Peabody Energy Corp. (BTU) said that it is in preliminary talks with Coal India for long-term coal supplies and other possible co-operative ventures. However, the company said there has been no agreements or decisions made regarding timing or structure.
Peabody said it recognizes long-term coal demand in India. Peabody also said its discussions with Coal India are unrelated to other potential transactions Peabody is involved in.
Peabody pointed out that Coal India is in negotiations that would give Coal India a stake in some of Peabody’s Australian coal mines along with other assets. Peabody has eight mines in Australia.
St. Louis, Missouri based Peabody Energy produces enough coal to fuel 10% of all U.S. electricity generation and 2% of worldwide electricity. It is the world’s largest private sector coal mining company, owning majority interests in more than 30 mines in the U.S. and Australia.
The company has a proved and probable reserve of 9.2 billion tons of coal and sold 224 million tons of coal in 2009. Peabody’s total revenue in 2009 was $6.0 billion.
Coal Demand Scenario
More than half of India’s energy demands are met by coal and it is an essential resource for its power generation and steel industries. Though India has significant coal reserves and is already one of the world’s biggest coal producing countries, the country’s local output is not keeping pace with demand. India is expected to have a coal shortfall of more than 80 million tons next year and the supply gap is set to widen rapidly.
This has resulted in India emerging as a major importer of metallurgical coal in recent times. China has been another major importer of metallurgical coal recently, pushing up prices for metallurgical coal to about $200 per ton.
U.S. coal companies such as Peabody have been looking to capitalize on surging demand for coal in India and China, especially for metallurgical coal, which is used to make steel.
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