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Peabody wrote down coal mine value by $1.4 billion

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By Micah Maidenberg

Peabody Energy Corp. wrote down the value of a big coal mine in Wyoming, a move that reflects intense pressure on coal as an energy source and comes as the mining company struggles with weaker demand amid the Covid-19 pandemic.

Peabody on Wednesday said it impaired the value of its North Antelope Rochelle Mine by $1.42 billion after accounting for what it assumes will be lower natural gas prices over the long term, the timing of the retirements of coal plants and the growth of renewable energy sources.

"These factors have contributed to the company projecting that coal's share of the U.S. generation mix will continue to be lower than prior year levels," Peabody said.

Thermal coal, the type of the mineral used to generate electricity, has lost ground in recent years as utilities have opted to produce more power using natural gas and invested in solar- and wind-powered facilities.

The U.S. Energy Information Administration said Wednesday that 121 coal-fired power plants in the U.S. had been repurposed to burn other types of fuel between 2011 and last year, with 103 of them converted or replaced by natural gas facilities.

"The decision for plants to switch from coal to natural gas was driven by stricter emission standards, low natural gas prices, and more efficient new natural gas turbine technology," the agency said.

Last year, Peabody sold 85.3 million tons of coal meant for coal-fired power plants from the North Antelope mine, located near Gillette, Wyo.

The impairment weighed on Peabody's results for the second quarter, with the company reporting a loss of $1.55 billion, down from earnings of $39.5 million the year earlier. The loss attributable to common shareholders amounted to $1.54 billion, or $15.78 a share, compared with a profit of $37.1 million, or 34 cents a share, in the second quarter last year.

Revenue for the latest period fell to $626.7 million from $1.15 billion, Peabody said.

The company characterized prices for thermal coal, as well as for metallurgical coal used in steelmaking, as depressed, a situation it said was largely driven by the spread of the coronavirus.

"While Peabody's mine operations were not materially impacted by the Covid-19 pandemic during the quarter, the company has responded to weaker demand by lowering production across its operations to meet demand," Peabody said.

The company has been reducing costs. Since April, it cut another 450 positions, including contractors. Over the past year and a half, the company has cut its work force by about 24%, Peabody said.

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