Peabody Joins Bid to Rescue U.S. West's Biggest Coal Plant

(Bloomberg) -- Coal supplier Peabody Energy Corp. is trying to help save one of its biggest U.S. customers.

On Thursday, the mining giant released a report it commissioned showing the 2,250-megawatt, coal-fired Navajo power plant in Arizona, the largest in the U.S. West, is capable of making money through 2040, even in an era of cheap natural gas. It's also offering lower-price coal for the plant. Meanwhile, the complex's utility owners have said they may have to shut it later this decade because it will be cheaper to buy power on the open market.

Peabody has joined an escalating fight to keep one of the nation's biggest coal plants alive. Native Americans who work there have turned its survival into a national issue, calling on President Donald Trump to make good on his promise to support coal and protect U.S. jobs. If retired, the complex would join the thousands of megawatts of coal-fired generation that have already shut from mounting costs, environmental regulations and cheap natural gas unleashed by the shale boom.

“We believe that that plant can compete,” Peabody Chief Executive Office Glenn Kellow said in interview at Bloomberg headquarters in New York on Tuesday. “We're prepared to roll up our sleeves and do what we can to help. We know that it's such a significant contributor to the Navajo economy and to the Hopi economy.”

Thousands of jobs would be lost if the plant closes, Beth Sutton, a spokeswoman for Peabody, said by phone Thursday. The U.S. Department of the Interior is coordinating talks in Washington next week to keep it running, she said.

The four utility owners of the plant are seeking an extension to their lease with the Navajo Nation so they can keep the plant running through 2019, when they can begin the decommissioning process. 

“Our number one priority is to get this first extension done in order to keep the plant open,” Meghan Cox, a spokeswoman based for the Navajo Nation, said by phone Friday. “Of course, we want to keep it open as long as possible.”

The plant and the Peabody mine that supplies it with coal employ 3,090 people, Cox said.

Bridging the Gap

UNS Energy Corp., which has a 7.5 percent stake in the plant, is in favor of sticking to the 2019 shutdown date as part of a shift away from coal, though Chief Executive Officer David Hutchens urged caution.

“Knowing the effect it will have on those communities, we're not stepping on the gas,” Hutchens said in an interview at Bloomberg headquarters in New York on Thursday. “People have woken up and said is there a way to bridge the gap between the 2019 shutdown date and something further off.”

One idea was to look at providing a transition for the native tribes from coal jobs to other industries or economic activities, he said.

Conceived in the 1960s, the plant is located in the Navajo Nation near Page, Arizona. It's jointly owned by state and federal agencies as well as publicly traded utilities.

The study commissioned by Peabody was carried out by Navigant Consulting Inc. and presented at a working group meeting of the Arizona Corporation Commission in Phoenix.

To contact the reporter on this story: Jim Polson in New York at jpolson@bloomberg.net.

To contact the editors responsible for this story: Lynn Doan at ldoan6@bloomberg.net, Jim Efstathiou Jr., Stephen Cunningham