TECO Coal posts slim net income margin in Q2 2014

TECO Energy (NYSE: TE) said July 31 that its TECO Coal unit in Central Appalachia had second quarter net income of $0.8m on sales of 1.5 million tons, compared with net income of $0.7m on similar sales volumes in the same period in 2013.

In 2014, second-quarter results reflect an average net per ton selling price, excluding transportation allowances, of $80, more than $5 lower than in 2013. In the second quarter of 2014, the all-in total per-ton cost of sales was $80, compared with almost $86 in the 2013 period.

Second quarter costs include an approximately $0.30 per ton negative impact of incremental transportation costs due to a tunnel fire on the railroad serving the Premier Elkhorn Coal mining complex in eastern Kentucky. These costs are expected to be recovered from the railroad in a future quarter.

Headquartered near Myra in Pike County, Ky., Premier Elkhorn Coal has both underground and strip mines that produce high-quality steam coal for utilities, specialty stoker products for ferro-silicon and industrial uses, pulverized coal injection coals for steel mills and other metallurgical products. Facilities at Premier Elkhorn include a unit train load-out with 200-car siding capable of loading up to 6,000 tons per hour, as well as single-car siding.

TECO Coal recorded a 2014 year-to-date loss of $0.8m on sales of 2.8 million tons, compared with net income of $3.7m on similar sales volumes in the 2013 period. The 2014 year-to-date average net per-ton selling price was almost $80, compared with $87 in 2013. The all-in total per-ton cost of sales was $81, compared with almost $87 in 2013.

TECO Coal expects 2014 sales of about 6 million tons, reflecting almost 70% specialty coal. Almost 90% of the expected second half sales tons are committed and priced, with the remainder subject to quarterly met coal price adjustments based on Asian benchmark prices.

At prices currently being paid for its products, about $80 per ton, TECO Coal expects to be about earnings breakeven for the year, and cash-flow positive. However, the most recent quarterly Asian benchmark price was set at levels below the level at which TECO Coal’s current prices were set. The all-in cost of sales is expected to be $79-$83 per ton.

The cash cost of sales, which excludes depreciation and allocated interest, is expected to be about $7 per ton below the all-in cost.

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.