Industry experts have concluded that the end of the road is looming for U.S. coal fleet, with different headwinds — including market forces, investor sentiment and existing policies — expected to continue to prompt closures.
The last of the power plants, however, may remain online well past the next decade without policy interventions.
"America's coal fleet is on the road to extinction," said Michael Gerrard, director of Columbia University's Sabin Center for Climate Change Law. "The plants are old, expensive to maintain, and increasingly unable to compete with natural gas and renewables."
Gerrard added that the economic calculations of coal plant owners will likely increasingly favor closure due to stronger environmental regulations from the Biden administration.
Meanwhile, analysts with Morgan Stanley expect coal generation will drop to 0% in the early 2030s, according to a Feb. 1 research update. The analysts modeled a power grid that is 55% renewables, 15% gas and 0% coal by 2035.
As indicated in its Chapter 11 bankruptcy filing, Lighthouse Resources Inc. shut down its Decker coal mine in Montana — the first to close in the Powder River Basin in recent history.
The company filed voluntary petitions for Chapter 11 bankruptcy in early December last year, saying it could not afford its obligations to a pension plan with an estimated unfunded liability of approximately $2.7 million. Lighthouse is in a dispute with its union workforce over a court request to reject a collective bargaining agreement.
It had noted that it would not have any coal buyers remaining for the mine once its contracts with DTE Electric Co. ends early this year.
In line with market expectations, Alliance Resource Partners LP announced last week that its net income in the fourth quarter of 2020 rose 35.6% year over year to $35.0 million, equivalent to 27 cents per unit, from $25.8 million, or 20 cents per unit.
The company is among the only three coal producers that are projected to post positive EPS.
The double-digit increase in the quarterly profit came despite Alliance's coal sales sliding 14.4% year over year to 8.1 million tons and production dropping to 7.4 million tons from 8.6 million tons.
For full year 2020, the company swung to a net loss of $129.2 million, or a loss of $1.02 per unit, from a year-ago net income of $399.4 million, or $3.07 per unit.
Amid current market challenges — including the Biden administration's push toward energy transition — Alliance President and CEO Joseph Craft outlined plans to invest in emerging opportunities in the energy sector, including the electric vehicle market.
"We're trying to determine where best we fit, whether it's on the power side, whether it's on the EV side, whether it's in royalties and trying to expand royalties beyond just oil and gas and coal," Craft said during an earnings call last week.
Meanwhile, Missouri-based coal producer Peabody Energy Corp.'s net loss attributable to stockholders narrowed to $129.2 million, or a loss of $1.32 per diluted share, in the quarter, compared to a net loss of $289.8 million, or $2.98 per diluted share, in the year-ago period.
It was, however, a different story for the whole 2020, as the miner's net loss widened to $1.87 billion, or a loss of $19.14 per diluted share, from a loss of $211.3 million, or a loss of $2.04 per diluted share, in 2019.
Following a dismal year for thermal coal, Peabody expects the slump in the commodity to continue in 2021. The company's outlook included a modest decline in its other U.S. thermal coal segment, which includes operations in the Western and Midwestern U.S.
Peabody produced 136.0 million tons of thermal coal in the U.S. in 2019, or about 19.3% of the total reported annual U.S. coal production for that year, according to U.S. Energy Information Administration data.
In other news, Alpha Metallurgical Resources Inc., formerly Contura Energy Inc., last week announced that Kenneth Courtis, Elizabeth Fessenden and Daniel Smith joined its board as independent directors, effective Feb. 1.
The board's expansion is part of the company's agreement with MG Capital Management Ltd. on steps to accelerate the refreshment of the board.
Upcoming coal events
Future of Mining Australia 2021: Aspermont Media will hold the conference Feb. 22-23 in Sydney.
Essential rules of adopting AI in Mining and Metals: The webinar will take place Feb. 23.
