Bad business decisions are driving coal companies out of business

Last Modified: Mon Jul 04 2016 14:49:45 GMT+0530 (India Standard Time)
  • 3
    of the United States’ major coal companies filed for bankruptcy over the past year. These companies and their trade association allies have often blamed environmental regulations for their precarious financial state. The facts are that debt-fueled acquisitions hobbled their finances at a time when market conditions were rapidly souring.
  • $7.1 billion
    Alpha Natural Resources paid for Massey Energy through debt-financing to secure what it saw as “a big opportunity to advance Alpha’s position as a premier supplier of metallurgical coal.”
  • $3.4 billion
    Arch Coal paid for the acquisition of metallurgical coal producer International Coal Group. The acquisition was debt-financed.
  • $5.1 billion
    Peabody Energy paid for their acquisition of McArthur Coal to expand metallurgical coal production in Australia. This too was debt-financed.
  • 2011
    Year in which all 3 acquisitions took place - at a time when the price of metallurgical coal was at a three-year high.
  • 33%
    fall in prices in 2014, compared to 2011 levels. The metallurgical coal export price to China ($/short ton) in 2011 was $160.39 and fell to $100.84 in 2014.
  • $6.2 million
    combined increase in annual compensations to the CEOs of the 3 companies, during 2012 - 2014 even as they were losing money on account of the drop in prices.
  • $70 billion
    coal industry's total debt, which according to a McKinsey report of Nov 2015, cannot be serviced even if supply and demand reached a balance that too at peak coal prices.
  • 2015
    Alpha Natural Resources went bankrupt in August of this year and moved to cut worker benefits, increased spending on lobbying and blamed environmental regulation.
  • $14 million
    total compensation Alpha Natural Resource rewarded four top executives in 2014 even as a bankruptcy was looming.
  • 2016
    Arch Coal’s bankruptcy in this year, primarily triggered because of debt incurred by their acquiring operations in Central Appalachia to expand metallurgical mining operations.
  • $20 million
    Arch Coal paid five of its executives in 2015, the year preceding the bankruptcy and an additional $18.5 million to bankruptcy advisors.
  • 2016
    Peabody Energy filed for bankruptcy in March of this year after deal to sell assets in New Mexico and Colorado to Bowie Resource Partners failed.
  • $24.8 million
    Peabody Energy paid five of its executives in 2014, and an additional $27.5 million to bankruptcy advisors in April 2016.