Yet another coal giant has filed for bankruptcy protection under Chapter 11 on Monday, as the industry is grappling with utilities switching to renewables and plummeting prices.
Alpha Natural Resources is hoping that Chapter 11 protection will aid the company in landing on its feet after the 3 billion debt is threatening its entire existence.
Market trends have shifted greatly in the past years from coal and fossil fuels to renewable alternatives for energy and not only. Environmental regulations are toughening at the same time across the U.S.
In 2011, when Alpha Resources ventured into purchasing Massey Energy for the astonishing 7.1 billion dollars after having borrowed heavily, none of the later inconveniences were quite foreseeable.
As such, the effects of trying to establish an empire with the Appalachian coal mines are felt today. China, which was hailed as the main growing market for coal export, surprisingly turned away from the resources, limiting imports.
Coal-fueled power generating industry is dwindling in the U.S. as well. As a result, not only Alpha Natural Resources, but other giants in the coal industry have filed for bankruptcy recently.
The official statement of the chairman and chief executive of Alpha Natural Resources, Kevin S. Crutchfield reads:
“The change and challenges in the U.S. coal industry has experienced over the last several years are greater than any in the past three decades”.
Indeed, natural gas took precedence. Prices in this sector went sufficiently low to make natural gas an attractive alternative for coal. Not only that, but the mix of renewable-generated power in the grid, like solar and wind is growing year by year.
The newest environmental plan unfurled by the White House on Monday further constrains the coal industry and particularly coal-fueled power plants. The set of regulations under the patronage of the Environmental Protection Agency are very specific with regards to cutting coal use. Moreover, they are hailed as the most ambitious plan aimed at addressing climate change.
Under these regulations, coal’s share in the power grid is envisaged to fall to 27 percent by 2030. In May 2015, coal generated power share was calculated at 33 percent.
According to the official statement concerning filing for bankruptcy protection, this measure is aimed at momentarily keeping the company afloat as it intends to gradually downsize. Kevin S. Crutchfield stated that ‘for the foreseeable future’ coal-fueled power plants will still share 30 to 40 percent of U.S. energy.
Optimist estimates, some analysts argue, as coal production is also decreasing considerably in the U.S. and foreign markets are reluctant to imports. This year alone, the Energy Department of the U.S. estimated that coal production will fall by 70 million tons as a result of coal-powered energy demand also dropping by 7 percent.
Currently, Alpha Natural Resources operates 50 mines across several states. On Monday, it also announced that the company secured a Citigroup financing package amounting to 692 million dollars.
The shares of the company dropped to 3 and a half cents in over-the-counter trading. It is not expected that Alpha will close any of the mines currently.
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