Renewables finally getting credit they deserve for driving out coal
October 29, 2019
Murray Energy filed for bankruptcy yesterday, and Robert Murray is out of a job. Couldn't happen to a nicer fellow or company. I do regret what will happen to retiree pensions and to employees, although Democrats want to help them while Republicans refuse. The lesson to any current coal worker under the age of 55 should be clear though - get out, get out, get out.
With luck, this will throw a monkey wrench into Murray's efforts to throw a monkey wrench into policies addressing climate change, as money spent on lobbying would be viewed skeptically by a bankruptcy judge. OTOH, Murray has a deal with major creditors (but not unions) so emerging from court supervision could happen quickly. We'll see how much the court protects employees and other creditors.
Some excerpts from the bankruptcy filing, and my commentary and emphasis added:
The thermal coal markets that Murray traditionally serves have been meaningfully
challenged over the past three to four years, and deteriorated significantly in the last several
months. This sector-wide decline has been driven largely by (a) the closure of approximately
93,000 megawatts of coal-fired electric generating capacity in the United States, (b) a record
production of inexpensive natural gas, and (c) the growth of wind and solar energy, with gas and
renewables, displacing coal used by U.S. power plants.
For years, lukewarmers have given all credit to reduced emissions to natural gas, now even coal producers are admitting the truth. Murray had to cast a little shade though by not expressly admitting renewables are cheaper, implying that government policies are the problem.
--
At the same time, demand for U.S. coal from international utilities has been subject to its own perfect storm of negative forces, and the European benchmark price for thermal coal has halved in the last year
Trump gets his share of the shade for trade wars (pay attention, workers). European renewable efforts should get their share of the credit for reducing coal demand.
--
At the same time, Murray has had to rebate cash to certain customers under price sharing arrangements as a result of low pricing in the PJM Interconnection
I didn't know about this. Murray scored deals with utilities by (theoretically) taking on the risk that its product could get undercut by gas or renewables. So here's a question - did the utilities pay in advance and now won't get their rebates because of bankruptcy? If so, then the public is stuck with subsidizing coal when cheaper and lower emission supplies are available. This practice should be regulated, and maybe regulators should make the utility companies eat the costs, instead of ratepayers. Even if utilities didn't pay in advance, the best they can do now is walk away and see what short term pricing they can get, which is a gamble.
--
Competitors have used bankruptcy to reduce debt and lower their cost structures by eliminating cash interest obligations and pension and benefit obligations, leaving them better positioned to compete for volume and pricing in the current market,
Pretty clear what Murray intends to do in bankruptcy. Pay attention, coal workers.
--
As of December 31, 2018, Murray owns and operates 26 harbor boats and towboats, 478 barges, 15 locomotives, 748 railcars, and 25 coal hauling tractor trailers (exclusive of non-debtor Foresight operations).
I wonder if this adds to the reason why railroad companies fight efforts to address climate change. Not only do they haul a lot of coal, coal companies are also their direct customers.
--
In June 2015, Murray Global Commodities, Inc. entered into a joint partnership agreement for a 34 percent interest in non-debtor Javelin Global Commodities Holdings LLP (together with its direct and indirect subsidiaries, “Javelin”).
Elsewhere it says that Javelin is one of their major international customers, which they apparently partly own. I wonder if it's a stalking horse for Murray to interfere in foreign politics to promote coal usage.
--
As of the Petition Date, Robert E. Murray holds all of the issued and outstanding voting Class A common shares
All other shares are non-voting, so Robert has (had?) full control of Murray. He's a serious bad guy, so whether he emerges with full control or any control is an important issue.
--
On June 29, 2018, Murray entered into the Superpriority Credit and Guaranty Agreement (as amended, restated, amended and restated, supplemented, or otherwise modified from time to time, the “Superpriority Term Loan Agreement”)
This involves some of the senior creditors who are going to do the best at the other end of bankruptcy. The question in my mind is the date. At such a recent date, the risk of bankruptcy should have been clear and the possibility of a sweetheart deal at the expense of employees, retirees, and other creditors should be investigated. Does Robert Murray or family have any ownership of the senior creditors? Some other recent debt listed in the doc raises similar issues.
--
Following the large wave of chapter 11 filings in 2015 and 2016, more than half a
dozen large U.S. coal companies collapsed into bankruptcy over the last several years and
withdrew from the 1974 Pension Plan. When an employer withdraws, its vested beneficiaries
remain in the 1974 Pension Plan and are referred to as “orphan” beneficiaries. The remaining
contributing employers become responsible for the benefits of these orphaned participants who
were never their employees. As a result, approximately 95 percent of beneficiaries who currently
receive benefits from the 1974 Pension Plan last worked for employers that no longer contribute
to the Plan. As of January 2019, 11 employers contribute to the 1974 Pension Plan, compared to
over 2,800 in 1984. This has placed significant stress on the 1974 Pension Plan and the small
number of contributing employers—Murray most of all.
Pretty good summary of how effed up coal worker pensions are.
--
remaining coal-fired power plants are running at capacity factors of just 42 percent versus 48 percent in 2013.
It's not just plant closures, the still-open plants are running at lower rates.
--
Murray maintains its belief that longer term demand for coal is underpinned in the
United States by a practical requirement that approximately 25 percent of the power supplied to
the electrical grid come from coal power generation to ensure reliable electricity during cold snaps
and heat waves, when other parts of the grid will be less reliable or overly expensive. This belief
has guided Murray’s decisions to make value-accretive acquisitions during general market distress,
That 25% figure is debatable to say the least, and not to mention that it could come from nuclear, large hydro, natural gas and eventually from power storage. Also, their acquisition strategy has been to double down on coal. How's that worked out?
