Tags: Peabody | Energy | coal | BTU

Peabody Energy Powered by Cheap Coal

By    |   Thursday, 01 Dec 2011 06:17 PM

Coal may be a dirty source of energy, but there’s plenty of it around and it’s cheap to produce. That allows Peabody Energy (BTU), the world’s largest private-sector coal producer, to clean up. It produces 10 percent of U.S. electricity and 2 percent of the world’s electrical needs.

The company has an unparalleled portfolio of properties in the United States, Australia, and Asia. Within the United States, Peabody is focused on the Powder River Basin, located in southeast Montana and northeast Wyoming. It also has operations in the Midwest and Southwest.

In Australia, Peabody tripled its output in 2006 after buying Excel for $1.5 billion, Morningstar reports. The expansion has generated hefty profits for the company during the past two years.

Australia gives Peabody a strong base from which to export coal to the fast-growing economies of India and China. The company also is developing operations in China itself — in the Xinjiang Uyghur autonomous region — and in Mongolia.

Strong earnings

Peabody’s profit soared 22 percent in the third quarter, to $274.1 million from $224.1 million a year earlier. Revenue gained 9 percent to $2 billion.

Standard & Poor’s analyst Jim Corridore has a four-star buy rating on Peabody shares. He’s actually negative on the coal industry but believes that Peabody is best in its sullied class.

“Our opinion is based, in part, on the company's significant operating scale, which we view as a competitive advantage,” Corridore writes.

“In addition, we see BTU's direct exposure to international coal demand as an avenue of growth not afforded to BTU's competitors. We also view positively the recent announcement that the
company was selected as part of a consortium to develop coking coal assets in Mongolia.”

Peabody Energy next reports on Jan. 25.

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Coal may be a dirty source of energy, but there s plenty of it around and it s cheap to produce. That allows Peabody Energy (BTU), the world s largest private-sector coal producer, to clean up. It produces 10 percent of U.S. electricity and 2 percent of the world s...
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Thursday, 01 Dec 2011 06:17 PM
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