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Company Profile:

Peabody energy is a US headquartered (St Louis) coal mining company. The company has 23 mines
across US and Australia and supplies coal to power plants and steel plants across the globe in 25
countries in 6 continents.

Operations:

The company operates 23 mines across USA and Australia. Of these company owns majority stake in
22 mines while it owns 50% stake in Middlemount mine in Queensland, Australia. Apart from coal
production from its own mines, the company brokers and trades coal produced by other mines and
markets them. The company has marketing offices in US, UK, Australia and China.

The company’s operations are divided into 2 countries and 6 segments. The US mining operations
consist of Powder river basin, Midwestern US mining and Western US mining. Australian operatios
consist of Australian metallurgical mining and Australian thermal mining. Apart from these, there is a
6th segment which consists of trading and brokerage.

Financial Details:

a. Revenue: $ 5.6 Billion (2017)


b. Coal sales : 191.5 Tonnes
c. D/E Ratio: 48.2
d. Market Capitalization: $ 4.533 Billion (27th April 2018)
e. Employees: 7100 Globally

2015 2016 2017


Revenues 5609.2 4715.3 5578.8
Costs 7074.0 4992.2 5642.8
EBITDA -1464.8 -276.9 -64.0
Net Profit -1958.2 -721.4 481.6
Company Analysis – SWOT:

a. Strengths:
1. The company is one of the largest coal manufacturers worldwide and one of the two
largest coal companies in USA.
b. Weaknesses:
1. Recent Bankruptcy: The company has recently emerged out of bankruptcy and has
reduced debt by $5Billion. However, even now the company’s overall Debt to Equity
ratio is extremely high and given that the company is not in a very strong position to
make very strong new investments
c. Opportunities:
1. New Markets: The Company’s Australia business has been growing steadily and already
occupies around 50% of share by sales. This is primarily because of the increasing
demands from the fast growing Asian economies, the primary customers of the
Australian coal.
d. Threats:
1. Declining potential of US market: Coal market in USA is continuously diminishing which
has impacted the health of all major coal producers in US. As the demand in US reduces,
the company’s US coal operations continuously are losing revenue year on year, having
their major customer base in US power plants. Over the period from 2012 to 2017, the
share of coal in US energy generation reduced from 37% to 30%
2. Alternative sources of energy: As the emphasis on clean energy grows there is an
increasing threat to coal plants from Natural gas which is a much cleaner fossil fuel.
Further renewable sources of energy like wind power have become cheaper compared
to coal in several countries due to new and better technologies. As demand for coal
reduces, miners rely on mining coal required in steel plants, which has limited scope of
salvaging these mining companies.
3. Slower growth in demand: In the context of the more mature markets of the west, the
correlation between growth in economy and increase in the demand for electricity no
longer exists. With increased growth of energy efficient devices, in 2017 a fall in
consumption of electricity by 2% was noted in USA despite a growth in economy. Coal
consumption is directly linked to growth in electricity production.

Technological Scenario:

There are mainly two types of technologies that Peabody Energy is investing on

a. High Efficiency Low Emissions (HELE): These are technologies deployed in coal fired thermal
power plants. Some form of this technology is available as of today. Use of this technology
can increase the efficiency of coal fired plants to 40% from 33% today.
b. Carbon Capture Use and Storage (CCUS): CCUS encompasses methods and technologies to
remove CO2 from the flue gas and from the atmosphere, followed by recycling the CO2 for
utilization and determining safe and permanent storage options. Use of this technology can
ultimately lead to almost zero emission of green house gases
Since the 1990s, Peabody has advocated clean coal technologies to reduce carbon and other
emissions. In 2015, Peabody’s President and Chief Executive Officer Glenn Kellow chaired a National
Coal Council report that called for enabling carbon capture to achieve policy parity with other low-
carbon options, such as solar and wind.

The report outlined what is needed to propel progress for CCUS technologies, which ultimately
would lead to near-zero emissions from coal, and is recognized by global leaders as essential to
global carbon goals.

Key recommendations :

 Financial Incentives: Financial incentives for CCUS must be substantially increased and
broadened to include incentives available to other clean energy sources.
 Regulatory Improvements: A first-of-its-kind regulatory blueprint is needed to remove
barriers to construction and development of CCUS projects.
 Research, Development and Demonstration: The DOE must be a catalyst for additional
commercial-scale demonstration projects, and such projects must commence immediately.
 Communication and Collaboration: The U.S. Department of Energy must assure U.S. and
global policymakers and other stakeholders that fossil fuels will be used in coming decades
to a greater extent than today, and there is a resulting need for CCUS.

New Initiatives:

1. Peabody energy as a part of National Coal Council helped carry out a study for the Secretary
of energy providing an industry assessment of the progress made by the department of
energy and others with respect to the cost, safety and technical operation of CCUS
2. The company has recognised and awarded several power plants in USA in Dec 2016, for
advancing modern large scale CCUS projects. It has recognised several others on the basis of
data available from Environment protection agency for achieving the lowest level of sulphur
dioxide and nitrogen oxide emissions.

Conclusion:

The demand and support for coal and coal fired power is reducing globally and very clearly in the
west. Peabody energy, one of the largest producer and marketer of coal, has been severely impacted
by this change. Realising that the movement towards clean energy and away from coal is going to
get stronger in the future, the company has started making desperate attempts at encouraging clean
coal technologies. However their contribution has been very limited in the form of encouraging and
awarding performing plants and carrying out studies. The company has not invested in directly
funding or carrying out research in this area.

Alternatively the company has supported governments openly vocal of increasing coal consumption
for power generation. It has also carried out campaigns emphasising that clean coal is going to
remain an inevitable part of the global energy mix in the future, without providing any evidence of a
reliable example of coal technology which is 100% clean.

References:

1. https://www.peabodyenergy.com/Peabody/media/MediaLibrary/Fact%20Sheets/2018-Fact-
sheet_Company.pdf
2. https://www.peabodyenergy.com/Peabody/media/MediaLibrary/Investor%20Info/Annual%
20Reports/2017-Peabody_BTU-10K_1.pdf?ext=.pdf
3. https://www.peabodyenergy.com/Peabody/media/MediaLibrary/Investor%20Info/Annual%
20Reports/2017-Peabody-Annual-Report.pdf?ext=.pdf
4. https://www.bloomberg.com/quote/BTU:US
5. https://www.marketwatch.com/investing/stock/btu/profile
6. https://finance.yahoo.com/quote/btu?ltr=1
7. http://www.stltoday.com/business/local/one-year-after-bankruptcy-peabody-expresses-
optimism-though-challenges-remain/article_77416645-110d-5ad8-8572-1f2c39d0b75c.html
8. https://www.bloombergquint.com/business/2018/04/26/u-s-coal-output-just-took-another-
hit-as-demand-keeps-fading
9. https://www.peabodyenergy.com/Sustainability/Clean-Coal-Technologies
10. https://www.peabodyenergy.com/Sustainability/Energy-Carbon
11. https://www.aiche.org/ccusnetwork/what-ccus
12. https://www.worldcoal.org/reducing-co2-emissions/high-efficiency-low-emission-coal#ql_0
13. https://www.prnewswire.com/news-releases/national-coal-council-releases-new-study-for-
secretary-of-energy-300028071.html
14. https://www.power-eng.com/articles/2016/12/peabody-energy-honors-cleanest-coal-
fueled-power-plants-in-the-united-states.html
15. https://www.prnewswire.com/news-releases/peabody-honors-global-leadership-in-clean-
coal-technologies-300566947.html