Cloud Peak's primary problem: Utility customers are dwindling

|By:, SA News Editor

Cloud Peak Energy (NYSE:CLD) sells its coal exclusively to electricity generators, and it faces the daunting task of keeping enough power plant customers amid rising competition from cheap natural gas and the growth of wind and solar power.

U.S. coal-fired power plants lost 15% of their generating capacity during 2011-17, from 306 GW to 261 GW, and another 12.5 GWs of plants are scheduled to close this year, according to Bloomberg; the problem was underscored today by news that FirstEnergy plans to sell or shutter a 1.3 GW plant in West Virginia by 2019.

Shares of rivals including Arch Coal (NYSE:ARCH) and Peabody Energy (NYSE:BTU) that produce metallurgical coal used in steelmaking have gained over the past several months, while CLD, which offers only thermal coal, is down nearly 20% in the last 10 months, with Foresight Energy (NYSE:FELP) more than 30% lower and Alliance Resource Partners (NASDAQ:ARLP) down 17%.

Against this backdrop, CLD fell 22% in today's trade after posting Q4 adjusted EBITDA of $19M vs. the $25.3M analyst consensus estimate, forecasting 2018 EBITDA of $75M-$100M vs. $116M consensus, and saying a new credit facility would be “significantly smaller” than its $400M facility that matures in February 2019.


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