Peabody Energy Agrees to Fully Disclose Climate Risks from CoalPublished by MAC on 2015-11-11
Source: Statement, Climate Wire (2015-11-10)
Peabody Energy Agrees to Fully Disclose Climate Risks from Coal
Coal companies struggle with the dirtiest fossil fuel’s pollution
By Daniel Cusick
10 November 2015
Peabody Energy Corp. describes its statement that it would more fully disclose the financial risks it faces from climate change as a penalty-free modification of its financial reporting process.
“There is no other action associated with this settlement, no admission or denial of wrongdoing and no financial penalty,” the company said of the culmination of a two-year investigation by the New York Attorney General’s Office in which it was accused of violating state laws prohibiting “false and misleading conduct” in statements to the public and investors.
Peabody stressed it has “always sought to make appropriate disclosures” and explained that financial disclosures “evolve over time.” Even so, future disclosures will include information detailing the risk the company faces from “potential laws and regulations relating to climate change or coal, which could result in materially adverse effects on its markets or [the] company,” it said.
Peabody also agreed to disclose a range of scenarios from the International Energy Agency suggesting declining future demand for coal, changing course from earlier financial statements where the company only disclosed IEA’s business-as-usual scenario.
But refining how it discloses financial risk from climate change will not solve Peabody’s problems.
The world’s largest private-sector coal firm, along with other U.S. giants like Arch Coal Inc., Cloud Peak Energy Inc. and Alpha Natural Resources Inc., are swimming against a powerful current of regulatory and economic change that has shrunk markets and driven down stock prices to unprecedented lows.
Peabody shares on the New York Stock Exchange fell in value during morning trading before rebounding to $15.09. One year ago, the company’s stock traded at $171, compared with roughly $300 per share in November 2013.
Meanwhile, some of Peabody’s chief competitors have bottomed out, with a trio of Chapter 11 bankruptcy filings—Alpha Natural Resources, Patriot Coal Corp. and Walter Energy Inc.—since the beginning of the year.
Arch Coal on watch list
On the Chapter 11 watch list now is Arch Coal, Peabody’s largest U.S. rival and hometown competitor. Both companies are headquartered in St. Louis.
Yesterday, Arch Coal reported bleak third-quarter results to investors, with a net loss of just under $2 billion ($93.91 per diluted share), while its stock price hovered at between $1.50 and $1.60 per share in afternoon trading. Total revenues declined to $2 billion for the nine months ending Sept. 30, “largely due to lower metallurgical coal prices and output,” the company said.
Arch also reported nearly $150 million in losses related to the bankruptcy of Patriot Coal, as millions of dollars’ worth of retiree medical benefits belonging to Patriot subsidiary Magnum Coal Co. flowed back onto Arch’s balance sheet as part of Patriot’s court-approved reorganization.
“Our results reflect the actions we have taken to respond to the challenging market environment, including reducing costs and enhancing efficiency across the company,” Arch Chairman and CEO John W. Eaves said in a statement.
Yet despite some positive signs, including increased cash margins and higher adjusted earnings before interest, taxes, depreciation and amortization of $262 million, Eaves warned that “the difficult conditions impacting the coal industry persist, and we expect they will continue throughout 2016.”
In its most recent earnings report issued late last month, Peabody saw revenue of $1.42 billion, down from $1.72 billion the year before. The company’s earnings per diluted share were down $8.08 due to a reverse split of common stock that occurred in early October. Its U.S. mining operation saw pretax earnings decline by $44.3 million “primarily due to a volume reduction of 2.5 million tons largely driven by lower natural gas prices and a longwall move in Colorado,” the company said.
While industry executives said they would continue to adjust to challenging market conditions, independent experts following the coal sector saw little in the recent news to suggest a rebound, especially as competing fuels from natural gas to renewables like solar and wind power continue to dominate the market for new generation.
“The coal industry is desperately looking for positives, but most appear to come from their own PR campaigns claiming that coal is the solution to energy poverty or that coal is amazing,” James Leaton, head of research at the nonprofit Carbon Tracker Initiative, said of the industry’s ongoing slide in the online journal World Finance.
In its statement, Peabody reiterated its belief that advanced clean coal technology “is the bridge to a low-emissions future for a world experiencing rising electricity demand to satisfy urbanization and offer a higher quality of life.” It cited its work in China on the country’s 250-megawatt GreenGen power plant that will use integrated gasification combined-cycle technology to reduce carbon emissions.
Peabody is also one of the founding partners in the Advanced Energy for Life, an industry-funded campaign to promote coal-fired power as an antidote to acute energy shortages in developing countries.
Peabody Energy, New York Attorney General Resolve Longstanding Questions Regarding Climate Change Disclosures
Peabody press release
9 November 2015
ST. LOUIS -- Peabody Energy announced today that it has reached a resolution with the New York Attorney General's (NYAG) office regarding the company's disclosures involving climate change.
Following an extensive eight-year investigation initially discussed in the company's 2007 disclosures, Peabody has agreed to amend its disclosures. There is no other action associated with this settlement, no admission or denial of wrongdoing and no financial penalty. The company has always sought to make appropriate disclosures. Subsequent disclosures evolve over time, and the most recent disclosures planned for the company's third quarter 2015 Form 10-Q address the matters raised by the New York Attorney General.
Through the agreement, the company agreed to modifications in its financial disclosures centering around two primary areas:
- The use of the International Energy Agency's (IEA) World Energy Outlook scenarios. Peabody has long cited IEA's World Energy Outlook regarding global energy scenarios. In the future, the company has agreed to enhance its disclosure around all the published scenarios when referencing IEA's World Energy Outlook.
- The ability of the company to estimate impacts from prospective future laws or regulations. The company has previously stated that it cannot predict the impact of potential laws or regulations on Peabody due to the uncertainty surrounding those predictions. Nonetheless, the company has agreed that any future statements concerning the difficulty of making particular projections or predictions shall be accompanied by a statement that Peabody has made projections of the impact of scenarios involving certain potential laws and regulations relating to climate change or coal, which could result in materially adverse effects on its markets or company. To evaluate risks and allocate capital, Peabody has examined the potential impact of hypothetical future laws on coal markets.
Moving forward, Peabody believes that technology is the bridge to a low-emissions future for a world experiencing rising electricity demand to satisfy urbanization and offer a higher quality of life. Peabody has been among the most vocal companies worldwide in advocating clean coal technologies, including greater deployment of high-efficiency low-emissions coal-fueled plants and development of next-generation carbon capture, use and storage technologies.
Peabody has been involved in major global initiatives to reduce carbon emissions for nearly two decades. Among other current activities, Peabody is:
- The only non-Chinese equity partner in GreenGen, a 250 megawatt integrated gasification combined cycle power plant in Tianjin, China. GreenGen is expected to increase generation to 650 megawatts in later stages and plans to add carbon dioxide capture for enhanced oil recovery
- A founding member of the China and U.S. Energy Cooperation Program pursuing clean energy;
- A founding member of the Consortium for Clean Coal Utilization advancing coal and energy research at Washington University in St. Louis;
- A founding member of the COAL 21 Fund in Australia supporting technology research and demonstration, and a founding member of the Global Carbon Capture and Storage Institute in Canberra, which has a mandate of developing carbon capture projects.
Peabody Energy is the world's largest private-sector coal company and a global leader in sustainable mining, energy access and clean coal solutions. The company serves metallurgical and thermal coal customers in more than 25 countries on six continents. For further information, visit PeabodyEnergy.com and AdvancedEnergyForLife.com.