An insurance company sued Peabody Energy Corp. last week because the multinational coal operator hasn’t provided collateral for bonds meant to secure mine reclamation.
Argonaut Insurance Co. has issued about $203 million in surety bonds for Peabody operations in the United States and abroad. Most of the bonds relate to coal mine cleanup.
Argonaut has asked Peabody to either release it from the bonds or provide collateral. Peabody has provided $75 million, but Argonaut wants the full $203 million.
The coal company’s “deteriorating” financial condition “may adversely impact the Surety’s risk under the Bonds,” the lawsuit says.
“We are seeking a mutually agreeable solution with Argo with regard to their collateral request,” Peabody spokesperson Julie Gates said in a statement.
Peabody is the nation’s largest coal miner, with operations in Colorado, Illinois, Indiana, New Mexico and Wyoming. It went through a bankruptcy reorganization in 2016, and this year the company is reeling from the double whammy of shrinking coal markets and the coronavirus pandemic.
Gates said Peabody would provide a comprehensive update on collateral requests when it reports its third-quarter earnings Monday. When it reported its second-quarter earnings in August, Peabody slashed the value of its largest asset – the North Antelope Rochelle mine in Wyoming – by $1.4 billion (Greenwire, Aug. 6).
It can be a harbinger for coal companies short on cash when sureties come calling.
Sureties asked Cloud Peak Energy Inc. for increased collateral before that company filed for bankruptcy last year. Navajo Transitional Energy Co. has since taken over Cloud Peak’s mines in Montana and Wyoming.
Peabody reported having $849 million in cash and equivalents in August.
Reprinted from Greenwire with the permission of E&E News. Copyright 2020. E&E News provides essential news for energy and environment professionals at www.eenews.net.