Cloud Peak Could Feel Impacts Of Powder River Basin Coal Consolidation

Jun 25, 2019

Powder River Basin in northeastern Wyoming and southeastern Montana.
Credit USGS

The recently bankrupt coal giant Cloud Peak is planning to sell off its assets next month. But a new deal between Arch Coal and Peabody Energy could throw a wrench in those plans.

Cloud Peak Energy has not had any luck in selling off its assets which include three coal mines. A marketing process last year only attracted one prospective buyer, which then walked away. Taylor Kuykendall, a coal reporter for S&P Global Market Intelligence, said that's been due to a depressed coal market. But he said this consolidation could make the sale process even tougher now.

"If you were thinking about buying Cloud Peak's mines and then last week you saw in the news that two of your potential future competitors just merged into a huge competitor... I don't think that that bodes well for anybody that might have been interested," Kuykendall said.

He said the impacts of the collaboration also come down to what the two companies want. Perhaps they're looking to save costs by lowering supply to meet demand. Alternatively, they could be looking for more control in the Powder River Basin.

"It'll be interesting to see if, once Peabody and Arch are together -- and again this is months down the road -- if they're going to use that power to try to edge out other competitors in the basin," Kuykendall said.

The consolidation still needs to get past regulatory hurdles which include potential antitrust concerns out of the Federal Trade Commission. Cloud Peak Energy's auction is expected to take place on July 11.