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PRB coal to up US generation market share, exports to rise: Cloud Peak CEO

Despite the current challenges facing the US coal industry, Powder River Basin coal will see an increase in its share of the domestic power generation market and an almost 700% rise in exports over the next six years, according to a Wednesday presentation by Cloud Peak Energy CEO Colin Marshall.

Speaking at the Scotia Howard Weil Energy Conference in New Orleans, Marshall outlined what Cloud Peak sees as a strong future for PRB coal. The presentation was filed Wednesday with the US Securities and Exchange Commission.

Cloud Peak expects the amount of PRB coal burned by power generators will remain relatively stable in the next six years, but utilities' use of coal from other basins, especially Central Appalachia, will decline.

Overall, US coal burn will fall 18%, or 175 million st, by 2020 from a 2007 baseline. However, PRB's share of the generation market compared with that of other basins will increase.

Despite the current challenges facing the US coal industry, Powder River Basin coal will see an increase in its share of the domestic power generation market and an almost 700% rise in exports over the next six years, according to a Wednesday presentation by Cloud Peak Energy CEO Colin Marshall.

Speaking at the Scotia Howard Weil Energy Conference in New Orleans, Marshall outlined what Cloud Peak sees as a strong future for PRB coal. The presentation was filed Wednesday with the US Securities and Exchange Commission.

Cloud Peak expects the amount of PRB coal burned by power generators will remain relatively stable in the next six years, but utilities' use of coal from other basins, especially Central Appalachia, will decline.

Overall, US coal burn will fall 18%, or 175 million st, by 2020 from a 2007 baseline. However, PRB's share of the generation market compared with that of other basins will increase.

According to Cloud Peak, coal-fired plants accounted for 49% of all US generation in 2007, and 45% of coal burned, or 427 million st, was PRB coal. In 2014, coal-fired plants accounted for 39% of all US generation, and 48% of coal burned, or 410 million st, was PRB coal.

In 2020, Cloud Peak estimates that coal-fired plants will account for 36% of all US generation, and 54% of coal burned, or 418 million st, will be from PRB mines.

The amount of Illinois Basin coal used for generation will also rise, increasing from 13% in 2014 to 17% in 2020, according to Cloud Peak.

The big loser in the generation mix will be Central Appalachian coal, Cloud Peak said. With declining production in the basin, high operating costs, increased emissions standards and the low cost of natural gas, the share of Central Appalachian coal in the generation mix will continue to drop, falling from 16% in 2007 to 8% in 2014 to 6% in 2020.

Cloud Peak has 80 million st of coal committed for sale in 2015, with 72 million st fixed at a weighted-average price of $12.92/st, and 47 million st committed for 2016, with 38 million st fixed at a weighted-average price of $13.75/st.

ASIAN DEMAND TO BOOST PRB EXPORTS

International demand for PRB coal will increase from 11 million st in 2014 to 75 million st in 2020, according to Cloud Peak, while overall US coal exports will increase from 34 million st to 150 million st in the same timeframe.

Asian consumption will drive the export market in the US, Cloud Peak predicts, as imports to India, South Korea, Taiwan, Japan and Vietnam will continue to increase.

China, whose annual coal imports dropped in 2014 for the first time since 2009, will still be a big player for thermal coal imports as its energy consumption increases, Marshall said.

Cloud Peak's three mines -- Antelope and Cordero Royo in Wyoming and Spring Creek in Montana -- are positioned to take advantage of the expected rise in thermal coal exports to Asia, according to the presentation.

The producer is working to expand and build new ports on the West Coast to take advantage of export opportunities in Asia.

CLOUD PEAK PARTICULARLY UPBEAT ON SPRING CREEK

Cloud Peak singled out its Spring Creek complex as being poised to be a strong player in the export market. Marshall said the complex has an advantage over other southern PRB mines because it is 200 miles closer to West Coast export terminals and existing railroad infrastructure provides fewer bottlenecks than for coal from the northern PRB.

Coal from Spring Creek is also a higher quality at 9,350 Btu/lb and 0.73 SO2 (lb/mmBtu), Cloud Peak said.

There is also more untapped coal that will expand production at Spring Creek. The current mine has a reserve of 274 million st of coal. Within seven miles of the main mine, the undeveloped Youngs Creek mine has 287 million st of non-reserve coal deposits, and potential mines Squirrel Creek, Tanner Creek and Upper Youngs Creek have an estimated 1.4 billion st of coal, it said.

source: http://www.platts.com