Peabody’s Deeply Misguided Bankruptcy Reorganization Rejects Reality

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Brian Willis: 202.675.2386, Brian.Willis@sierraclub.org

As the American energy market doubles down on clean energy, Peabody Energy bets billions on 19th century coal technology

 

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WASHINGTON, D.C. - The U.S. Bankruptcy Court for the Eastern District of Missouri indicated today that it will approve Peabody Energy’s reorganization plan -- a plan that has been panned by environmental groups, creditors, and even its former corporate executives for its treatment of stakeholders and overly rosy projections for profitability in a sector rapidly shifting toward clean energy.

 

Over the past decade, coal-fired power plants have been aging and retiring. In 2015, for example, 40 coal-fired power plants were retired and enough overall coal capacity was shed to make up the total capacity of all of Indiana’s operating coal plants. All the while, utilities were aggressively seeking out cheap wind, solar, and energy efficiency options for their customers to replace the load left behind, not building new coal plants. The same thing happened in 2016, when 29 coal plants were scheduled to retire and 13,398 megawatts worth of coal capacity went offline - a megawatt number greater than all of the current coal plant output operating in West Virginia today.

 

While coal was declining in this time period, clean energy has dominated in new installations. In 2016, the U.S.’ wind energy increased by 19 percent from 2015 levels and 19 states saw wind generation increase over 10 percent. In the same time frame, solar saw a 44 percent increase in generation (compared to 2015) and 46 states saw an increase in solar generation by 10 percent or more. 36 states saw total renewable generation (wind and solar) increase by more than 10 percent over 2015 numbers.

 

In 2007, no state produced 10 percent of its electricity from clean energy, in 2016 it was 17 states. For reference, in 2007, only 9 states produced 10 percent or less of their electricity with coal, and now that number is up to 17 states. In this context, critics lambasted Peabody’s entire reorganization plan for structuring the company around the core assumption of increasing demand for coal (despite their being fewer and fewer coal plants to sell to, the shuttering of coal export terminals, and booming clean energy growth) and increasing profits (despite dozens of coal companies filing for bankruptcy over the past five years due increasingly to competition for cheaper, clean energy).

 

Sierra Club filed its own objection to the Peabody reorganization plan, urging the court to reject the plan based on its flawed assumption of a miraculous recovery of the coal market despite the clear market indicators showing coal cannot compete in many places in the United States.

 

In response to the anticipated approval of Peabody’s plan, Mary Anne Hitt, the Director of Sierra Club’s Beyond Coal campaign, released the following statement:

 

"This would be a suitable bankruptcy recovery plan for a rapidly growing coal company in the 19th century, but nowadays the market is shifting away from coal and Peabody is refusing to recognize that. The market for coal has never been worse in the United States because of the increasingly lower costs and popularity of clean energy, and the effective grassroots organizing around retiring coal plants and replacing them with energy efficiency, wind, and solar.

 

“Over the past two years, over two hundred coal units have retired (with more on the way), and analysis now shows that the new electricity capacity coming online is dominated by clean energy. With this in clear sight, Peabody’s reorganization plan is putting billion dollar bets on a coal resurgence that just isn't going to happen. America is transitioning away from coal, and by failing to recognize that in this deeply-misguided reorganization plan, Peabody’s balance sheet will quickly go back into the red.”

 

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About the Sierra Club

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