Arch Coal, the USA's second largest coal producer and the supplier of half the coal burned in Minnesota power plants, has filed for Chapter 11 bankruptcy protection. But the company has promised that there will be no interruption in mining and shipments to customers, which include major players Xcel Energy and Minnesota Power.
Arch Coal said that a majority of its primary lenders had agreed to cut $4.5 billion in debt that it couldn't repay because of the depressed coal market.
It is the latest sign of distress in the US coal industry, whose main customers for thermal coal are electric utilities. Three other coal companies have sought bankruptcy protection in the past year, squeezed by weak demand and low prices as utilities turn to cheaper, cleaner natural gas power generation in anticipation of future pollution legislation.
Arch Coal operates two mines in the Powder River Basin in Wyoming, including the largest, which shipped 48 % of the coal purchased by Minnesota power plants in 2014, according to the US Energy Information Administration. 38% of Minnesota's electricity currently generated by coal firing plants.
"We have been well aware of the potential filing by Arch," said Amy Rutledge, spokeswoman for Duluth-based Minnesota Power, which burns Arch coal at two plants. "To help offset any potential impact, we have [increased] our coal inventory levels to avoid any disruption."
Arch warned investors in November that it couldn't repay its more than $5 billion in debt. The stock has been trading at under $1, and dropped another 30 % on news of the filing to 57 cents. If the bankruptcy plan goes through, that stock would be valueless, with all equity going to the senior debt holders.
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