For a reality check on America’s coal industry, consider how much a collection of Appalachian pits just sold for: nothing.
That’s what Booth Energy Group’s Cambrian Coal Corp. paid up front for a Teco Energy Inc. unit that controls a collection of surface and underground mines, a company statement Monday shows. Teco said it may receive $60 million should coal prices reach “certain levels” over the next five years. (Coking coal is at a decade low. Futures are on track to fall for a record fifth straight year.)
Bargain-basement coal deals are proliferating as producers bail out of an industry stuck in its worst downturn in decades. Miners are facing a slowing global economy, escalating competition from cheap natural gas and mounting environmental and mining regulations. In February, West Virginia businessman Jim Justice paid Russia’s OAO Mechel$5 million and assumed some debt to buy back operations that he had sold to the company in 2009 for $568 million.
Coal’s annus horribilis has already seen miners including Alpha Natural Resources Inc. file for bankruptcy while others such asConsol Energy Inc. seek to vacate the sector.
In January, Coronado Coal II LLC paid Cliffs Natural Resources Inc.$174 million in cash and assumed liabilities for mines in West Virginia. Teco, whose Teco Coal LLC operations yielded 2.8 million tons of the fuel in 2014, said it will keep certain personnel-related liabilities and transfer all other liabilities as part of the deal.
“The upfront costs to close the mines can be prohibitive,” said Ted O’Brien, chief executive officer of Doyle Trading Consultants, a Grand Junction, Colorado-based analytical firm. “For the seller of the assets, it’s a significant cost savings.”
The deal marks Teco’s complete exit from the coal mining business, leaving the company with regulated electric and gas utility operations, the Florida company’s chief executive officer,John Ramil, said in the statement Monday.
“TECO Coal was an important component of TECO Energy’s business mix since the mid-1970s, contributing strong earnings and cash flow for many years,” Ramil said. “We appreciate the dedicated team members at TECO Coal and the contributions they have made to TECO Energy’s success.”