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Mission Coal submits plan to dissolve; sector's credit health stabilizes

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Mission Coal submits plan to dissolve; sector's credit health stabilizes

After a turbulent 2018, the U.S. coal industry started a new year with a series of familiar challenges and obstacles to recovery.

Mission Coal Co. LLC submitted a bankruptcy reorganization plan that would dissolve the company, pending court approval. Under the proposal, the coal producer would select an administrator to "wind down" operations and handle claims against the company. Mission intends to auction off substantially all of its assets in February.

Courts took action this week against two coal companies owned by the family of West Virginia Gov. Jim Justice over unpaid debts. A federal judge appointed a special commissioner to assist the National Union Fire Insurance Co. of Pittsburgh Pa. in collecting a nearly $560,000 judgment from Southern Coal Corp. and nearly $197,000 in prejudgment interest, while another judge granted a federal prosecutor's motion to depose employees and representatives of Justice Energy Co Inc. to gain information on the company's failure to pay a $1.2 million court-imposed sanction. The company may not have the resources to pay the fine, which was imposed in 2016 after the company failed to respond to a court order in a civil proceeding.

On a brighter note, coal producers' credit quality has stabilized over the last two years since many companies emerged from bankruptcy and focused on reducing debt and shareholder returns as opposed to major capital expenditures. A strong export market for both thermal and metallurgical coal helped the sector generate some cash in 2018, a positive development for the credit health of many companies. S&P Global Ratings projects that the average adjusted debt will continue to decline in 2019.

While exports were a key component to the health of many U.S. producers, some western coal companies saw little progress made in 2018 toward developing a West Coast coal export terminal to connect them to Asian producers. Millennium Bulk Terminals-Longview LLC's proposed terminal in Washington state and the proposed Oakland Bulk and Oversized Terminal in California are both tied up in the court system, and there has been little public discussion of a federal proposal to export coal from West Coast military bases since it was floated in October.

In the southwest, six legacy coal mining sites in Arizona and New Mexico are targeted to host renewable energy production. The Rocky Mountain Institute, an advocacy group, is partnering with Australian miner BHP Group Ltd. to redevelop the sites or similar sites to hold solar panels or wind turbines.

The industry experienced two barge incidents as the year drew to a close. A coal site worker was killed while working on a coal barge that sank in a recovery pond in Washington state just before the new year, marking the coal sector's 12th fatality of 2018, and a towing vessel pushing 15 loaded coal barges made contact with a bridge on the Ohio River on Dec. 25, 2018, causing all the barges to break free and several to sink.

Upcoming events

Energy forum: The United States Energy Association will hold its State of the Energy Industry Forum at 9 a.m. on Jan. 24 at the National Press Club in Washington, D.C.

Carbon capture discussion: The Atlantic Council and the Global CCS Institute will host a discussion on the institute's report "The Global Status of CCS" from 3-6 p.m. on Jan. 28 at the Atlantic Council's headquarters in Washington, D.C.

West Virginia Coal Association: The 42nd annual West Virginia Mining Symposium will take place Jan. 29-30 in Charleston, W.Va.

Coaltrans USA: The 19th Coaltrans USA conference will be held Jan. 31-Feb. 1 in Miami.

S&P Global Ratings and S&P Global Market Intelligence are both owned by S&P Global Inc.