Cloud Peak Energy, Inc. (NYSE:CLD) may sound like some new fangled alternative energy company, but this latest initial public offering (IPO), is a basic down to earth coal company. Although the IPO didn't have a spectacular opening, Cloud Peak Energy and other recent IPOs are evidence of the slow rebuilding in investor confidence.
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Cloud Origins
Cloud Peak Energy was spun out of Rio Tinto (NYSE:RTP), the large iron ore company that used the proceeds to pay down debt. The company issued 30.6 million shares of stock at $15.00 per share. This was slightly below the initial price range of $16-18 per share. Rio Tinto will still own about 48% of Cloud Peak Energy after the IPO.
The company also issued debt at the same time as the IPO. Cloud Peak Energy and its subsidiaries raised $600 million in two issues - an 8.25% issue due in 2017 and an 8.5% issue due in 2019.
Cloud Peak Energy owns three surface coal mines in the Powder River Basin. The mines contain sub-bituminous low sulfur coal. The company is the third largest producer in the U.S. Peabody Energy (NYSE:BTU) is the largest U.S. based producer, and estimates 2010 worldwide coal sales at 235-245 million tons. Cloud Peak Energy also owns a 50% interest in the Decker mine, a smaller operation that only produced 3.3 million tons in 2008.
Other Facts on Cloud Peak Energy
Cloud Peak Energy produced 97.1 million tons of coal in 2008, and has proven coal reserves of 885 million tons. The company had revenues of $1.24 billion and income from continuing operations of $88.3 million in 2008.
Cloud Peak Energy has two mines in Wyoming. The Antelope mine was purchased by Rio Tinto in the early 1990s from PacifiCorp, a utility that is now owned by MidAmerican Energy Holdings, a subsidiary of Berkshire Hathaway (NYSE:BRK.A). The mine produces from two seams, and produced 36 million tons of coal in 2008. The Cordero Rojo Mine produces from the Wyodak Seam, and produced 40 million tons in 2008.
Spring Creek Mine is located in Montana, and was also purchased from PacifiCorp in the early 1990s. Spring Creek shipped 18 million tons of coal in 2008.
The IPO of Cloud Peak Energy was not that well received and the stock has slipped a little since it started trading last week, selling for just under $15 a share.
Other IPOs
Several other IPOs hit the market the same week as Cloud Peak Energy. 7 Days Group Holdings Ltd. (NYSE:SVN) issued 10.1 million shares at $11 per share. 7 Days Group Holdings Ltd. owns a chain of hundred of low cost motels in China.
Archipelago Learning Inc. (Nasdaq:ARCL) issued 6.25 million shares at $16.50 per share. The company is a subscription-based online education company that uses the brand names Study Island and Northstar Learning. Both 7 Days Group Holdings Ltd. and Archipelago Learning Inc. are trading up from the IPO price.
The Bottom Line
The IPO market marches on, ignoring the debate over whether the market is ahead of itself, with several issues that caught investor's attention. The IPO market continues its comeback from the nadir hit during the financial crisis. (To learn more, read Oil And Gas Industry Primer.)
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