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From Securities Regulation Daily, November 9, 2015

Peabody Energy agrees to enhanced disclosures regarding climate change impact

By Kevin Kulling, J.D.

The New York Attorney General’s office announced that it has entered into an “Assurance of Discontinuance” agreement with Peabody Energy Corporation following an investigation by the Attorney General’s office that found Peabody violated New York laws prohibiting false and misleading conduct in the company’s statements to the public and investors regarding financial risks associated with climate change and potential regulatory responses (In the Matter of Investigation by Eric T. Schneiderman, Attorney General of the State of New York, of Peabody Energy Corporation, November 8, 2015).

The Attorney General’s office said in a press release that as part of the agreement, Peabody will file revised shareholder disclosures with the SEC that “accurately and objectively represent these risks to investors and the public.” Peabody has agreed that all future statements to shareholders and the public will be consistent with the terms of its agreement with the Attorney General’s office and the disclosures it will file with the SEC. The Assurance of Discontinuance includes the attorney general’s findings, which are neither admitted nor denied by Peabody.

Findings of AG’s investigation. According to the Attorney General’s office, Peabody repeatedly denied in public financial filings to the SEC that it had the ability to predict the impact that potential regulation of climate change pollution would have on its business, even though Peabody and its consultants actually made projections that such regulation would have severe impacts on the company.

The Attorney General’s office also said that its investigation found that Peabody, in SEC filings as well as other public communications, provided incomplete and one-sided discussions of the findings and projections of the International Energy Agency (IEA) relating to future world coal demand.

The Attorney General’s office concluded that Peabody’s disclosures denying the ability to reasonably predict the future impact of any climate change regulation on its business, and the company’s statements in SEC filings and in other public communications concerning the IEA’s projections for the future of coal, violated provisions of both New York’s Martin Act and Executive Law which prohibit false and misleading conduct in connection with securities transactions.

The agreement. Under the agreement, Peabody commits to ending certain representations to investors and the public that minimize the company’s financial risks related to climate change. The agreement requires the company in its quarterly reports to provide disclosures concerning projections that the company has been able to make regarding the impact on the company’s business of certain potential laws, regulations and policies involving climate change, and regarding different scenarios used by the IEA in its projections of demand for coal, according to the attorney general’s statement. The company also agrees to not represent in any public communication that it cannot reasonably project or predict the range of impacts that any future laws, regulations and policies relating to climate change or coal would have on Peabody’s markets, operations, financial condition or cash flow. The company also agrees to correctly and in good faith describe IEA’s scenarios for global demand for coal in its public communications.

Peabody serves power generating and metallurgical customers in 25 countries on 6 continents. The company, through its subsidiaries, has majority interests in 26 coal operations located throughout all major US coal producing regions and Australia. The company reports revenues totaling $6.79 billion.

The matter is Assurance No. 15-242.

Companies: Peabody Energy Corporation

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