Bowie Agrees to Acquire Major Peabody Assets

By Anca Gagiuc, Associate Editor

Powder river basin coal mine provide more than 140 million tons of coal each year.

Peabody Energy announced it entered a definitive agreement to sell its New Mexico and Colorado coal assets to Bowie Resource Partners LLC for a $358 million price tag, subject to customary working capital adjustments. Furthermore, the buyer will also assume approximately $105 million in related liabilities.

The transaction targets the El Segundo and Lee Ranch mines in New Mexico and the Twentymile Mine in Colorado, which when combined account for approximately 330 million tons of coal reserves.

“This transaction is consistent with our stated focus area of portfolio optimization. While our New Mexico and Colorado operations and workforce have been substantial contributors to our success over the years, we are reshaping our portfolio focus around our core regions including the Powder River Basin, Illinois Basin and Australia,” said president & CEO Glenn Kellow. “At this time, we believe it is appropriate to monetize the value of these mines in a transaction that would bring forward multiple years of cash flows.”

In 2016, the mines are projected to produce 11 million tons; pre-tax cash flows after capital expenditures for these mines are expected to be approximately $70 million in 2016.

The transaction is estimated to close before the end of the first quarter of 2016, subject to certain governmental and regulatory approvals and other customary approvals. Bowie Resource Partners intends to fund the transaction through a debt refinancing and an equity commitment for a major private equity firm.

Peabody Energy intends to use transaction proceeds through for corporate purposes. Moreover, the transaction reduces the amount of Peabody’s self-bonding in place for reclamation obligations by more than $300 million. Peabody’s financial adviser is Morgan Stanley & Co. LLC.