trending Market Intelligence /marketintelligence/en/news-insights/trending/8ScpLpEowMzJaaalRW9DmA2 content
Log in to other products

Login to Market Intelligence Platform

 /


Looking for more?

Contact Us

Request a Demo

You're one step closer to unlocking our suite of comprehensive and robust tools.

Fill out the form so we can connect you to the right person.

If your company has a current subscription with S&P Global Market Intelligence, you can register as a new user for access to the platform(s) covered by your license at Market Intelligence platform or S&P Capital IQ.

  • First Name*
  • Last Name*
  • Business Email *
  • Phone *
  • Company Name *
  • City *
  • We generated a verification code for you

  • Enter verification Code here*

* Required

Thank you for your interest in S&P Global Market Intelligence! We noticed you've identified yourself as a student. Through existing partnerships with academic institutions around the globe, it's likely you already have access to our resources. Please contact your professors, library, or administrative staff to receive your student login.

At this time we are unable to offer free trials or product demonstrations directly to students. If you discover that our solutions are not available to you, we encourage you to advocate at your university for a best-in-class learning experience that will help you long after you've completed your degree. We apologize for any inconvenience this may cause.

In This List

Proposed 'super-competitor' coal joint venture casts shadow over Cloud Peak sale

Greenhouse gas and gold mines Nearly 1 ton of CO2 emitted per ounce of gold produced in 2019

Essential Metals & Mining Insights - September 2020

Q2: U.S. Solar and Wind Power by the Numbers

Essential Energy Insights - September 17, 2020


Proposed 'super-competitor' coal joint venture casts shadow over Cloud Peak sale

SNL Image

Cloud Peak Energy mines coal from their Antelope coal mine in the Powder River Basin.
Source: Alan J. Nash

News of a joint venture formed by its two largest competitors could thwart potential buyers of Cloud Peak Energy Inc. as the distressed company advances its bankruptcy sale process.

The two largest coal miners in the Powder River Basin, Peabody Energy Corp. and Arch Coal Inc., announced June 19 they were working to combine the operations of their Powder River Basin and Colorado coal assets to better compete with natural gas and renewable energy. Cloud Peak, the third largest coal miner in the struggling Powder River Basin region, already reported scant initial interest from potential buyers as recent operational issues and weakened overseas demand compound longer-term problems caused by weaker domestic demand.

"Clearly, Cloud Peak is struggling," said Robert Godby, a professor and director of the University of Wyoming Center for Energy Economics and Public Policy. "It's an open question of what it will do to the potential auction. It could possibly have a negative effect if people read that these two companies are going to control a good chunk of the Powder River Basin. If it was tough competition before, competing against companies with so many resources, now, it's going to be really difficult."

The bankruptcy court recently approved an auction date of July 11 and allowed Cloud Peak to choose a stalking horse bidder for its assets up to two days before the auction.

Cloud Peak, which was formed in summer 2008 from assets previously owned by Rio Tinto, said general distress in the U.S. thermal coal industry and recent export market volatility were primary factors leading to its petition for Chapter 11 bankruptcy. Weather also contributed to the company's woes as heavy rains in the second quarter of 2018 kicked off months of structural instability at the Antelope mine while recent flooding in the Midwest U.S. caused significant disruptions to rail deliveries of coal.

Any buyer of the Cloud Peak assets would not only inherit potential operational challenges in a declining market but also may now face a potential "super-competitor" in the region better equipped to take on remaining market share, said Matt Preston, Wood Mackenzie's research director for North American coal markets.

"It's not positive for that, that's for sure," Preston said.

Clark Williams-Derry, director of energy finance for Sightline Institute, a sustainability think tank that closely watches coal mining in the Powder River Basin, said the announcement was "perfectly timed to undermine" Cloud Peak's sale process. He noted that of the company's three primary active coal mines in the basin, the most valuable is likely the Antelope mine, which has experienced operational issues, but produces coal that is of a higher quality than the company's Cordero Rojo mine and sells to a more stable market than the Spring Creek mine. The company's Spring Creek mine serves the depressed Asian market and many domestic power plants that are slated to close.

"The competition for the Antelope mine just got tougher. That could spell some bad news for the attempted sale during the bankruptcy process," Williams-Derry told S&P Global Market Intelligence. "At best it's neutral. At worst it's really bad."

Cloud Peak began exploring a sale process late last year and through its investment banker engaged with 21 potentially interested parties in November and December 2018, bankruptcy filings show.

"Unfortunately, the process resulted in only one proposal that was not actionable due to significant execution risk, and the sale process concluded without resulting in a transaction," said Cloud Peak Executive Vice President and CFO Heath Hill in a declaration filed May 10.

Cloud Peak also identified and contacted certain strategic and financial investors in early March 2019 to market a potential merger and acquisition transaction with third parties, but despite some parties entering into confidentiality agreements and investigating interest in the assets, an acceptable offer was not received. An adviser to Cloud Peak said they contacted 67 parties as of a June 7 filing, with 28 parties executing non-disclosure agreements to access confidential information about the company, another filing states.

Seaport Global Securities LLC analyst Mark Levin estimated in a November 2018 note that Cloud Peak's Antelope mine could be worth between $125 million and $175 million. He said the Spring Creek mine could be valued at about $90 million while Cloud Peak's Cordero Rojo mine's value was "negligible at best." He also noted the company, the third largest by volume in the Powder River Basin, already has higher cash costs than any other publicly traded coal company in the basin.