Year in review: Peabody Energy

THE year 2005 marked a lot of changes for Peabody Energy as it continued its quest to remain the world’s largest private-sector coal company. During the year the US coal giant successfully acquired additional reserves and operations at home and eyed assets abroad.
Year in review: Peabody Energy Year in review: Peabody Energy Year in review: Peabody Energy Year in review: Peabody Energy Year in review: Peabody Energy

Peabody's Harris No. 1 Mine, West Virginia.

Donna Schmidt

That movement started fresh within the first full week of the year, when Peabody successfully acquired 324 million tons of Powder River Basin coal reserves for US$.92 cents/minable ton . The company also purchased more than 100Mt of Kentucky reserves and facilities from Alcoa in November.

With any change comes the ability to take worthwhile risks – something Peabody did a lot of in 2005. In February, the company sold its 47% stake in the Prairie State Energy Campus project in Illinois, but in March said it would acquire Lexington Coal Company and its 70Mt of reserves through a $US61 million cash buy-out.

In September, Peabody became an international industry force when it announced it would invest in the Chinese coal market over the following year, targeting a stake of at least 20% in any potential joint venture. The company also opened a branch office in Beijing the same week.

Peabody president Greg Boyce, who was appointed to Peabody’s top seat in April, said the move was preordained, as its “mission [was] to be a worldwide supplier of low-cost energy”. It is now in the process of examining opportunities in the country, including options for cleaner energy such as coal conversion.

Shortly after Peabody’s global expansion, its interest in the industry’s future came to fruition when it signed an agreement in October giving it a 30% stake in modular coal gasifier owner Econo-Power International Corporation (EPIC). The $US6 million investment in the coal-to-synthetic gas Btu conversion system was one that served to “[expand] coal’s traditional markets beyond electricity generation and steelmaking”

In November, the company joined with ArcLight Capital Partners to develop a 3Mtpa coal gasification facility in Illinois. When completed, the project could be one of the largest coal-to-natural gas complexes in the US.

Some expansion Peabody made throughout the year made change a truly key word for the organisation, but not all involved acquisition. Although the company announced it would close its 100-employee Seneca mine by year’s end, it also announced that it was considering recommencing production at its Mine No.11, an Illinois mine sealed more than 50 years ago.

The effects of these changes were viewed positively in the marketplace. Shares of Peabody stock increased 123% during 2005, from a low of US$37.74 to an October high of US$86.90. In all, 2005 was a banner year for Peabody and its shareholders.

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