--
That's it for the main bankruptcy filing. Definitely worth it for someone to look at the restructuring agreement.
With luck, this will throw a monkey wrench into Murray's efforts to throw a monkey wrench into policies addressing climate change, as money spent on lobbying would be viewed skeptically by a bankruptcy judge. OTOH, Murray has a deal with major creditors (but not unions) so emerging from court supervision could happen quickly. We'll see how much the court protects employees and other creditors.
Some excerpts from the bankruptcy filing, and my commentary and emphasis added:
The thermal coal markets that Murray traditionally serves have been meaningfully
challenged over the past three to four years, and deteriorated significantly in the last several
months. This sector-wide decline has been driven largely by (a) the closure of approximately
93,000 megawatts of coal-fired electric generating capacity in the United States, (b) a record
production of inexpensive natural gas, and (c) the growth of wind and solar energy, with gas and
renewables, displacing coal used by U.S. power plants.
For years, lukewarmers have given all credit to reduced emissions to natural gas, now even coal producers are admitting the truth. Murray had to cast a little shade though by not expressly admitting renewables are cheaper, implying that government policies are the problem.
--
At the same time, demand for U.S. coal from international utilities has been subject to its own perfect storm of negative forces, and the European benchmark price for thermal coal has halved in the last year
Trump gets his share of the shade for trade wars (pay attention, workers). European renewable efforts should get their share of the credit for reducing coal demand.
--
At the same time, Murray has had to rebate cash to certain customers under price sharing arrangements as a result of low pricing in the PJM Interconnection
I didn't know about this. Murray scored deals with utilities by (theoretically) taking on the risk that its product could get undercut by gas or renewables. So here's a question - did the utilities pay in advance and now won't get their rebates because of bankruptcy? If so, then the public is stuck with subsidizing coal when cheaper and lower emission supplies are available. This practice should be regulated, and maybe regulators should make the utility companies eat the costs, instead of ratepayers. Even if utilities didn't pay in advance, the best they can do now is walk away and see what short term pricing they can get, which is a gamble.
--
Competitors have used bankruptcy to reduce debt and lower their cost structures by eliminating cash interest obligations and pension and benefit obligations, leaving them better positioned to compete for volume and pricing in the current market,
Pretty clear what Murray intends to do in bankruptcy. Pay attention, coal workers.
--
As of December 31, 2018, Murray owns and operates 26 harbor boats and towboats, 478 barges, 15 locomotives, 748 railcars, and 25 coal hauling tractor trailers (exclusive of non-debtor Foresight operations).
I wonder if this adds to the reason why railroad companies fight efforts to address climate change. Not only do they haul a lot of coal, coal companies are also their direct customers.
--
In June 2015, Murray Global Commodities, Inc. entered into a joint partnership agreement for a 34 percent interest in non-debtor Javelin Global Commodities Holdings LLP (together with its direct and indirect subsidiaries, “Javelin”).
Elsewhere it says that Javelin is one of their major international customers, which they apparently partly own. I wonder if it's a stalking horse for Murray to interfere in foreign politics to promote coal usage.
--
As of the Petition Date, Robert E. Murray holds all of the issued and outstanding voting Class A common shares
All other shares are non-voting, so Robert has (had?) full control of Murray. He's a serious bad guy, so whether he emerges with full control or any control is an important issue.
--
On June 29, 2018, Murray entered into the Superpriority Credit and Guaranty Agreement (as amended, restated, amended and restated, supplemented, or otherwise modified from time to time, the “Superpriority Term Loan Agreement”)
This involves some of the senior creditors who are going to do the best at the other end of bankruptcy. The question in my mind is the date. At such a recent date, the risk of bankruptcy should have been clear and the possibility of a sweetheart deal at the expense of employees, retirees, and other creditors should be investigated. Does Robert Murray or family have any ownership of the senior creditors? Some other recent debt listed in the doc raises similar issues.
--
Following the large wave of chapter 11 filings in 2015 and 2016, more than half a
dozen large U.S. coal companies collapsed into bankruptcy over the last several years and
withdrew from the 1974 Pension Plan. When an employer withdraws, its vested beneficiaries
remain in the 1974 Pension Plan and are referred to as “orphan” beneficiaries. The remaining
contributing employers become responsible for the benefits of these orphaned participants who
were never their employees. As a result, approximately 95 percent of beneficiaries who currently
receive benefits from the 1974 Pension Plan last worked for employers that no longer contribute
to the Plan. As of January 2019, 11 employers contribute to the 1974 Pension Plan, compared to
over 2,800 in 1984. This has placed significant stress on the 1974 Pension Plan and the small
number of contributing employers—Murray most of all.
Pretty good summary of how effed up coal worker pensions are.
--
remaining coal-fired power plants are running at capacity factors of just 42 percent versus 48 percent in 2013.
It's not just plant closures, the still-open plants are running at lower rates.
--
Murray maintains its belief that longer term demand for coal is underpinned in the
United States by a practical requirement that approximately 25 percent of the power supplied to
the electrical grid come from coal power generation to ensure reliable electricity during cold snaps
and heat waves, when other parts of the grid will be less reliable or overly expensive. This belief
has guided Murray’s decisions to make value-accretive acquisitions during general market distress,
That 25% figure is debatable to say the least, and not to mention that it could come from nuclear, large hydro, natural gas and eventually from power storage. Also, their acquisition strategy has been to double down on coal. How's that worked out?
--
That's it for the main bankruptcy filing. Definitely worth it for someone to look at the restructuring agreement.
