Old Rocks
Diamond Member
The Big Coal Bailout of 2016
Peabody Coal's long-awaited concession that bankruptcy lies ahead signals the curtain fall on the long-running, silent and secret bailout of the management of the U.S. coal industry. As one analyst put it when Peabody announced that it faced a "going concern" letter, "It's the end of the era of publicly traded coal companies."
Peabody is about to join Arch, Murray, Alpha and other coal producers in bankruptcy. The total market value of the U.S. coal sector since 2011 has plunged from more than $70 billion to barely $6 billion and most of the remaining value is natural gas operations owned by Consol Inc. Coal stocks have dropped far faster than coal consumption, because the industry, ignoring competition from renewable energy and dismissing pressure to clean up the air, recklessly invested in far greater mining capacity than the market needs. Coal prices dropped by 75 percent.
But even as King Coal inescapably rushes towards bankruptcy, the companies are being showered by regulators and judges with extraordinary largesse. This is not a bailout like GM and Chrysler, (or even the banks), when the taxpayers took very large risks but gained a good shot at rescuing operating enterprises and the value they create. This bailout largesse to coal, largely driven by Republican politicians, is showering down on shareholders and management of enterprises which cannot and will not be rescued, just to postpone the moment at which they are reorganized, thus fattening management and shareholders before the evil moment.
And who pays? The general taxpayer for sure, but more spectacularly sick and retired mine workers and their communities.
Now in spite of this, Trump has promised to bail out coal. For people that claim to admire market forces, the GOP is certainly going against them. And you and I will pay for it.
Peabody Coal's long-awaited concession that bankruptcy lies ahead signals the curtain fall on the long-running, silent and secret bailout of the management of the U.S. coal industry. As one analyst put it when Peabody announced that it faced a "going concern" letter, "It's the end of the era of publicly traded coal companies."
Peabody is about to join Arch, Murray, Alpha and other coal producers in bankruptcy. The total market value of the U.S. coal sector since 2011 has plunged from more than $70 billion to barely $6 billion and most of the remaining value is natural gas operations owned by Consol Inc. Coal stocks have dropped far faster than coal consumption, because the industry, ignoring competition from renewable energy and dismissing pressure to clean up the air, recklessly invested in far greater mining capacity than the market needs. Coal prices dropped by 75 percent.
But even as King Coal inescapably rushes towards bankruptcy, the companies are being showered by regulators and judges with extraordinary largesse. This is not a bailout like GM and Chrysler, (or even the banks), when the taxpayers took very large risks but gained a good shot at rescuing operating enterprises and the value they create. This bailout largesse to coal, largely driven by Republican politicians, is showering down on shareholders and management of enterprises which cannot and will not be rescued, just to postpone the moment at which they are reorganized, thus fattening management and shareholders before the evil moment.
And who pays? The general taxpayer for sure, but more spectacularly sick and retired mine workers and their communities.
Now in spite of this, Trump has promised to bail out coal. For people that claim to admire market forces, the GOP is certainly going against them. And you and I will pay for it.
king
