Cloud Peak Energy's Not-So-Peak 1Q16 Earnings
Interest expenses
According to the latest company filings, the book value of Cloud Peak Energy’s (CLD) debt is about $491.5 million. Out of that $491.5 million, $295.4 million is due for payment in 2019, and the remaining portion of this debt is due in 2024.
For 1Q16, Cloud Peak’s interest expenses came in at $11.0 million, as compared to $12.6 million in 1Q15 and $11.3 million in 4Q15.
Off-balance-sheet risk
CLD’s off-balance-sheet risks include self-bonds and surety bonds. Recent bankruptcies in the coal mining industry have heightened regulatory pressure on reclamation bonding and self-bonding in particular. This could require Cloud Peak to maintain sufficient collateral to meet these obligations. As of March 31, 2016, Cloud Peak Energy posted $190 million in the form of self-bonds and $427 million in surety bonds. It’s also worth noting that CLD has no lease by application obligations going forward.
Given the ongoing regulatory uncertainties regarding self-bonding obligations in Wyoming, Cloud Peak Energy is seeking to reduce its self-bonding obligations in the state by posting more surety bonds. This could require CLD to maintain additional collateral to meet the surety bond obligations.
Cloud Peak Energy’s liquidity position
According to company filings, Cloud Peak has $79.4 million in cash and cash equivalents on its books, with a total available liquidity of $557.7 million as of March 31, 2016. Moreover, it possesses an aggregate borrowing capacity of approximately $478.3 million under the credit agreement and the account receivables securitization program as of March 31, 2016.
Cloud Peak (CLD) expects its interest expenses to remain stable in 2016. With long-dated bond maturities, no future LBA obligations, and manageable interest expenses, Cloud Peak Energy clearly stands out among pure-play coal miners like Peabody Energy (BTUUQ), Alpha Natural Resources (ANRZQ), and Arch Coal (ACIIQ). Alliance Resource Partners (ARLP), and CONSOL Energy (CNX) are coal mining companies that also have manageable amounts of debt.
In the next part, we’ll conclude the series with an outlook for Cloud Peak Energy.
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