Peabody asks Patriot court to terminate healthcare liabilities

Peabody Energy (NYSE: BTU), the nation’s top coal producer, said Sept. 13 that it has asked the bankruptcy court for Patriot Coal to confirm the termination of Peabody’s contractual obligation to fund certain of Patriot Coal’s retiree healthcare benefits.

Under Patriot Coal’s new labor agreements with the United Workers of America (UMWA) union, its obligation to pay healthcare benefits for its retirees will terminate by Jan. 1, 2014. Under the terms of Peabody’s contract with Patriot, Peabody said its obligation to fund certain of Patriot’s retiree healthcare liabilities will terminate at the same time. After Patriot’s obligations to provide retiree healthcare benefits end, a Voluntary Employee Beneficiary Association (VEBA) will provide healthcare benefits to Patriot retirees.

Peabody spun Patriot off in an IPO in 2007, but kept certain union obligations. Patriot has been in Chapter 11 bankruptcy protection since July 2012 and is just starting to unveil to the court and parties to the case its reorganization plan.

“Despite the impending conclusion of Peabody’s contractual obligations to fund Patriot’s liabilities, Peabody has made several offers to contribute substantial funding to the newly-established VEBA,” said Peabody. “Unfortunately, the UMWA has continued to grandstand, and will have to explain to its members why it chooses to posture while denying them significantly greater retiree healthcare benefits. The UMWA’s unreasonable position has left Peabody with no plausible avenue but to protect our legal rights.”

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.