt about the science, they might not have joined the long (and ever growing) list of bankrupt global coal companies.”
He was not alone. Ian Dunlop, one-time chair of the Australian Coal Association turned climate advocate, described Peabody’s stance on climate change as “exceptionally irresponsible”.
The leadership misled shareholders about the risks and used their money to try and discredit scientists, he said – forcing regulator the Securities and Exchange Commission to intervene.
“Peabody’s departure is ironic in that had it taken an honest approach to dealing with climate change it might still be in business, transforming itself away from coal without having destroyed large amounts of shareholder’s money,” said Dunlop.
“It is an object lesson to other fossil fuel companies and their industry bodies, in Australia and elsewhere, who continue the same irresponsible practices today.”
Miners should not rely on poorer countries to fill the gap in demand, added development experts.
Ilmi Granoff, of the Overseas Development Institute, said: “We know their playbook. As coal majors like Peabody lose out to cleaner technologies in their home markets, they pitch their industry as the solution to poverty.
“But increasingly developing economies – from Ethiopia to China – aren’t buying the pitch. Cleaner technologies are delivering better on everything from household energy access to national energy security.”
Growing Asian economies are planning hundreds of coal plants, but there is uncertainty around how many will be built.
EAS Sarma, former power minister of India, said once the health and climate costs were factored in, “coal-based electricity… burdens the poor, rather than benefits them”.
Christian Aid’s Alison Doig agreed “coal power belongs in the past” and the world’s poor needed sustainable energy.