Released October 26, 2017 | SUGAR LAND
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Researched by Industrial Info Resources (Sugar Land, Texas)--Buoyed by favorable third-quarter earnings results, executives with the world's largest private-sector coal mining company say they don't plan to make substantial production changes solely as a result of the recently-announced closure of a big U.S. coal-consuming power plant. Peabody Energy Corporation (NYSE:BTU) (St. Louis, Missouri) leaders attempted on Wednesday to put the closure in context, saying the power plant's coal consumption represents only a small percentage of the total output from the company's Powder River Basin mining operations in Wyoming. Industrial Info is tracking more than $700 million in active Peabody Energy projects in the U.S. and Australia.
Earlier this month, Luminant, a subsidiary of Vistra Energy (NYSE: VST) (Dallas, Texas), said it plans to retire the coal-fired, 1,800-megawatt (MW) Monticello Power Plant in Texas early next year. The power plant is a major consumer of coal from Peabody's Rawhide mine in the Powder River Basin. For related information, see October 9, 2017, article - Another One Bites The Dust: Luminant to Close Coal-Fired Power Plant in Texas and October 16, 2017, article - Luminant to Close Two More Texas Coal-fired Power Plants.
News of the closure has led to questions by market analysts regarding the future of the Rawhide mine.
Peabody Chief Financial Officer Amy Schwetz maintained during the company's third-quarter 2017 earnings conference call on Wednesday that the Rawhide Mine is part of a three-mine complex owned by the company in the Powder River Basin.
As such, "We don't just ship two to three products; we ship 20-plus products out of the Powder River Basin and we ship to 23 states and [have] over 50 contracts, so we don't view [power] plant closures in the singular sense as being game changers to us."
Peabody Chief Executive Officer Glenn Kellow said coal consumed by the Luminant power plant in Texas represents about 3% of the volume from the coal company's overall Powder River Basin operations. Peabody expects to ship 120 million tons of coal from its Powder River operations this year, Schwetz said.
Schwetz said about 50 gigawatts in U.S. coal-fired power generation is expected to shut down in the next five years, "so we don't anticipate as we see individual [power] plant closures, that they would be either material, or that they would be one that we would adjust our production plans on, unless we publicly disclose that."
Coal operations in the U.S. have been hammered by adverse market dynamics, due largely to low-priced natural gas and environmental mandates. Peabody emerged from Chapter 11 bankruptcy protection last spring.
However, Peabody, which has large operations in Australia as well as the U.S., reported third-quarter net income of $230 million, compared with a $135.8 million loss during the same quarter of 2016. Revenues for the just-ended quarter totaled $1.47 billion, compared with $1.21 billion in third-quarter 2016.
Pricing for seaborne thermal and metallurgical coal from the company's Australian operations remained well above prior-year levels on continued strength in China and overall supply constraints. Kellow said that while China only accounts for approximately 20% of total seaborne coal demand, changes in Chinese demand have significant impacts on seaborne market fundamentals for both thermal and metallurgical coal.
In the U.S., industry fundamentals were impacted by mild weather and weaker gas pricing in the third quarter, Peabody reported. But even as overall electricity demand weakened year over year, utility consumption of Powder River Basin coal rose about 8% above the prior year, with natural gas decreasing 12%. Peabody Energy said it now expects U.S. coal consumption from electricity generation to be largely flat for full-year 2017, compared with 2016 levels. The company projects that higher capacity utilization of U.S. coal plants will offset the impact of about 15 million tons of lower demand as a result of coal plant retirements this year.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
Earlier this month, Luminant, a subsidiary of Vistra Energy (NYSE: VST) (Dallas, Texas), said it plans to retire the coal-fired, 1,800-megawatt (MW) Monticello Power Plant in Texas early next year. The power plant is a major consumer of coal from Peabody's Rawhide mine in the Powder River Basin. For related information, see October 9, 2017, article - Another One Bites The Dust: Luminant to Close Coal-Fired Power Plant in Texas and October 16, 2017, article - Luminant to Close Two More Texas Coal-fired Power Plants.
News of the closure has led to questions by market analysts regarding the future of the Rawhide mine.
Peabody Chief Financial Officer Amy Schwetz maintained during the company's third-quarter 2017 earnings conference call on Wednesday that the Rawhide Mine is part of a three-mine complex owned by the company in the Powder River Basin.
As such, "We don't just ship two to three products; we ship 20-plus products out of the Powder River Basin and we ship to 23 states and [have] over 50 contracts, so we don't view [power] plant closures in the singular sense as being game changers to us."
Peabody Chief Executive Officer Glenn Kellow said coal consumed by the Luminant power plant in Texas represents about 3% of the volume from the coal company's overall Powder River Basin operations. Peabody expects to ship 120 million tons of coal from its Powder River operations this year, Schwetz said.
Schwetz said about 50 gigawatts in U.S. coal-fired power generation is expected to shut down in the next five years, "so we don't anticipate as we see individual [power] plant closures, that they would be either material, or that they would be one that we would adjust our production plans on, unless we publicly disclose that."
Coal operations in the U.S. have been hammered by adverse market dynamics, due largely to low-priced natural gas and environmental mandates. Peabody emerged from Chapter 11 bankruptcy protection last spring.
However, Peabody, which has large operations in Australia as well as the U.S., reported third-quarter net income of $230 million, compared with a $135.8 million loss during the same quarter of 2016. Revenues for the just-ended quarter totaled $1.47 billion, compared with $1.21 billion in third-quarter 2016.
Pricing for seaborne thermal and metallurgical coal from the company's Australian operations remained well above prior-year levels on continued strength in China and overall supply constraints. Kellow said that while China only accounts for approximately 20% of total seaborne coal demand, changes in Chinese demand have significant impacts on seaborne market fundamentals for both thermal and metallurgical coal.
In the U.S., industry fundamentals were impacted by mild weather and weaker gas pricing in the third quarter, Peabody reported. But even as overall electricity demand weakened year over year, utility consumption of Powder River Basin coal rose about 8% above the prior year, with natural gas decreasing 12%. Peabody Energy said it now expects U.S. coal consumption from electricity generation to be largely flat for full-year 2017, compared with 2016 levels. The company projects that higher capacity utilization of U.S. coal plants will offset the impact of about 15 million tons of lower demand as a result of coal plant retirements this year.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
