Currents - Energy Industry Insights - June 2020

Spilman Thomas & Battle, PLLC

Coal Earnings Set to Plunge 50% in North America, Moody's Says -

"Earnings for North American coal miners may plunge by more than half this year as the coronavirus pandemic makes a weak market even worse, according to Moody’s Investors Service."

Why this is important: The COVID-19 outbreak continues to wreak havoc with U.S. coal companies as the outbreak has exacerbated an already weak coal market. Moody’s Investors Service has just announced it expects U.S. coal production to drop 25 percent this year. That will cause U.S. producers' earnings before interest, taxes, depreciation, and amortization to drop 50 percent. Moody’s has had a negative outlook on U.S. coal since August 2019, before COVID-19 emerged. While the U.S. Energy Information Agency has predicted a rebound in coal usage from higher gas prices next year, Moody’s believes that is wrong. “We expect prices for natural gas, perhaps coal’s biggest competitor in North American power generation, to remain low through the early 2020s,” according to the report. “Persistently low natural gas prices will undercut the EIA’s expectations.” These developments will continue to stress U.S. steam coal producers with declining U.S. sales and very weak export markets.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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