St. Louis-based Peabody Energy, widely considered the largest coal company in the world, filed for Chapter 11 bankruptcy Wednesday, showing that even the most storied coal companies are not impervious to the coal industry’s downturn.
The company cited a slew of reasons for its decision, including the coal industry’s downward plunge in the energy market, stiff competition from natural gas producers, as well as economic slowdowns in China.
“This was a difficult decision, but it is the right path forward for Peabody,” Glenn Kellow, the company’s chief executive said in a statement Wednesday. “This process enables us to strengthen liquidity and reduce debt, build upon the significant operational achievements we’ve made in recent years and lay the foundation for long-term stability and success in the future.”
The move to file bankruptcy was prompted by both external market forces as well as an ill-timed decision to acquire Macarthur Coal of Australia in 2011 for $5.2 billion, which led to the company taking on massive debt after it failed to recognize China’s drop in demand for coal.
Shares in the company have tumbled more than 99 percent from their 2008 peak. Peabody shares closed Tuesday at a mere $ 2.06, leaving the company with just $38 million in its war chest.
Peabody’s fall comes amid the stumbles of several other major U.S. coal companies.
Arch Coal, another Missouri-based coal company, filed bankruptcy as well in January in a last ditch effort to slash nearly $4.5 billion from its doles. The filing, according to Arch Coal officials, essentially leaves most of the company in the hands of lenders. Arch Coal is the second largest coal producer in the U.S.
The coal industry’s descend claimed another victim in February when Illinois-based coal company Alliance Coal announced it planned on laying off 275 employees.
Alliance said that 75 of its employees will be cut from Illinois mines River View Coal, LLC and White County Coal, LLC, while Hamilton County Coal, LLC announced the temporary layoff of 200 employees.
The company claimed the layoffs come as a result of falling natural gas prices, “overreaching regulations” from the Obama administration and a glut in coal market.
Alpha Natural Resources Inc. filed for Chapter 11 in August, allowing the company to stay afloat for the time being.
But the move did not do much to ratchet down the glut in the coal industry. Alpha has managed to reduce its coal output to 44 million tons, which is only a 10 percent drop down from the 60.7 million tons it said it sold in 2015, according to Bloomberg.
Despite the bad news, Peabody Energy continues to stay upbeat, suggesting in its press statement that there is a place for coal in the energy market.
“Globally, thermal coal is expected to continue to fuel hundreds of existing coal generating plants as well as scores more that are under construction,” the statement reads. “Coal currently fuels approximately 40 percent of global electricity and is expected to be an essential source of global electricity generation and steel making for many decades to come.”
Content created by The Daily Caller News Foundation is available without charge to any eligible news publisher that can provide a large audience. For licensing opportunities of our original content, please contact firstname.lastname@example.org.