| Type | Public (NYSE: BTU) S&P 500 Component |
|---|---|
| Industry | Coal |
| Founded | 1883 (Chicago, Illinois) |
| Headquarters | St. Louis, Missouri |
| Key people | Gregory H. Boyce, President and CEO |
| Revenue | US$ 6.86 Billion (FY 2010)[1] |
| Operating income | US$ 1.31 Billion (FY 2010)[1] |
| Net income | US$ 774 Million (FY 2010)[1] |
| Total assets | US$ 11.4 Billion (FY 2010)[2] |
| Total equity | US$ 4.66 Billion (FY 2010)[2] |
| Employees | approx. 7,200 [3] |
| Website | www.peabodyenergy.com |
Peabody Energy Corporation (NYSE: BTU), is the largest private-sector coal company in the world.[4] Its primary business consists of the mining, sale and distribution of coal, which is purchased for use in electricity generation and steelmaking. Peabody also markets, brokers and trades coal through offices in China, Australia, Germany, the United Kingdom, Indonesia, Singapore and the United States. Other commercial initiatives include the development of mine-mouth coal-fueled plants, the management of coal reserve holdings, and technologies to transform coal to natural gas and transportation fuels.
The coal produced by Peabody Energy fuels approximately 10% of the electricity generated in the United States and 2% of electricity generated throughout the world, based on recorded sales in 2010 of 246 million tons of coal.[5] Peabody markets coal to electricity generating and industrial customers in more than 25 nations. As of December 31, 2010, the company had approximately 9 billion tons of proven and probable coal reserves and liquidity that matches the company’s entire enterprise value of 12 years ago.[5]
Peabody Energy maintains ownership of majority interests in 28 surface and underground mining operations located throughout the United States and Australia. In the United States, company-owned mines are located in Wyoming, Colorado, Arizona, New Mexico, Illinois, and Indiana. Peabody's largest operation is the North Antelope-Rochelle Mine located in Campbell County, Wyoming, mining more than 100 million tons of coal in 2010. Peabody spun off coal mining operations in West Virginia and Kentucky into Patriot Coal Corporation (NYSE: PCX) in October 2007. In October 2011, Peabody acquired a majority ownership stake in Queensland-based Macarthur Coal Ltd, which specializes in the production of metallurgical coal, primarily seaborne pulverized injection coal.[6]
Peabody Energy was listed as number 338 on the Fortune 500 list of companies in 2011.[7] The company was named to Fortune Magazine's list of America's Most Admired Companies in 2008, ranking first in their sector in: Innovation, People Management, Social Responsibility, Financial Soundness, et al.[8] The company is headquartered in downtown St. Louis, Missouri.[9]
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The Peabody Energy company was originally founded as Peabody, Daniels & Company in 1883 by Francis Peabody, the son of a prominent Chicago lawyer, and a partner.[10] The company bought coal from established mines and sold it to homes and businesses in the Chicago area. In the late 1880’s, Francis Peabody bought out his partner’s share of the business and the company was incorporated in the state of Illinois under the name Peabody Coal Company in 1890. In 1895, it began operations of its first mine in Williamson County, Illinois and later expanded its operations in Illinois.[11] In 1913, the company won its first long-term contract to supply Chicago Edison Company, the predecessor to utility Commonwealth Edison.[12] The company’s growth continued after World War I and the corporation went public for the first time in 1929 with a listing on the Midwest Stock Exchange and in 1949, was listed on the New York Stock Exchange.[13]
Despite being ranked eighth among the country’s top coal producers in the mid 1950’s, Peabody began to lose market share to companies operating cost-efficient surface mining operations.[11] To address the situation, it entered into merger talks with Sinclair Coal Company. A merger between the two companies occurred in 1955, resulting in the transfer of Peabody's headquarters to St. Louis, Missouri. The merged company retained the Peabody name.[13] Under the leadership of chairman Russell Kelce, the company expanded production and sales.[11]
In 1962, Peabody expanded into the Pacific with the opening of mining operations in Queensland, Australia.[11] During this period Peabody also forged an equity partnership with the Japanese trading company Mitsui & Co., Ltd. and the Australian construction company Thiess Holdings.[14] In 1968, the company was purchased by the Kennecott Copper Corporation. However, the U.S. Federal Trade Commission challenged the purchase as an antitrust violation. In 1976, the FTC ordered Kennecott to divest itself of Peabody. The newly-created Peabody Holding Company purchased the Peabody Coal business of Kennecott for $1.1 billion, and a consortium of companies controlled Peabody-Holding.[13]
In the 1980s, Peabody expanded its operations in the Eastern United States, acquiring the West Virginia coal mines of Armco Inc in 1984.[15] The company sought to broaden its metallurgical coal portfolio through the purchase of Eastern Gas and Fuel Associates’ seven West Virginia mines in 1987.[11] Peabody also expanded westward, opening the North Antelope and Rochelle mines in the low sulfur Wyodak seam in the heart of Wyoming’s Powder River Basin in 1983 and 1984, respectively.[14]
The passage of the Clean Air Act amendments in 1990 prompted the closure of some Peabody mines. However, other mines under its ownership were able to remain in operation due to the implementation of new equipment and procedures that reduced sulfur dioxide emissions.[11] Stricter requirements outlined in Phase II of the legislation also prompted Peabody to invest in emissions reducing technologies. In 1990, the U.K.-based conglomerate Hanson plc, one of the owners of Peabody Holding at the time, bought out the rest of the owners.[16]
