In Alpha’s latest revenue report released Friday, the company attributed the loss to a range of factors, including slowing economic activity, the general shift away from coal towards low priced natural gas and US environmental regulations discouraging the use of coal.
Alpha’s disappointing quarter comes only weeks after US President Barack Obama’s State of the Union address which failed to mention the role coal would play in the country’s future, instead giving increased mention to natural gas.
Meanwhile, Alpha said unusually mild winter weather experienced in the US also played a role in its disappointing last quarter for 2011.
“The mild weather, burgeoning inventories and prolific production of natural gas has recently driven the price of natural gas to decade lows, which has increased fuel switching in favor of gas and forced the price of thermal coals lower across all production basins,” Alpha said in its revenue report.
“Regulatory uncertainties, particularly surrounding the recently delayed cross-state air pollution rule and maximum achievable control technology, are causing utilities to defer coal purchasing decisions and in some cases to retire coal-fired generating facilities.”
In response to the change in market conditions, Alpha has curtailed production at its Central Appalachian thermal coal operations by 2.5 million tons, which would reduce 2012 shipments by approximately 4Mt.
The decision to reduce thermal coal production was made in early February when Alpha said it would idle four mines in Kentucky and West Virginia immediately, while two more would be idled within 12 months.
Alpha chief executive officer Kevin Crutchfield said the move was “necessary”
“This decision, which affects several hundred employees in Kentucky and West Virginia, was not made lightly,” he said.
“We will do everything in our power to ensure that all affected employees are treated fairly, with dignity and respect.”
On top of the quarterly loss, the company recorded a $245 million goodwill impairment charge, resulting from the changing market environment and the purchase and revised expectations of future operating costs of the company’s Easter operations.
Alpha does not expect the non-charge to adversely affect the company’s ongoing operations.
Looking ahead for 2012, Alpha said it was focused on the successful integration of the legacy Massey operations and continuing its outstanding safety performance in the industry, while also continuing its unbroken history of generating positive free cash flow every year.
Excluding the goodwill impairment charge, the company’s Q4 adjusted loss from continuing operations was $16 million.
