|Traded as||NYSE: BTU
S&P 500 component
|Industry||Metals and Mining|
|Founded||1883Chicago, Illinois, USA)(|
|Headquarters||St. Louis, Missouri, USA|
|Key people||Gregory H. Boyce, Chairman and CEO|
|Revenue||US$ 7.01 Billion (FY 2013)|
|Operating income||US$ (324.8) Million (FY 2013)|
|Net income||US$ (512.6) Million (FY 2013)|
|Total assets||US$ 14.13 Billion (FY 2013)|
|Total equity||US$ 3.95 Billion (FY 2013)|
Peabody Energy Corporation (NYSE: BTU), is the largest private-sector coal company in the world. Its primary business consists of the mining, sale and distribution of coal, which is purchased for use in electricity generation and steelmaking. Peabody also markets, brokers and trades coal through offices in China, Australia, Germany, the United Kingdom, Indonesia, India, Singapore, and the United States. Other commercial initiatives include the development of mine-mouth coal-fueled plants, the management of coal reserve holdings, and technologies to transform coal to natural gas and transportation fuels.
The coal produced by Peabody Energy fuels approximately 10% of the electricity generated in the United States and 2% of electricity generated throughout the world. In 2013, Peabody Energy recorded sales of 251.7 million tons of coal. Peabody markets coal to electricity generating and industrial customers in more than 25 nations on six continents. As of December 31, 2013, the company had approximately eight billion tons of proven and probable coal reserves.
Peabody Energy maintains ownership of majority interests in 28 surface and underground mining operations located throughout the United States and Australia. In the United States, company-owned mines are located in Wyoming, Colorado, Arizona, New Mexico, Illinois, and Indiana. Peabody's largest operation is the North Antelope Rochelle Mine located in Campbell County, Wyoming, mining more than 100 million tons of coal in 2010. Peabody spun off coal mining operations in West Virginia and Kentucky into Patriot Coal Corporation (NYSE: PCX) in October 2007. In October 2011, Peabody acquired a majority ownership stake in Queensland-based Macarthur Coal Ltd, which specializes in the production of metallurgical coal, primarily seaborne pulverized injection coal.
Peabody Energy was listed as number 315 on the Fortune 500 list of companies in 2013.The company was named to Fortune Magazine's list of America's Most Admired Companies in 2008, ranking first in their sector in: Innovation, People Management, Social Responsibility, Financial Soundness, et al. The company is headquartered in downtown St. Louis, Missouri.
Early years (1883 – 1959)
The Peabody Energy company was originally founded as Peabody, Daniels & Company in 1883 by Francis Peabody, the son of a prominent Chicago lawyer, and a partner. The company bought coal from established mines and sold it to homes and businesses in the Chicago area. In the late 1880s, Francis Peabody bought out his partner's share of the business and the company was incorporated in the state of Illinois under the name Peabody Coal Company in 1890. In 1895, it began operations of its first mine in Williamson County, Illinois and later expanded its operations in Illinois. In 1913, the company won its first long-term contract to supply Chicago Edison Company, the predecessor to utility Commonwealth Edison. The company's growth continued after World War I and the corporation went public for the first time in 1929 with a listing on the Midwest Stock Exchange and in 1949, was listed on the New York Stock Exchange.
Despite being ranked eighth among the country's top coal producers in the mid 1950s, Peabody began to lose market share to companies operating cost-efficient surface mining operations. To address the situation, it entered into merger talks with Sinclair Coal Company. A merger between the two companies occurred in 1955, resulting in the transfer of Peabody's headquarters to St. Louis, Missouri. The merged company retained the Peabody name. Under the leadership of chairman Russell Kelce, the company expanded production and sales.
