Peabody Ends Benefit Plan Amidst Financial Struggles
In a November federal filing, Peabody Energy reported it would no longer be paying into a certain healthcare benefit plan for retired miners who are on or eligible for Medicare or provide life insurance to retirees. That includes those in Wyoming.
"We regret not being able to maintain our existing retiree healthcare program; however, we are continuing to offer some financial support for pre-65 retirees," Julie Gates, Peabody's vice president of communications, said in a written statement.
The move will save the company $174.5 million in the long-term as it seeks to make cost-cutting measures. The coal producer's most recent quarterly report showed a strong cost performance for its thermal mines, but major financial issues overall. In its third quarter, the company saw a revenue decline of 39 percent compared to the prior year, pressure to put up significant collateral for reclamation obligations, and an impending debt obligation amidst it all.
"The decision to allocate funds where they are needed most follows several other initiatives the company has undertaken this year to further improve our operating performance and ensure we have a scalable structure that can respond to evolving market conditions," wrote Gates.
One effort streamline costs fell through recently. Peabody sought to save costs through a joint venture with Arch Resources, another coal producer,but a federal judge rejected the proposal.
In Peabody's November 9 filing, the company warned of bankruptcy risk.
"The combined risks associated with the Company's recent financial results, market conditions, additional collateral demands and potential Credit Agreement noncompliance raise substantial doubt about whether the Company will meet its obligations as they become due within one year from the date of issuance of these unaudited condensed consolidated financial statements and its ability to continue as a going concern," read the filing.
Josh Macey, a University of Chicago Assistant Professor of Law and coal bankruptcy expert, said the move by Peabody is a typical one given it has sole discretion over the move. He said, though, that more cuts sound like they're coming based on Peabody's own warnings in its latest quarterly report.
The move will take effect Jan. 1, 2021.