Alpha Natural Resources, the third largest US coal company, had a rough few days in the stock market last week. First, it tumbled afternewsthat the company would have to pay $200 million to stop illegally dumping toxic pollution into the waterways of Kentucky, Pennsylvania, Tennessee, Virginia and West Virginia, as well as a $27.5 million fine – the largest penalty in history under section 402 of the Clean Water Act,according to the US Environmental Protection Agency.
(Of course, a better approach would be to properly regulate the coal industry and actually prevent pollution into our waterways from the mining, processing, transport, and burning of coal, asseveralcommunity and environmental groupspointed out.)
Then, Alphas stock slumped the most in seven months after Goldman Sachs Group Inc. cut its rating to sell and lowered price estimates for the commodity,accordingto Bloomberg News. Goldman Sachs, which published a report last year titled, The window for thermal coal investment is closing highlighted afew reasonswhy Alpha is a particularly bad bet among its peers in theshrinking US coal industry, such as, competitively disadvantaged assets, including higher-cost met coal assets and lower-quality PRB mines. But the Goldman Sachs analysis also pointed to challenges facing the entire US coal sectorlikean expected slowdown in the growth of Chinese imports, and the stock prices of other coal companies like Peabody and Arch fell as well, even while the S&P 500closedat a record high.
Now you might think that Alphas top executives, CEO Kevin Crutchfield and President Paul Vining, would be worried about their companys tumbling stock price, record fines, and dim outlook. Nope: SNLreportsthat Crutchfield and Vining were each offered $2 million bonuses because of the particularly difficult market and regulatory conditions which could affect the company and the coal industry generally in the coming years.
Virginia-based coal producerAlpha Natural Resources Inc.offered top executives hefty retention bonuses to remain with the company during bleak market conditions, according to a Form 10-K filed with the U.S. Securities and Exchange Commission.
Alpha Chairman and CEO Kevin Crutchfield and President Paul Vining will each receive a total of $2 million if they remain with the company through August 2016 and February 2016, respectively.
And thats just their bonuses – both have been well compensated in recent years despite their companys falling stock. CEO Kevin Crutchfieldtook in morethan $6.1 million in 2012, on top of the $6.7 million in 2011. President Paul Vining got $5.1 million in 2012, and $2.5 million in 2011. Meanwhile, Alphas stock price has lost more than 90% of its value since early 2011.
Alpha Natural Resources (ANR) stock price has lost 92% of its value since January 2011, and other US coal companies like Peabody Energy (BTU) and Arch Coal (ACI) have also fallen, even as the Dow Jones Index rose 41%
As the US moves away from coal and countries around the world respond to the urgent need to reduce carbon pollution, some shareholders are questioning the business model pursued by Alpha and other coal companies. The Unitarian Universalist Association of Congregations hasfiled a shareholder resolutioncalling on Alpha Natural Resources to report on the companys goals and plans to address global concerns regarding fossil fuels and their contribution to climate change, including analysis of long and short term financial and operational risks to the company. Thats one of 142 climate related shareholder resolutionsannounced by CERESthat companies will face this year.
While shareholders who havent already heededcalls to divestmay continue to get hit by coal companies falling stock prices, it appears many coal company executives are getting out of the industry now. FromSNL:
Top executives at several major coal companies have retired or resigned in recent years amid mounting challenges facing the industry. One executive recruitersuggestedto SNL Energy in 2013 that the pressure may be prompting some executives to re-evaluate their futures.
In 2012,Arch Coal Inc.‘s Steven Leer, the company’s CEO since its formation in 1997,
Richard Whiting
In July 2013, metallurgical coal and iron ore producerCliffs Natural Resources Inc.said President and CEO Joseph Carrabba
In August 2013, coal and gas producerRhino Resource Partners LP
The flurry of retirements has not been limited to the U.S.BHP Billiton
So if you like lavish CEO payouts along with falling stock prices, record pollution fines, and diminishing prospects in a carbon constrained world – invest in coal! Otherwise, it might be time to take a hint from these coal executives and abandon this ship.
crossposted from Grist
