Peabody Energy Australia

In a time in which people still get most of their power from coal-fired plants, Peabody Energy is king. The world's largest private-sector coal producer, Peabody operates some 30 mines and processing facilities in the US and Australia. It sells about 251 million tons of coal annually and maintains more than 9 billion tons in reserve. US customers, primarily power companies, account for most of Peabody's sales, and its coal fuels almost 50% of US power. Its operations include coal trading and brokering, coalbed methane production, transportation-related services, and development of coal-based generating plants. The company has also begun investing in carbon capture technology. 

Operations

The company operates three mining segments (Western US Mining, Midwestern US Mining, and Australian Mining) and a Trading and Brokerage segment. A fifth segment, Corporate and Other, includes mining and export/transportation joint ventures, energy-related commercial activities as well as the management of coal reserve and real estate holdings.

Sales and Marketing

The bulk of Peabody's sales are to US electricity generating plants. The remaining sales are in Australia and to US manufacturing facilities. The company also has a 48% stake in a Venezuelan joint venture which produces thermal coal for export..

Financial Analysis

Peaboby saw it revenues grow by 18% in 2011 thanks to a 28% increase in the Australian mining segment due to higher prices and due to increased pricing for seaborne metallurgical and thermal coal thanks to stronger global coal demand. Other factors included coal supply constraints resulting from weather impacts in early 2011, a 7% increase in Western US Mining segment sales due to increase in volumes and the weighted average sales price, and increased shipments in the Powder River Basin region due to increased customer demand, and a 12% increase in Midwestern US Mining sales due to higher sales prices and contracts. It also saw a 63% increase in its Trading and Brokerage results due to increased in export volumes, and higher coal market pricing on brokerage activity.

Net income declined by almost 24%, primarily due to the increase in depreciation, depletion and amortization expenses stemming from the company's acquisition of Macarthur Coal (Australia).

Strategy

Peabody focuses on organic growth projects in Australia and the US, including expanding and extending existing mines and developing new ones. It is also working to grow its global Trading and Brokerage platform, including sourcing coal from third-parties via purchases and joint venture arrangements and expanding its presence in the Asia-Pacific region through strategic partnerships and joint ventures.

In 2011 Peabody joined with the world's largest steel producer, ArcelorMittal, to make an offer to jointly acquire Macarthur Coal and its extensive holdings in Australia's Bowen Basin (270  million tons of coal reserves and mines that produced about 4 million metric tons in 2010). Under terms of the deal, Peabody was to hold a 60% stake in Macarthur and ArcelorMittal 40%. Their joint venture was called PEAMCoal. Macarthur's largest shareholder, China-based Citic Resources, which owned 25%, agreed to an offer of A$16 a share. Shortly after PEAMCoal took a majority stake in Macarthur, ArcelorMittal backed out of the deal and sold its stake in the joint venture back to Peabody. Through its subsidiary PEAMCOAL, Peabody acquired full control of Macarthur at a cost of about $5 billion.

Ownership

In 2012 BlackRock, Inc. owned 11% of Peabody, T. Rowe Proce Associates, 9.5%.

Company Background

Peabody was founded in 1883 as a coal supplier but began coal mining in earnest in 1926.