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Foresight Energy income tanks as talks with creditors lead to liquidity crunch

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Essential Energy Insights - September 17, 2020

Essential Energy Insights September 2020

Rate case activity slips, COVID-19 proceedings remain at the forefront in August


Foresight Energy income tanks as talks with creditors lead to liquidity crunch

Foresight EnergyLP reported a net loss attributable to limited partner units of $41.7million, compared to a net income of $42.3 million in the year-ago period as revenuesank on weak domestic coal demand.

The company reported coal sales revenue of $163.1 million, downfrom $238.9 million in the year-ago period. Foresight reported adjusted EBITDA of$50.2 million and cash flows from operations of $34.2 million.

"Our industry continues to be faced with extreme challengesresulting from competition from low cost natural gas, government regulations impactingelectric utilities and a reduction in demand for power domestically," saidForesight President and CEO Robert Moore. "Foresight Energy, while dealingwith the external industry challenges and matters related to the bondholder litigation,continues to focus on being the safest, lowest cost source of coal supplied fromthe Illinois Basin, and continues to believe that its cost structure will enablethe company to weather the depressed coal market better than its competitors."

Foresight reported a net loss attributable to partnership unitsof 32 cents per unit in the first quarter, below the S&P Global Market Intelligence normalized EPS consensus estimate of a 15 cents per unit loss.

Part of the net loss during the period is attributed to the impactof $9.7 million in debt restructuring costs, comprising legal and other adviserfees related to the bondholder dispute, Foresight said.

Another $5.9 million was incurred in "transition and reorganizationcosts," primarily representing retention compensation resulting from the partnership'stransaction with Murray Energy Corp.And $3.8 million in costs related to the Hillsboro mine fire that shut down operationsat the Deer Run mine.

Foresight noted thatit remains in default under all of its long-term debt and capital lease obligations,prohibiting the company from accessing borrowings or other credit. The company hadjust $16.2 million of cash on hand as of March 31.

The partnership remainsin active negotiations with affiliates and creditors, equity holders and otherstakeholders concerning terms of proposed restructuring transactions.

Murray Energy acquired a major stake in Foresight in April 2015. Foresightdebuted as a public companyin summer 2014 with high hopes as a low-cost producer based in the Illinois Basin.