Arch Coal bankruptcy not expected to harm Minnesota utilities

Dive Brief:

The largest coal supplier in Minnesota has filed for bankruptcy, but utilities say they do not foresee a problem with deliveries and have ample supplies on hand in case there are disruptions.
Arch Coal, the second largest coal producer in the nation, filed for bankruptcy on Monday, meaning more than a quarter of the United States' coal production is now in Chapter 11, according to the Wall Street Journal.
While Arch has said it does not anticipate problems with mining or deliveries as it restructures, clean energy advocate and analyst Leslie Glustrom told the Star Tribune that utilities need to consider a future where "we can't be assured of long-term coal supplies."

Dive Insight:

Whether or not Arch's bankruptcy impacts coal deliveries, it stands as just the most recent reminder that the United States' coal industry is in disarray. Commodity prices have fallen steeply in the last five years, and Arch's announcement this week that it needs to reduce debt by $4.5 billion is an indication of the hurdles ahead.

"Since the market downturn, we have taken many steps to enhance the efficiency of our operations and to strengthen our asset base," Arch Chairman and CEO John Eaves said in a statement. "As a result, all of our operating segments were cash flow positive during the first three quarters of 2015. We will continue to provide our customers with exceptional service as we move through this process, while maintaining and further reinforcing our position as an industry leader in safety, environmental stewardship and productivity."

The company had more than $600 million in cash and short-term investments beginning this week, and said it expects to receive $275 million in debtor-in-possession financing from members of an ad hoc group of lenders.

Arch's filing didn't take utilities by surprise, and some said they had been preparing.

"We have been well aware of the potential filing by Arch," Minnesota Power spokeswoman Amy Rutledge told the Star Tribune. "To help offset any potential impact, we have grown our coal inventory levels to avoid any disruption."

But while utilities and Arch say their supply of coal remains steady, observers say that may not always be the case.

"Minnesota and any state dependent on Powder River Basin coal should be taking a hard look at what is going on in the coal industry, and consider the unthinkable thought that we can't be assured of long-term coal supplies in this country," said Glustrom, the energy advocate who spoke with the Star Tribune. "That has massive implications for the U.S. electrical grid."