Peabody Profits While the World Burns

Move over Big Oil, and make room for America's new profiteers: Big Coal.  Hey you, Exxon, why not take a breather and let Peabody enjoy the spotlight for a while?

Peabody Energy is the world's largest private-sector coal company.  Its coal products fuel approximately 10 percent of all U.S. electricity generation and more than 2 percent of worldwide electricity.  (And its industry is largely responsible for fueling global warming.)  Unfortunately, the company just announced record revenues for 2008 -- nearly doubling profits from 2007 and setting a new mark of $6.59 billion on coal sales of 256 million tons.

"Our results demonstrate the capability of our operating platform to deliver substantial cash flows," said Executive Vice President and Chief Financial Officer Michael C. Crews. "We are positioned to weather the global economic downturn with nearly $2 billion of available liquidity from our cash balances and lines of credit."

Despite the recent economic downturn that has softened electricity generation, Peabody reported a 2% increase in global coal demand last year, primarily in emerging economies like India and China -- and that trend is expected to continue in 2009.  Last year U.S. coal production increased more than 20 million tons, largely to accommodate an increase in U.S. exports to those countries. 

While Peabody expects U.S. coal demand to slow down this year due to the recession-driven decline in electricity demand, the company eagerly anticipates strong demand for coal in the long-term:

"The International Energy Agency's World Energy Outlook estimates world primary energy will grow 45 percent between 2006 and 2030 with demand for coal rising more than any other fuel, accounting for over a third of the increase in energy use...Longer term, the U.S. Energy Information Administration expects that coal will power more growth in U.S. electricity generation through 2030 than any other fuel."

How frustrating that one of the financial sector's bright spots in this historically bad economy is the worst form of fuel.  Then again, with climate legislation on the horizon and a new era of clean energy on the way, perhaps Big Coal's big paydays will be numbered.