ST. LOUIS — Coal juggernaut Peabody Energy has reshaped itself with two moves over two weeks.

Last week, the St. Louis-based company struck a multibillion-dollar deal to take over “world-class” Australian mines for metallurgical coal, used in steelmaking.

Just days earlier, Peabody — the world’s largest private-sector coal producer — welcomed a high-profile partner in a project to put solar panel fields at almost a dozen coal mine sites across Illinois and Indiana.

The moves put less of an emphasis on providing coal to burn in power plants and lean toward higher-profit, higher-demand businesses, like steelmaking and solar power.

“They represent Peabody trying to diversify and move into higher margins,” said Joe Aldina, a coal-focused analyst who runs the consulting firm First Ridge Associates. “That’s a good thing.”

Peabody’s flurry of moves at least partially draws from a playbook that other coal companies have used in recent years, including its closest U.S. peer, Arch Resources, which in 2020 announced its own pivot toward metallurgical coal. Now, Peabody finds itself accelerating down a similar path.

The up to $3.8 billion deal for Anglo American’s Australian mines has the biggest ramifications and is hailed as potentially transformative.

Thermal coal, used for electricity generation, has accounted for about half of Peabody’s business. When the Anglo American deal closes next year, Peabody will have a roughly 75-25 split, in favor of metallurgical coal. That focuses Peabody on a market that’s expected to be more resilient in the foreseeable future.

“Over the long term, it will be a very good acquisition,” said Matt Warder, a natural resources analyst and the CEO of Seawolf Research. “This deal puts them in a more stable sector, relying more on the steel industry than the thermal coal industry.”

Peabody has long pinned its hopes for the future on steelmaking in Asia’s growing economies but is now betting more heavily than ever on its ability to serve demand in the region from its operations in Australia.

The company said Asian markets were entirely responsible for the growth in global steel demand over the past decade, and are expected to drive the “vast majority” of demand for metallurgical coal through 2050.

“This transaction gives us a strong foundation to position the company for long-term success,” said Jim Grech, Peabody’s president and CEO, in last week’s announcement.

Putting solar panels on coal mines

Changes at Peabody are also reflected at regional mine sites in the Illinois Basin.

Days before its Anglo American deal, the company announced a new partner in its push to build solar- and energy storage projects on sites of reclaimed coal mines in Illinois and Indiana — pairing up with RWE Clean Energy as part of its joint venture called R3 Renewables, originally formed in 2022.

At the time of R3’s formation — which experts said marked a surprising but sensible shift for the coal company — Peabody had teamed up with investors Summit Partners Credit Advisors and Riverstone Credit Partners. Now, RWE is acquiring the stakes held by SPCA and Riverstone and will have a majority interest in R3, while Peabody retains a 25% stake, down from an earlier share of 50%.

The deal pairs two heavyweights in their respective fields. Peabody has touted its “extensive” land holdings in the region as attractive sites for the development of renewable projects. And RWE says it is the second-largest owner of U.S. solar projects.

When R3 first launched, it aimed to develop six sites over five years — including more than 3.3 gigawatts of solar power and 1.6 million gigawatts of battery storage capacity.

The companies said Thursday that R3’s founding members had initiated a pipeline of 10 potential projects, representing 5.5 gigawatts of capacity.

And in the wake of the fresh deal, Peabody and RWE expect that pace to speed up further and boost growth prospects for R3.

“We would anticipate that this would accelerate the pace of development, given the wherewithal of a leading partner like RWE,” said Vic Svec, Peabody’s vice president of investor relations.

“This would be a larger enterprise, particularly given RWE’s capabilities,” he added, while addressing the change in Peabody’s stake. “So Peabody has a smaller share of a larger pie.”

RWE brings key “development expertise and know-how,” capital and equipment supplier relationships to the table, said Hanson Wood, its head of U.S. onshore development.

RWE will acquire seven of the 10 planned projects and enter into the joint venture with Peabody “to continue development of the three remaining projects” on reclaimed mine sites, the companies announced.

Construction is likely to start at the first sites in 2027, Wood said. Nailing down buyers for the electricity is an essential first step, he noted, whether that’s with utilities or with companies seeking to buy the power directly.

Another ‘hurrah’ for coal power?

Redeveloping old coal mines represents an exciting opportunity for investment in rural communities, Wood said, and avoids conflicts that can ensnare renewable projects when other uses, like farming, compete for the land.

And as coal-fired power plants continue to retire, the new projects could help feed a surge of demand from hungry consumers like data centers.

“The demand for renewables is about to become voracious,” Wood said. “We’re excited to meet that demand.”

Outside experts voiced excitement about Peabody’s coming foray into solar.

“I do like it. I think it’s a positive development,” said Aldina. “It adds some value to lands that Peabody already owns. ... There’s more and more reason to do this kind of thing.”

The prospect of growing power demands also leads some to think that the thermal coal business could be a bit more resilient than many expected just a few years ago.

“I don’t think thermal coal has seen its last hurrah,” said Warder, pointing to concerns about energy capacity. “I suspect you’ll see coal plant retirements slowed down, if not outright reversed.”

Still, that might not be enough to entice Peabody to remain committed to its major thermal coal mines, like those in Wyoming’s Powder River Basin, or P.R.B., the national powerhouse for production. Profit margins there are very low — about $1 per ton, Aldina said — leaving some to wonder if a sell-off will be the next big move for Peabody.

“I think those assets are struggling,” said Aldina. “Peabody does not make enough money in the P.R.B. to make that a worthwhile business, frankly. ... There’s a question of: ‘Why stay in that business?’ ”

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