Peabody Energy (NYSE: BTU), the nation’s largest coal producer, announced Jan. 21 that it has entered into a definitive agreement to sell the subsidiary holding its 5.06% share of the coal-fired Prairie State Energy Campus in Illinois to the Wabash Valley Power Association for $57 million, subject to certain customary closing adjustments.
The definitive agreement was entered into following a competitive bidding process Peabody launched in the fourth quarter of 2015 as part of the company’s emphasis on portfolio optimization and sale of non-core assets. Prairie State is a 1,600-MW, coal-fueled plant and adjacent coal mine in Washington, St. Clair and Randolph counties in Illinois, which commenced operations in 2012. Peabody originally developed the plant on its own coal reserves and then sold off shares of the project to various parties.
Closing on the transaction is anticipated to occur before the end of the second quarter of 2016, subject to certain governmental and regulatory approvals, expiration of purchase rights and other customary conditions. Peabody expects to use transaction proceeds for general corporate purposes and/or deleveraging activities, and expects to record a modest gain related to the sale.
The sale is the latest in a series of actions to reshape Peabody’s portfolio and increase proceeds through sales of non-core assets. The planned sale of the Prairie State interest, along with other recently announced or enacted transactions, would bring total proceeds from asset sales to nearly $500 million since the beginning of the second quarter of 2015.
In the fourth quarter, Peabody entered into a definitive agreement to sell its New Mexico and Colorado assets for $358 million in cash. The transaction would bring forward multiple years of cash flows and release the company of approximately $105 million of liabilities. The sale recently received Hart-Scott-Rodino regulatory approval, the purchaser is currently arranging financing, and closing is expected within the first quarter.
The company’s planned completion of the sale of the Wilkie Creek Mine and other associated assets in Queensland’s Surat Basin in Australia has been delayed and remains highly dependent on successful financing by the proposed purchaser.
During the last three quarters of 2015, the company realized cash proceeds of nearly $70 million related to its ongoing resource management activities through the sale of surplus land and coal reserves.
Peabody continues to evaluate its portfolio to target the best market base, with a filter that includes strategic fit, value consideration, growth and cash requirements as the company turns greater focus on its core mining assets in the Powder River Basin in Wyoming, the Illinois Basin and Australia. It sold off its Appalachia mines years ago to Patriot Coal.