In 1962, Peabody expanded into the Pacific with the opening of mining operations in Queensland, Australia. During this period Peabody also forged an equity partnership with the Japanese trading company Mitsui & Co., Ltd. and the Australian construction company Thiess Holdings. In 1968, the company was purchased by the Kennecott Copper Corporation. However, the U.S. Federal Trade Commission challenged the purchase as an antitrust violation. In 1976, the FTC ordered Kennecott to divest itself of Peabody. The newly created Peabody Holding Company purchased the Peabody Coal business of Kennecott for $1.1 billion, and a consortium of companies controlled Peabody-Holding.
In the 1980s, Peabody expanded its operations in the Eastern United States, acquiring the West Virginia coal mines of Armco Inc in 1984. The company sought to broaden its metallurgical coal portfolio through the purchase of Eastern Gas and Fuel Associates' seven West Virginia mines in 1987. Peabody also expanded westward, opening the North Antelope and Rochelle mines in the low sulfur Wyodak seam in the heart of Wyoming's Powder River Basin in 1983 and 1984, respectively.
The passage of the Clean Air Act amendments in 1990 prompted the closure of some Peabody mines. However, other mines under its ownership were able to remain in operation due to the implementation of new equipment and procedures that reduced sulfur dioxide emissions. Stricter requirements outlined in Phase II of the legislation also prompted Peabody to invest in emissions reducing technologies. In 1990, the U.K.-based conglomerate Hanson plc, one of the owners of Peabody Holding at the time, bought out the rest of the owners.
In 1993, Peabody Energy expanded their holdings in the Pacific with the acquisition of three mines in Australia and subsequently developed a fourth operation in New South Wales. Peabody also expanded its operations domestically with acquisitions in New Mexico in 1993 and Wyoming in 1994 and assumed a stake in Black Beauty, a Midwest producer, in response to increased demand for metallurgical coal.
Following corporate ownership changes in the 1990s, the company filed an initial public offering (IPO) in May 2001, and since this time it has operated as a publicly traded company. In 2002, Peabody launched its Peabody Energy Australia Coal Co. following the acquisition of the Wilkie Creek Mine in Queensland's Surat Basin. The North Goonyella coal mine was acquired by Peabody in 2004. In October 2006, Peabody completed an acquisition of Excel Coal Limited, an independent coal company in Australia. Peabody paid $1.52 billion for Excel and also assumed $227 million of Excel's debt. At the time, Excel owned three operating mines and three development-stage mines in Australia. Additionally, Excel had an estimated 500 million tons of proven and probable coal reserves. As of 2011, Peabody's Australian mining operations are located in Queensland and New South Wales. Most of the company's Australian production is metallurgical coal.
The company also advanced a number of coal-to-liquids and coal-to-gas projects to reduce emissions during the decade. On August 30, 2007, Ernie Fletcher, the governor of the U.S. state of Kentucky signed into state law a bill that will provide approximately $300 million in incentives to Peabody to build a coal gasification plant in that state. The resulting incentives were provisioned in the form of breaks on sales taxes, incentive taxes and coal severance taxes. In 2007, Peabody and a consortium of municipal electric cooperatives began construction on the 1600-megawatt Prairie State Energy Campus clean coal project in Lively Grove, Illinois. The company now retains five percent equity stake in the project, which is expected to begin generating power for customers in 2011. At the 2010 World Energy Congress, Peabody CEO Gregory Boyce proposed a plan that advocated for the expanded use of coal worldwide, placing emphasis on geographic areas with limited or no access to electricity.
Areas of business
Peabody Energy's world headquarters is in St. Louis, and as of 2014 it also maintains offices in London, Beijing, Ulaanbaatar, Singapore, Brisbane, Sydney, Essen, Balikpapan, Jakarta, and Urumqi. In the U.S. West, Peabody operates Powder River Basin operations in Wyoming as well as other mining operations in Arizona and New Mexico. Operations in the U.S. Midwest consist of mines in Indiana and Illinois. Peabody also operates a single underground mine in Colorado. All of these assets are occupied with the mining, preparation, and selling of coal to utility companies or steelmakers.
