TECO’s coal sales lower lately, and may go lower

TECO Coal, with mining operations primarily in eastern Kentucky, had third quarter net income of $17.4m on sales of 1.9 million tons, compared with $14.1m on sales of 2.1 million tons in the same period in 2011, said parent TECO Energy (NYSE: TE) in a Nov. 1 earnings report.

In 2012, third quarter results reflect an average net per-ton selling price, excluding transportation allowances, of more than $96/ton, more than 7% higher than in 2011. In the third quarter of 2012, the all-in total per-ton cost of production was 3% higher than 2011 at about $84/ton, which is below the middle of the cost guidance range previously provided. The 2012 per-ton cost of production increase was driven by spreading fixed costs over fewer tons.

TECO Coal’s effective income tax rate in the third quarter of 2012 was 26%, compared with 22% in the 2011 period.

TECO Coal had year-to-date net income of $39.4m on sales of 4.9 million tons in 2012, compared with $38.1m on sales of 6.2 million tons in the 2011 period. Lower sales volumes in the 2012 year-to-date period reflect the current coal market conditions, TECO Energy noted. The 2012 year-to-date average net per-ton selling price was more than $95/ton, compared with almost $87/ton in 2011, and the all-in total per-ton cost of production was more than $85/ton compared with $79/ton in 2011.

The 2012 year-to-date cost of production reflects higher surface mining costs due to increased diesel fuel usage as a result of trucking coal and overburden further due to the lack of new surface-mine permits, spreading fixed costs over fewer tons, and costs incurred in the first quarter associated with idling a section of a mine. These factors were partially offset by reduced overtime and lower contract miner costs in 2012.

TECO Coal’s effective income tax rate was 25%, compared with 22% in the 2011 year-to-date period.

TECO Coal has 2.5 million tons of thermal coal contracted for 2013 at prices between $75 and $82 per ton. Total expected volume, selling price and cost of production for 2013 will be determined at the conclusion of the metallurgical coal contracting cycle, which is currently under way but proceeding more slowly than in recent years, TECO Energy reported. “The general expectation in the current coal market environment is that average prices for metallurgical and PCI coal will be lower in 2013 than in 2012,” it added. “TECO Coal will mine to profitably meet demand for its products, which may result in fewer total tons being mined in 2013 than in 2012.”

TECO Coal operates primarily in eastern Kentucky, with limited operations in Virginia. Its major operations include Clintwood Elkhorn Mining Co., Perry County Coal Corp. and Premier Elkhorn Coal Co.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.