Bankrupt coal miners Alpha Natural Resources Inc. (NYSE: ANR) and Walter Energy Inc. (NYSE: WLT) are both scheduled to hold auctions in the coming week as they try to raise capital by selling assets. If ever there was time to repeat “Caveat emptor,” now is that time.
New regulations promulgated by the Obama administration have added another brick in the wall that coal miners face. Under the new rules, no new coal mining leases will be offered on federal lands. There will be lawsuits, of course, but even if the miners win, it will be a pyrrhic victory.
Natural gas-fired power generation almost certainly overtook coal-fired generation in 2015. The U.S. Energy Information Administration (EIA) reported earlier this month that natural gas use outstripped coal use in 5 of the first 10 months of 2015 and that the natural gas use dominated in the last 4 months in the report, July through October. As recently as 10 years ago coal generated 50% of U.S. electricity and natural gas accounted for about 19% of generation. Each now generates about 33% of the nation’s electricity.
So why would an auction of coal assets be attractive? Walter Energy is trying to sell its coke-making plant along with several Alabama mines. Alpha Natural Resources wants to sell more than a dozen mines in Virginia, West Virginia, and other locations.
According to a report from Dow-Jones, Walter Energy sold most of its coal-mining operations for around $1 billion earlier this month. Bids for the Alabama properties will be reviewed by the bankruptcy court once Monday’s auction is over.
Bids for Alpha’s mines were due by January 20th and will be reviewed by a bankruptcy court on February 9th.
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