Peabody's Australian operations consist of metallurgical and thermal coal mining operations in Queensland and New South Wales. Purchasers of its coal product include Australian utility companies or steel producers.
The Trading and Brokerage function is primarily concerned with the brokering of coal sales, trading coal, and freight or freight-related contracts. A smaller division of Peabody Energy deals with mining, export and transportation joint ventures, energy related commercial activities, and the management of Peabody's operations and holdings. With growing demand for coal across Asian markets, especially in China, Indonesia, and India, Peabody has expanded its presence in Asia through offices in China, Mongolia, Indonesia, and Singapore.
Black Mesa controversy
In 1964 Peabody Energy subsidiary Peabody Western Coal signed a series off-lease agreements with the Navajo tribe and two years later with the Hopi tribe for mineral rights as well as use of a water source on the Black Mesa, a 2.1-million-acre highland in Northeast Arizona. The company's contracts with the Navajo Nation and Hopi Tribe were approved despite opposition from those who disputed the authority of the official tribal councils. They were also negotiated by natural resources attorney John Sterling Boyden, who represented the Hopi tribe but whose firm had also represented Peabody in other legal matters, contributing to allegations of a conflict of interest.
When rail negotiations to transport coal from the project broke down, Peabody designed a coal slurry pipeline similar to a natural gas pipeline to transport the coal 273 miles to the Mohave Generating Station in Laughlin, Nevada. The company pumped potable water from the underground Navajo Aquifer (N-aquifer) to supply the slurry pipeline, a solution that generated controversy. The Navajo Aquifer is a main source of potable water for the Navajo and Hopi tribes, who use the water for farming and livestock maintenance as well as drinking and other domestic uses. Members of the tribes as well as outside environmental groups have alleged that the pumping of water by Peabody Energy has caused contamination of water sources and a severe decline in potable water. Peabody contends that operations consumed only one percent of the aquifer's water.
The Black Mesa Mine suspended operations in 2006 after the mine's sole customer, the Mohave Station, was retired. The site was fully decommissioned in January 2010.
The practice of extracting coal from the earth for energy production purposes has been the subject of controversy for an extended duration of time. The Sierra Club has expressed concern regarding Peabody Energy's initial opposition to the Clean Air Act and other environmental regulations, as well as its support for the expanded use of coal generated electricity as a means of meeting increasing worldwide energy usage demands. The Natural Resources Defense Council has been critical of Peabody's advocacy for expanding coal generated electricity in the U.S., specifically on account of the environmental impacts of surface mining operations. The environmental impact of Peabody's surface mining operations in Muhlenberg County, Kentucky was also the subject of criticism in John Prine's 1971 song "Paradise." In Newsweek's 2011 rankings of the least eco-friendly companies in the US, Peabody Energy was ranked #9 out of the top 500 largest US companies based on their environmental impact.
Peabody Energy states its mission as "to be a leading worldwide producer and supplier of sustainable energy solutions, which power economic prosperity and result in a better quality of life," and to return mined lands to a "condition that is equal to or better than before mining occurred. Peabody launched its first land reclamation program, Operation Green Earth, in 1954. Since then, Peabody's activities in regards to the pursuit of its mission, specifically concerning environmental sustainability practices, have been recognized by regulators and industry groups, but have raised concerns among its critics, primarily some environmental advocacy organizations. The company has taken steps to enact environmental restoration and has been recognized by the United States Department of the Interior, for their reclamation efforts.
In response to federal legislation, such as the 1970 Clean Air Act and the 1990 Clean Air Act amendments, and environmental criticism of its mining operations, Peabody has directed investments in technologies and equipment that serve to mitigate adverse environmental effects of their coal mining operations. In 2007, the company became the only non-Chinese equity partner in the 650-megawatt near-zero emissions GreenGen clean-coal project in Tianjin, China. Peabody has also invested in the development of carbon capture technologies and coal-to-gas and coal-to-hydrogen projects.
American Legislative Exchange Council
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