Peabody Energy Realigns Kentucky Coal Mining Operations for the Future

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). Peabody Energy Corporation (NYSE:BTU) (Saint Louis, Missouri) has made several strategic acquisitions and has secured coal sale agreements to insure its long-term growth for its Kentucky coal operations. This includes several capital expenditures to boost operations in the area. At the same time, the company has recently announced that it will close three mines representing close to five million tons per year of coal capacity in Kentucky and West Virginia. A sluggish market is cited as the cause for the closures. But long term the company sees a slow improvement in market conditions.

In 2001, the company began work to bring its Highland underground coal mines #9 and #11 into operation. The #11 mine has been operating since this summer. Located in Morganfield, Kentucky, start up of the Highland mine #9 has been delayed until the first quarter of 2003.

The new Highland #9 mine is being constructed at a cost of about $30 million. It will produce 4 million tons per year of coal, which will be barged to TVA's Cumberland plant in Nashville, Tennessee. The project included the relocation of about 30,000 feet of overland conveyor to feed an existing coal preparation plant performed by by Fricke Management and Contracting Incorporated (Murphysboro, Illinois).

In 2002 the company acquired about 100 million tons of additional Western Kentucky coal reserves, with the acquisition of Beaver Dam Coal Company. It also acquired a greater interest in the Arclar Company. Arclar recently started up a new mine; its Willow Lake coal mine and 1,200 ton per hour wash plant located in Equality, Illinois started operating in January of 2002.

Also in Kentucky the company is developing the Thoroughbred Energy project. The planned 1,500 MW mine-mouth development was issued an air permit from the state of Kentucky in October 2002, but has subsequently been sued by the Sierra Club. Expect the project to be delayed at least a year. An identical sister plant, the Prairie State Energy project, is proposed in Southern Illinois, and is at an earlier stage of development. Both projects would support 6 million ton per year mines.

Peabody Energy is the world's largest coal producer and sold approximately 194 million tons in 2001. It currently accounts for more than 9% of the nation's coal-fired electricity generation and 2% of the world's. Peabody Energy has approximately 9.3 billion tons of coal reserves and 30,000 acres of land holdings.