Peabody Energy Corporation
) has entered into an agreement with
Kinder Morgan Energy Partners, L.P.
) to utilize Kinder Morgan's Gulf Coast export platform for
Peabody's Colorado, Illinois Basin and Powder River Basin ("PRB")
coal products. The company will commence export of its Illinois
Basin, Colorado and PRB coal products from the deepwater facility
With this agreement, Peabody expects to increase its Gulf Coast
annual coal export capacity in the range of 5 - 7 million tons
between 2014 and 2020. Peabody will utilize the terminals to
increase its global customer reach.
In addition to this agreement, the company has extended its
existing contract with Kinder Morgan's Houston Bulk Terminal. An
ongoing contract involving the Cora river terminal in Illinois will
be extended through 2018 to facilitate exports through
International Marine Terminal and domestic sales.
Kinder Morgan plans to invest $400 million to expand its Gulf
Coast terminal network for this project and for all other projects
We view that the present coal market is improving at a fast pace
with higher electricity generation and steel production. The demand
for coal from emerging markets, primarily China and India will act
as a positive catalyst for the company's future growth. The
increase in thermal power generation is expected to drive demand.
In addition, Japan is also increasing thermal coal imports driven
by higher seaborne natural gas prices and shutdown of a few nuclear
power generation plants.
The recent agreement is likely to boost Peabody's U.S. and
Australian coal export capacity. The demand for Australian coal in
particular is expected to increase owing to its superior quality
and proximity to Asian markets. This will allow the company to
strengthen its share of the seaborne coal market.
During first quarter 2012 earnings release, Peabody announced
its full year 2012 total sales guidance of 235 - 255 million tons,
including 33 - 36 million tons from Australia, 185 - 195 million
tons from the U.S. and the remainder from Trading and Brokerage
activities. The Zacks Consensus Estimate for second quarter 2012 is
currently pegged at 53 cents per share.
Peabody Energy Corporation currently retains a short-term Zacks
#3 Rank, which translates into a short-term Hold rating.
St. Louis, Missouri-based Peabody Energy Corporation is the
world's largest private sector coal mining company and a global
leader in clean coal solutions. The company owns majority interests
in 29 mines in the U.S. and Australia.
PEABODY ENERGY (BTU): Free Stock Analysis
KINDER MORG ENG (KMP): Free Stock Analysis
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