Peabody Energy Signs Three Utilities to Invest in Coal

Peabody Energy Signs Three Utilities to Invest in Coal-Fired Power Plant

St. Louis Post-Dispatch - May 19, 2003

Peabody Energy Co. has signed up three electric utilities to invest in a large coal-fired power plant in Washington Township, Ill. The utilities will have a one-third interest in the $2 billion plant and will use about one-third of the electricity.

St. Louis-based Peabody, the largest coal producer in the country, has been planning to build a 1,500 megawatt Prairie State Energy Campus since late 2001. But Peabody has said it will not break ground until it has signed up users for 80 to 90 percent of the anticipated electricity, and investors for 50 percent of the construction cost.

"It's much easier to finance a project like an electricity plant that has both secure supply and a customer to take off the power," said Garrett Smith, portfolio manager of the $300 million BP Capital Energy Equity Fund, which owns about 400,000 Peabody shares.

Prairie State plant would be the first electric plant for Peabody, which has limited its business solely to coal production. The plant will be built in Lively Grove, Ill., about 50 miles southeast of St. Louis, near Peabody reserves of 200 million to 300 million tons of coal.

Prairie State will be a "mine-mouth" plant, where coal is fed from conveyor belts leading from the mines. Mine-mouth plants are comparatively inexpensive to operate because coal does not have to be delivered by rail or barge.

"We think it's a great model in this era of increasing energy needs," said Vic Svec, a spokesman for Peabody.

Peabody is planning to build a similar plant in Kentucky.

The Prairie State investors include Indiana Municipal Power Agency, a non-profit wholesale power provider to 150,000 households in 40 cities and towns; Wolverine Power Cooperative of Cadillac, Mich., whose five members serve more than 600,000 rural residents in 35 Michigan counties; and Missouri Joint Municipal Electric Utility Commission, a coalition of 56 consumer and municipal utilities, including one in Kirkwood.

--Bloomberg News contributed to this report.

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