At the time of filing its IPO, Peabody released an Energy Ventures Analysis Inc study which showed that between June 2000 and February 2001 Powder River Basin coal prices increased 25% while central Appalachian coal prices were up 45%.
The study said the expectation of continued high prices was "due to several factors, including the high cost of competing fuels such as natural gas, higher electricity demand and the availability of excess coal-based electricity generation capacity".
Peabody's earnings release noted the company has only 6 million tons of production that are subject to improved pricing in 2001, adding "uncommitted production grows to an estimated 68 million tons" in 2002.
Peabody also expects power plant consumption to grow to 984 million tons in 2005 and 1.01 billion in 2015 out of projected total US usage of 1.08 billion tons and 1.10 billion tons, respectively.
In 2000, coal-based plants generated an estimated 51% of US electricity, consuming 928 million tons of coal out of the total of 1.03 billion used in the US. Another 59 million tons were exported.
Last week, Peabody also released its December 2000 quarter results, reporting lower third-quarter operating earnings that were in line with expectations.
Fourth quarter results are expected to reflect a gain of US$150 million from the January sale of the group’s Australian operations to Rio Tinto. Subsequent to the US$455 million sale Peabody has repaid US$248 million of term loans, while a further US$152 million will be used to repay long-term debt and the rest will be used to fund capital spending.
For the third quarter Peabody reported EBITDA - earnings before interest, taxes, depreciation and amortisation - of US$112.7 million compared with US$115.7 million in the quarter ended December 31, 1999.
After interest, taxes, depreciation and amortization the company had a third quarter net loss of US$934,000 compared to a loss of US$9.7 million in fiscal 2000.
Quarterly revenues declined to US$634.1 million from US$709.5 million a year earlier as lower volumes and pricing in the midwest were only partially offset by improved prices for coal from Wyoming's Powder River Basin and increased sales of Appalachian coal.
Peabody mines produced 115 million tonnes in 2000, well up on the 37 million tonnes produced in 1990.