Financial Distress Faces Westmoreland Coal Company

Apr 24, 2018

A look at the trajectory of Westmoreland Coal Company's Market Summary
Credit NASDAQ

In the past year, Westmoreland Coal Company’s stock price has dropped 97 percent, and, on Wednesday, April 25th, the company will be removed from the Nasdaq Stock Exchange with shares hovering around 20 cents. But that’s just a symptom of a larger trend for the company. 

It’s accumulated over a billion dollars in debt from declining customers in North Dakota and Texas, poor investments in Ohio and New Mexico, and less demand for their product in general. In the company’s last quarterly report, released April 2, it mentioned the possibility of filing for bankruptcy.

Westmoreland Coal Company is based out of Colorado with assets in five states, including Wyoming, and Canada. It owns the Kemmerer Mine in Lincoln County, one of the smaller coal-producing operations in the state. That mine sells thermal coal to Pacificorps’ Naughton Plant, which is expected to shut down one of its power-generating units, a coal-fired unit, by the end of year. The company was also expected to close doors of the unit in 2017 which did not happen.

Seth Feaster, Energy Data Analyst at the Institute for Energy Economic and Financial Analysis, said bankruptcy doesn’t mean the company will cease to exist.

“They will have to get rid of some of their debt, get new financing to consolidate things, but also restructure the company to make it more viable for the long-term. And it could mean selling off assets or closing some mines,” he said.

But bankruptcy does contain risk, especially to taxpayers and customers. For instance, if a company’s bonds don’t fully cover reclamation or clean-up costs, that financial obligation could fall to the state.

"It may be possible to go back to the company and say you need to put up some more money, but it’s almost impossible to get financially distressed companies to put up more money to cover reclamation,” Feaster said.

Wyoming’s Kemmerer Mine has about $83 million in surety bonds according to a dataset put together by Climate Home News. For now, the company has suspended the search for a new CEO, is in the process of transferring certain assets, and is conducting capital structure negotiations.