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Peabody expected to be key coal supplier to Indiana Michigan's Rockport plant

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Peabody expected to be key coal supplier to Indiana Michigan's Rockport plant

Peabody Coal Sales is expected to be the primary supplier of sub-bituminous coal, including through a new sales agreement, to Indiana Michigan Power Co.'s, or I&M's, 2,600-MW Rockport power plant in Spencer County, Ind., during the six months starting Oct. 1, according to a new regulatory filing.

Charles West, manager of coal procurement for Columbus, Ohio-based American Electric Power Co. Inc., I&M's parent company, told the Indiana Utility Regulatory Commission last week that coal will be supplied to Rockport under three Peabody agreements during the six-month period running through March 2018. Peabody Coal Sales is a subsidiary of Peabody Energy Corp.

The first agreement, for approximately 1 million tons, has been in place for several years and will expire at the end of 2017, West said.

The second is a new agreement for 3 million tons for one year and the third is a right-of-first-refusal agreement for 500,000 tons, he added.

Rockport's remaining sub-bituminous coal supply deals for the October-through-March period are with Arch Coal Sales Company Inc. for 500,000 tons and 300,000 tons, he said.

Alpha Coal Sales Co. LLC also has two contracts to supply a total of 310,000 tons of bituminous coal before the end of this year to Rockport, I&M's only remaining coal plant.

In addition, Southeastern Land LLC will supply 245,000 tons in 2017 and Ember Energy LLC about 108,000 tons of bituminous coal, he said.

West said I&M expects to pay a weighted average delivered cost of $43.25/ton, or 233.75 cents/MMBtu, for Rockport coal during the period. That is forecast to include an f.o.b. mine cost of $17.89/ton and a transportation cost of $25.36/ton.

Additional coal requirements not already committed will be purchased, as necessary, to fulfill any remaining supply requirements at Rockport, West said.

From Dec. 1, 2016, through May 31, I&M paid an overall weighted average delivered cost of $41/ton, or 225.98 cents/MMBtu, for Rockport coal, West said.

That was approximately 5.9% less than I&M's original projected cost of $43.29/ton, or 240.21 cents/MMBtu.

The actual cost was lower, West explained, because of lower barge, rail and transload rates "along with a significantly lower percentage of the higher-priced East coal that was delivered" during the period.

Since late 2016, Central Appalachian coal prices have stabilized at about $55/ton, while Powder River Basin coal prices dropped slightly in early 2017 after rebounding in late 2016, West said.

Bob Matyi is a contributing reporter to S&P Global Platts, which, like S&P Global Market Intelligence, is owned by S&P Global Inc.