Peabody Energy, one of the biggest producers of coal on earth, has warned that it is at risk of going bankrupt in the very near future, thanks to a lack of “sufficient liquidity to sustain operations and to continue as a going concern” caused largely by the continuing downturn in the coal mining industry.
In a regulatory filing on Wednesday, the US-based producer said that: “There can be no assurance that our plan to improve our operating performance and financial position will be successful.” Peabody has undertaken a huge programme of cost-cutting in recent years to stave off a massive crash in the price of the commodity.
At the same time as warning on potential bankruptcy, the company said that it had skipped a $71.1 million (£50.45 million) interest payment on some of its debt.
This is what the company had to say in its SEC filing (emphasis ours):
As a result of operating losses and negative cash flows from operations and our election to exercise a 30-day grace period with respect to certain interest payments, together with other factors, including the possibility that a covenant default or other event of default could cause certain of our indebtedness to become immediately due and payable (after the expiration of any applicable grace period), we may not have sufficient liquidity to sustain operations and to continue as a going concern.
Peabody’s shares have fallen by more than 95% in the past year.
Prices for coal have followed the general trend for commodities in the past few years, crashing ever lower. Coal’s market price has halved since 2011, and fallen 41% since late 2013. Here’s how that looks:
Coal has been particularly badly hit by the commodity crash as governments across the world have started to look at using more renewable energy sources, and lowering carbon emissions. That was compounded in late 2015 when the COP21 conference in Paris ended with an international agreement on cutting carbon emissions, which will necessitate less usage of coal, which was once by the far the most important means of producing power globally.
Peabody is not the first coal miner to hit serious trouble, with rivals Alpha Natural Resources and Arch Coal both filing for bankruptcy within the last year. Other coal based firms to file for bankruptcy protection last year included Walter Energy and Patriot Coal.
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