Arch Coal and Peabody today announced their intention to continue pursuing the creation of a joint venture, following the negative split decision by the US Federal Trade Commission (FTC) that advances the process to the legal system.
In a press release, Arch and Peabody said they intend to litigate the FTC's decision within the US federal court system over the coming months. The companies said they believe the FTC has incorrectly defined the market, and fails to reflect the true competitive nature of the current US energy landscape.
The transaction was announced in June 2019 and would combine the companies' Powder River Basin and Colorado assets. Ownership of the joint venture would be structured with Peabody owning 66.5 percent and Arch owning 33.5 percent. If consummated, the joint venture is expected to realize annual synergies of $120 million over an initial 10-year period, which would benefit all stakeholders, including customers, local communities, employees, investors and multiple others.
The transaction includes seven of the companies' mines, including Peabody's North Antelope Rochelle Mine (NARM) and Arch's Black Thunder Mine, which share a property line of more than seven miles. Additional assets include the Caballo, Rawhide and Coal Creek mines in Wyoming along with the West Elk and Twentymile mines in Colorado.
"We view the need for this combination as self-evident," said John W. Eaves, Arch's chief executive officer. "The proposed joint venture promises to enhance the cost-competitiveness of our thermal operations, enable us to serve the evolving needs of domestic power generators well into the future, and protect the value of our thermal assets for our shareholders. In short, it will create a stable, durable supply platform for our thermal customers even as we continue our organizational pivot towards global metallurgical markets."
"The proposed joint venture offers a clear and compelling path to strengthen both our and our customers' ability to compete in today's marketplace with electricity produced from coal," said Peabody President and Chief Executive Officer Glenn Kellow. "We have provided tremendous amounts of evidence to the FTC during an extensive review, fully demonstrating that coal, including Southern Powder River Basin coal, faces intense competition from natural gas and other alternate fuels. We believe that the commission has reached an incorrect decision that should be rapidly remedied within the court system to allow customers and others to benefit from the combination."