Peabody Energy and Kinder Morgan enter into long-term Gulf Coast coal export agreements

Wednesday, Jul 18, 2012

ST. LOUIS, July 17, 2012 /PRNewswire/ -- Peabody Energy (NYSE: BTU) and Kinder Morgan Energy Partners L.P. (NYSE: KMP) today announced long-term agreements to secure and expand the Gulf Coast export platform for Peabody's Colorado, Powder River Basin and Illinois Basin coal products.

Under the multi-terminal agreements, Peabody would gain additional access to export coal at Kinder Morgan's Deepwater Terminal and Houston Bulk Terminal (HBT) near Houston, and its International Marine Terminal (IMT) in Myrtle Grove, La., through 2021 and 2020, respectively.  This would increase Peabody's Gulf Coast export capacity to approximately 5 million – 7 million tons of coal per year between 2014 and 2020.

Peabody has also secured a rail service agreement with Union Pacific Railroad (UPRR) to transport the company's Colorado coal to Kinder Morgan's Houston terminals.

The agreements allow for throughput flexibility among Kinder Morgan's Gulf Coast export terminals to serve Peabody's international customer base.  The additional capacity also supports the planned expansion of Kinder Morgan's Gulf Coast coal handling facilities and Peabody's development of the Sage Creek extension of the Twentymile Mine.

Kinder Morgan will invest, including previously announced projects, approximately $400 million to expand its Gulf Coast terminal network.  After completion of all of the export expansion projects, Kinder Morgan's Gulf Coast terminal network will have a coal export nameplate capacity of approximately 27 million short tons per year.

"Peabody is securing a large-volume, sustainable U.S. export platform to meet growing global seaborne coal demand," said Peabody Energy Chairman and Chief Executive Officer Gregory H. Boyce. "These new throughput agreements further strengthen Peabody's ongoing partnership with Kinder Morgan as we continue to expand our long-term Gulf Coast capacity in line with emerging export opportunities for our competitive and reliable coal products."

"We look forward to expanding our partnership with Peabody into new markets," said Kinder Morgan Terminals President Jeff Armstrong.  "Export coal demand continues to grow around the country and Kinder Morgan is well positioned with our network of terminals to serve our customers' needs in multiple locations."

Peabody has extended its existing contract with KMP's HBT and will begin exporting Colorado and Powder River Basin coal products from the Deepwater facility beginning in 2014.

Peabody's Illinois Basin, Colorado and Powder River Basin coal will be exported through KMP's expanded IMT in New Orleans from 2014.  An existing agreement at the Cora river terminal in Illinois will be extended through 2018 to facilitate exports through IMT as well as domestic sales.

The Gulf Coast export platform is one of a number of ways in which Peabody accesses seaborne coal markets, including its global trading and brokerage activities, export coal from its growing Australian thermal and metallurgical coal position, export coal from its growing set of Indonesia supply sources, interest in developing a major West Coast export terminal, and ownership of a 38 percent interest in the DTA terminal in Virginia.

SOURCE Peabody Energy