Coal News
7
|
World Coal
|
January 2016
The coal industry continues
to navigate turbulent
times. What is your view of
long‑term energy markets?
In recognising the importance of coal
to long-term energy demand, we
have to start with the premise that
access to affordable energy is a basic
necessity and essential for quality of
life. Over the past century, access to
electricity has brought an
extraordinary transformation to our
lives, and coal’s contribution has been
far reaching.
Coal has been the world’s
fastest‑growing major fuel this decade,
underpinning urbanisation and lifting
billions to better, longer lives. Today
we are seeing more than 75 million
people added to cities each year,
which creates greater demand for
modern conveniences and
infrastructure that require steel to make
and energy to use. And this ultimately
points to use of coal. All forms of
energy are needed to meet these
demands. Coal is unique in its scale,
cost and reliability.
Peabody, along with others, believes
in favourable long-term demand trends
for coal, which is approaching oil in
terms of use. In a recent analysis, Wood
Mackenzie projected that coal would
surpass oil as the world’s largest
energy source in coming years.
What measures is Peabody
taking to help the company
weather the storm in global
markets?
Peabody’s new management team is
taking aggressive steps to improve the
business with an intense focus on the
operational, organisational, portfolio
and financial areas of our business. Let
me run through our progress:
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The business lowered costs while
often lowering production in line
with market factors. We have an
unmatched portfolio of assets,
geographic diversity and operations
in some of the best mining regions
in the US and Australia.
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We created a leaner organisation
structure at the management and
administrative level and had the
lowest overhead costs in a decade,
down 29% from the prior year.
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Our asset base provides option
value to hold for development,
transfer into joint venture
opportunities or to monetise.
We’re currently advancing
multiple processes, including
the sale of our New Mexico and
Colorado assets to Bowie Resource
Partners in a transaction that is
expected to close during the first
quarter of 2016.
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Our dual financial objectives
are optimising our liquidity and
reducing debt. Opportunities
for deleveraging could include
proceeds from assets sales,
reduced cash outlays for cost or
capital management, rising cash
flows from any eventual market
improvements, or buybacks and
exchanges of debt.
Beyond the planned sale
of your New Mexico and
Colorado assets, are any
further mine sales planned?
Our criteria for evaluating
opportunities for potential sale of
certain mines or non-core assets
includes strategic fit, value
considerations, potential growth and
capital or cash requirements. Making
the right deal is as important as the
timing.
What is your longer‑term
view of US coal markets?
While natural gas prices were lower in
2015, we expect prices to increase over
time from new industrial demand,
LNG export capacity, Mexico pipelines
and slower production growth. The
PRB and Illinois Basin are
best‑positioned and will benefit
from higher utilisation and basin
switching.
Energy policy is a
major topic for global
leaders. What are your
views on the steps needed
for a low‑carbon energy
future?
We all share the goals of affordable
energy, strong economies and a clean
environment. We believe use of
advanced coal technologies presents a
ready-today solution toward
low‑carbon energy systems for
policymakers worldwide.
Deployment of high-efficiency
low-emissions technologies, which can
achieve a 25% reduction in the carbon
dioxide (CO
2
) emissions rate, will
play an increasingly significant role
in meeting greenhouse gas
commitments. As an example, moving
the current average global efficiency
rate of coal-fueled power to
supercritical levels could deliver the
equivalent environmental benefit of
reducing India’s annual CO
2
emissions
to zero.
Longer term, world leaders
recognise that policy measures are
urgently needed to accelerate
development of carbon capture
utilisation and storage technologies,
which will drive toward the
ultimate goal of near-zero emissions
from coal.
