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Natural Resources & Energy

Cloud Peak Energy Considers Selling Company; Gives Executive Bonuses, Cuts Retirement Benefits

Market Summary of Cloud Peak Energy just after announcing its potential sale
Google Market Summary

Cloud Peak Energy, one of the largest coal producers in the country with two mines in Wyoming, announced today it will review strategic alternatives which include a potential sale of the company. The announcement comes after company stock shares hit a 52-week low today at $1.32. That’s nearly half of its value from this time last year.

Clark Williams-Derry, director of energy finance at Sightline Institute, an environmental research center, said “strategic alternatives” could be a potential sale of the company. It could also mean the sale of a mine or any kind of asset, refinancing existing debt, pushing debt out further, or doing nothing.

Williams-Derry says this comes as Cloud Peak has seen declining profit margins, lower profits in coal and a huge debt payment coming up.

“The bottom line here is that Cloud Peak probably sees the handwriting on the wall. It sees that it’s got big debt that it can’t pay back and is struggling now to make any money at all. This really looks like a desperation move,” Williams-Derry said.

Cloud Peak Energy did not lay out a concrete timeline for the process and wrote in its announcement not to expect updates on it either.

In a filing today, the company announced it would give an extra year's pay to executives to retain them through “ongoing challenges.”  That will be paid out over two years. This comes after a third-quarter announcement at the end of October to cut medical benefits for retired workers.

Rob Godby, energy economist at the University of Wyoming, said the timing makes sense.

"If selling the company was the strategy, canceled medical benefits makes much more sense, as reducing that liability makes the company more valuable,” he said.

Just after the announcement, share prices shot up 12 percent.

UPDATE: The original story read executive bonuses would be a doubling of the salary, but in fact it will be an extra year's pay, given out over two years time.

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