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of Water, Nevada Power and the Bureau of Reclamation. In a time of declining coal prices, <br />how much longer will the five owners of the plant be willing to pay $43.63 per ton for coal from <br />a mine mouth facility? <br />U.S. coal companies, including Peabody, have infrequently released their forward looking coal <br />price forecasts. When coal prices are rising and margins are ample this limitation on coal <br />company transparency receives little attention. During this time of severe financial pressures, <br />however, coal companies could better serve investors, the bankruptcy process, the market <br />and their own interests by providing a more robust picture of their forward looking coal prices <br />and the implications for economically recoverable coal that flows from these disclosures.37 <br />Peabody's Weakened Financial Condition Places <br />its Self -Bonding Program at Risk <br />Peabody Energy Corporation carries $1.3 billionS8 in reclamation obligations. These obligations <br />cover its self -bonding commitments in Colorado, New Mexico, Wyoming, Illinois and Indiana. <br />Self -bonding is the method used by some coal companies to comply with requirements under <br />the Surface Mining Control and Reclamation Act of 1977 (SMCRA). The act requires coal <br />companies to post bonds sufficient to cover the cost of reclaiming the site. The bond insures <br />that the site will be reclaimed and restored at the cessation of mining activities even if the <br />company goes out of business or fails to fulfill its obligations. The bond is released by the <br />federal government once the site is fully reclaimed. <br />The law contemplates that coal companies will obtain surety bonds or post other third party <br />commitments for each mine. The law also allows for self -bonding by a coal company. This <br />method effectively pledges company assets as a form of collateral in lieu of the bonds. This <br />allows coal companies to avoid premium payments on the third party insured bonds. The <br />bond premium savings is typically in the millions of dollars per mine. <br />Coal companies can qualify for self -bonding if they meet certain tests of financial solvency. <br />The companies make application under the federal law to administrators of the program in <br />designated state agencies. The mine applicant is usually a subsidiary corporation of a larger <br />parent company (i.e. Peabody, Arch and Alpha Natural Resources). The subsidiary must show <br />that it has access to unencumbered assets sufficient to cover the self -bonding obligation. The <br />applicant must show as part of its filing that the parent company has a liabilities to net worth <br />ratio of less than 2.5. States vary somewhat in methodological determinations of what are total <br />liabilities and what constitutes net worth. When coal prices are high, the value of company <br />reserves and equities are rising, and debt levels are manageable, most companies can easily <br />meet these solvency tests. <br />37 WpJ/powersource post-gazette.com/powersource/companies/2015/10/18/Coal-reserves-Unmined-or- <br />unm inable/stories/201510180092 <br />58 http /lwww.peabodyenergy.com/content/162/sec-filings , Form 10K, February 25, 2015 F-64. <br />Peabody's Strategies for Survival Ignore Market Realities and Risk Backfiring is <br />