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New Dynegy closures may strike nation's largest, bankrupt coal producers hardest

The 1,835 MW of coal-fired power capacity Dynegy Inc. announced it would shut down relies on coal fromfour mines that are among the largestin the nation and mostly held by companies in bankruptcy.

The announcementcarried hefty symbolism for those in opposition to the coal industry. The SierraClub followed the May 3 announcement with a release the next day celebrating theannounced retirement of more than 100,000 MW worth of coal-fired power in the U.S.

"The retirementof Illinois', and Newton coal units are not only a great step forwardfor public health in the Prairie State, it's a clear sign that we are winning —coal plant by plant — in the effort to transition our communities away from dirtycoal electricity," said Michael Brune, executive director of the Sierra Club."But we're not done — we're mobilizing nationwide because the fight for a fairand just transition from fossil fuels to clean energy is far from done."

Sierra Club credited its "unrelenting advocacy" leadingto an average shut down of coal plants at roughly a rate of one per 10 days since2010.

On top of the Sierra Club's aggressive campaign, the coal-firedpower industry has faced cheap natural gas competition, lower demand from a mildwinter, growing renewable energy competition, emissions limitations and more. Despiteproducers being forced into restrictively low coal prices nationwide, Dynegy saidit also faced what it called flaws in its regional wholesale market that awardedpayments too low to cover "basic operating costs."

According to SNL Energy data, the Newton plant received coalfrom Arch Coal Inc.'sBlack Thunder mine and Cloud PeakEnergy Inc.'s Antelope mine, both in Wyoming. The Baldwin complex receivedcoal from Peabody Energy Corp.'sNorth Antelope Rochelle and AlphaNatural Resources Inc.'s Belle Ayr mine.

North Antelope, Antelope and Black Thunder, both in the relativelylow-cost Powder River Basin, are the three largest surface coal in the nation. Belle Ayr is also amongthe top producers in the country but is considerably smaller by production.

North Antelope and Black Thunder produced 109.3 million tonsand 99.5 million tons of coal, respectively, in 2015. The Antelope mine produced35.2 million tons of coal in the period and Belle Ayr produced about 18.3 milliontons.

Three of the four coal mines supplying the affected plants arefrom coal companies currently in bankruptcy.The loss of more coal demand could potentially create significant complicationsin the reorganization efforts of Peabody, Alpha and Arch.

SNL Energy data shows that the Baldwin complex purchased about5.2 million tons of coal from North Antelope in 2015, about 4.8% of the 2015 productionfrom that mine. Baldwin also purchased 1.4 million tons of coal from Belle Ayr in2015, about 7.9% of annual production from that mine.

The Newton power plant took 1.5 million tons of coal from BlackThunder in 2015, about 1.5% of that mines supply in 2015. Black Thunder also providedDynegy's Wood River 4-5plant with about 1.5 million tons of coal in 2015. Dynegy announced last year itwas closing Wood Riverin mid-2016.

Newton also took about 120,000 tons of coal from North Antelopein January 2016.

Cloud Peak, one of the more financially fit companies in the coal sector has not been forcedto bankruptcy, but couldalso be affected by a disruption in demand from the Dynegy plants. The 2.0 milliontons of coal Cloud Peak sold through contracts to Newton represents about 5.7% of2015 production from its mine.

Cloud Peak CEO Colin Marshall said on a recent earnings callthe company was bracing for a coal market in which the "dynamics" of theindustry have "permanently changed."In its earnings report, Cloud Peak reduced 2016 shipment guidance for its three minesto between 60 million and 65 million tons, compared to an earlier estimate of between 64 million and 70 million tons.

Including the 1,835 MW announced May 3, Dynegy said a totalof 2,800 MW of Dynegy capacity is at risk of closure. According to SNL Energy data, Baldwin has one other unit with 634.5 MW in nameplatecapacity, while Newton has another 617.4-MW unit.