Cloud Peak Energy’s bankruptcy filing Friday afternoon may be the beginning of the end for the Gillette-based coal producer.
Unlike previous Powder River Basin coal bankruptcies, Cloud Peak seems to be looking to shed debt and sell its assets rather than emerge as an ongoing company.
The company said it will continue to attempt to sell "all of its assets" and that the company expects its three PRB mines "will continue normal operations throughout the process."
The filing ends moths of speculation about Cloud Peak's shaky financial footing, including failing to make interest payments on its debt, the company being delisted from the New York Stock Exchange and continued pressures of a depressed market for coal.
"Over the past several months, Cloud Peak Energy has thoroughly evaluated strategic alternatives to address the challenging market conditions in our industry," said President and CEO Colin Marshall in a prepared statement. "We believe, at this time, that a sale process in Chapter 11 will provide the best opportunity to maximize value for Cloud Peak Energy."
The company has secured about $35 million in debtor-in-possession financing from its debt holders, subject to court approval. That, along with cash on hand, will allow the company to continue operating as usual while looking to sell its assets.
“The company intends, subject to court approval, to pay vendors, suppliers and other providers essential to the company’s business in full for goods and services provided after the filing date,” according to a statement announcing the bankruptcy. “The Company also expects to continue entering into and fulfilling orders under sales contracts with customers in the ordinary course of business.”
What that means for the more than 1,250 employees at Cloud Peak’s three PRB mines — Cordero Rojo and Antelope in Wyoming and Spring Creek in Montana — is that for now, their jobs are safe, said Robert Godby, director of the Center for Energy, Economics and Public Policy at the University of Wyoming.
“The good news is, at least in the short term, is the mines are going to continue operating as best they can,” he said.
Whether that will be the case after selling the company’s assets is “the $64,000 question,” he said.
“The real question here is will there be buyers for all those mines?” Godby said. “They have different qualities of coal, different customer bases. … There is not a core of assets they’re looking to reorganize around. They’re looking to spin these off to any potential bidder.
“The bottom line is they have a variety of assets. Some of them are more valuable than others.”
Friday’s bankruptcy filing comes a day after Cloud Peak gave Campbell County a check for more than $617,000 for the last half of its 2018 property taxes. It hasn’t, however, paid $8.3 million owed for the last half of 2018’s ad valorem taxes on coal production.
Whether the county will see any part or all of that payment is in limbo as creditors line up at court, Godby said.
“The county may not get all of its production tax from this,” he said, adding that any ultimate sales of mines could include negotiations with the county to satisfy that debt.
Reacting to the filing, the Sheridan-based Powder River Basin Resource Council urged the state to make sure Wyoming’s interests in reclaiming mined land are protected, along with Cloud Peak’s employees.
“In light of Cloud Peak’s bankruptcy filing, we hope the company remains committed ot paying employees’ and retirees’ pensions and health care benefits as well as paying their county ad valorem taxes and continuing their reclamation efforts,” said Bob LeResche, the organization’s vice chairman. “Anything less than that would mean Cloud Peak has failed their own miners and the Wyoming communities that have long supported them.”
This is a developing story and will be updated. See Sunday's Gillette News Record for more on this story and how Cloud Peak Energy's bankruptcy could affect its more than 1,250 Powder River Basin employees.