In 1993, Peabody Energy expanded their holdings in the Pacific with the acquisition of three mines in Australia and subsequently developed a fourth operation in New South Wales.[17] Peabody also expanded its operations domestically with acquisitions in New Mexico in 1993 and Wyoming in 1994 and assumed a stake in Black Beauty, a Midwest producer, in response to increased demand for metallurgical coal.[18][11]
Following corporate ownership changes in the 1990s, the company filed an initial public offering (IPO) in May 2001, and since this time it has operated as a publicly-traded company.[11]
In 2002 Peabody launched its Peabody Energy Australia Coal Co. following the acquisition of the Wilkie Creek Mine in Queensland’s Surat Basin.[19] In October 2006, Peabody completed an acquisition of Excel Coal Limited, an independent coal company in Australia. Peabody paid $1.52 billion for Excel and also assumed $227 million of Excel's debt. At the time, Excel owned three operating mines and three development-stage mines in Australia. Additionally, Excel had an estimated 500 million tons of proven and probable coal reserves.[20] As of 2011, Peabody's Australian mining operations are located in Queensland and New South Wales. Most of the company’s Australian production is metallurgical coal.[21]
The company also advanced a number of coal-to-liquids and coal-to-gas projects to reduce emissions during the decade.[22] On August 30, 2007, Ernie Fletcher, the governor of the U.S. state of Kentucky signed into state law a bill that will provide approximately $300 million in incentives to Peabody to build a coal gasification plant in that state.[23] The resulting incentives were provisioned in the form of breaks on sales taxes, incentive taxes and coal severance taxes.[23] In 2007, Peabody and a consortium of municipal electric cooperatives began construction on the 1600-megawatt Prairie State Energy Campus clean coal project in Lively Grove, Illinois.[24] The company now retains five percent equity stake in the project, which is expected to begin generating power for customers in 2011.[25] At the 2010 World Energy Congress, Peabody CEO Gregory Boyce proposed a plan that advocated for the expanded use of coal worldwide, placing emphasis on geographic areas with limited or no access to electricity.[26]
Peabody Energy’s world headquarters is in St. Louis, MO, and as of 2010 it also maintains offices in London, England; Beijing, China; Ulaanbaatar, Mongolia; Singapore; Brisbane and Sydney, Australia; Essen, Germany; and Balikpapan and Jakarta, Indonesia.[27][5] In the U.S. West, Peabody operates Powder River Basin operations in Wyoming as well as other mining operations in Arizona and New Mexico. Operations in the U.S. Midwest consist of mines in Indiana and Illinois. Peabody also operates a single underground mine in Colorado. All of these assets are occupied with the mining, preparation, and selling of coal to utility companies or steelmakers.[5]
Peabody’s Australian operations consist of metallurgical and thermal coal mining operations in Queensland and New South Wales. Purchasers of its coal product include Australian utility companies or steel producers.[28]
The Trading and Brokerage function is primarily concerned with the brokering of coal sales, trading coal, and freight or freight-related contracts.[29] A smaller division of Peabody Energy deals with mining, export and transportation joint ventures, energy related commercial activities, and the management of Peabody’s operations and holdings. With growing demand for coal across Asian markets, especially in China, Indonesia, and India, Peabody has expanded its presence in Asia through offices in China, Mongolia, Indonesia, and Singapore.[29]
In 1964 Peabody Energy (then Peabody Western Coal) signed a contract with the Navajo tribe and two years later with the Hopi tribe, providing the company with an unusually generous mineral lease as well as use of the plateau's water source. The contract was approved despite widespread opposition and the lack of clear authority of U.S. appointed tribal councils. The contract was negotiated by prominent natural resources attorney John Sterling Boyden, who claimed to be representing the Hopi tribe while actually on the payroll of Peabody as well.[30]
Peabody Energy pumped potable water from the underground Navajo Aquifer in a slurry pipeline operation to transport extracted coal to its Mohave Generating Station in Laughlin, Nevada. The Navajo Aquifer (N-aquifer) is a main source of potable water for the Navajo and Hopi tribes, who use the water for farming and livestock maintenance as well as drinking and other domestic uses. The tribes have alleged that the pumping of water by Peabody Energy has caused contamination of water sources and a severe decline in potable water.
Peabody Energy has been tagged as a major offender of environmental degradation. Peabody Energy has a long history of opposing efforts to mitigate the negative environmental effects of coal production and combustion. Peabody Energy was an active opponent of efforts to enact a strong Clean Air Act in 1970, of acid rain provisions in the 1990 Clean Air Act Amendments, and throughout the current efforts to significantly strengthen mercury provisions.[31] In a recent report from the National Coal Council, headed by many major executives of Peabody Energy, they called for more than doubling U.S. coal consumption by 2025.[32]
In Newsweek's 2009 Green Rankings, Peabody Energy was ranked #500 out of the top 500 largest US companies based on their negative environmental impact - they received a the lowest possible score of 1 out of a possible 100.[33]
The environmental impact of Peabody Energy's surface mining operations in Muhlenberg County, Kentucky is the subject of John Prine's 1971 song "Paradise". The company was forever immortalized in the song,[34] popular on the bluegrass circuit, whose refrain goes this way:
[35]And daddy won't you take me back to Muhlenberg County
Down by the Green River where Paradise lay?
Well, I'm sorry my son, but you're too late in asking...
Mister Peabody's coal train has hauled it away.