Will the largest U.S. Coal Company Go Out of Business?

Will the largest U.S. Coal Company Go Out of Business?

Peabody Energy is the world’s largest private-sector coal producer. They warned Wednesday that they may go out of business- the latest sign of the brutal conditions in the battered industry.

In a regulatory filing the company said that ongoing losses and its decision to miss certain interest payments means it may not have enough cash to “sustain operations and continue as a going concern.”

This could spell disaster for the company which has 7,600 employees at its ongoing operations. If they go under, those people will quickly be out of jobs.

Peabody reported a loss of $2 billion last year, up from a $787 million slide the previous year. However their revenue tumbled 17% to $5.6 billion as the average price and amount of coal that it sold fell.

They also warned of further declines this year due to reduced use of coal by U.S. utilities along with lower demand from overseas markets.

Shares of Peabody, which had already plunged 98% in the past two years, tumbled nearly 50% in trading Wednesday following the filing. It’s just not looking good for Peabody.

The coal industry has faced a myriad of problems in recent years, including proposed regulation from the Obama administration to cut greenhouse gas emissions from the nation’s coal-burning power plants.

While the new regulations have been put on hold by the Supreme Court, the industry has faced a number of other economic worries, including significantly lower prices for natural gas, which is a competing fuel used by electric utilities, and slowing economic growth in China, a major market for U.S. coal.

It should also be noted that Arch Coal, which owns the second largest U.S. coal reserves behind Peabody, filed for bankruptcy in January.

Environmental group Rainforest Action Network said it’s important that even if a coal company does go into bankruptcy, it is still required to adhere to regulations.

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