In a move to focus on growing Asian and Australian coal markets, Peabody Energy has announced it likely will sell or spin off its West Virginia and Kentucky operations.

"We're very encouraged by the global coal markets, and we're continuing to move forward on a number of growth initiatives aimed at capitalizing on these events," said Peabody President and Chief Executive Officer Gregory H. Boyse in the company's quarterly conference call April 19.

International markets, Boyse said, underpin the fastest growing share of St. Louis-based Peabody's earnings profile.

"Activities outside the U.S. represented a mere 1 percent of our EBITDA" -- a measure of cash flow -- "five years ago," Boyse said. "This grew to 30 percent last year and will continue to increase as we move forward."

Boyse especially stressed growth in the Chinese market.

"Last quarter, I forecast that China could be a net importer by the end of 2007," Boyse said. China exported 80 million tons in 2005, but that nation's double-digit economic growth has created a strong pull to keep its energy resources at home.

"In fact," Boyse said, "the growth in China's coal demand has again surprised the world and, as a result, we believe China has been a net importer during the first quarter."

The company reviewed its Appalachian operations in this global context, saying in its release that geologic and business conditions in Appalachia are sufficiently different from its other operations that the assets would benefit from their own management.

"These eastern subsidiaries feature significant assets and best practices gleaned from a heritage with the world's largest coal company," said Chief Financial Officer and Executive Vice President of Corporate Development Richard A. Navarre.

"On a stand-alone basis, the new company would be well positioned to pursue a strategy of consolidation in the specialized and highly fragmented eastern U.S. coalfields," he said, "capitalizing on synergies with more than 20 coal companies in markets that are expected to experience favorable supply and demand fundamentals."

Peabody said it controls more than 1.5 billion tons of proven and probable coal reserves in the region.

It operates 15 mines in West Virginia through its Eastern Associated Coal Co., as well as five other subsidiaries and a joint venture. Its Highland No. 9 Mine near Waverly, Ky. also is considered part of its Appalachian operations.

Peabody has additional coal holdings in Indiana, Illinois, Wyoming, Colorado, Arizona and New Mexico. It also has operations in Australia and an interest in a mining operation in Venezuela.

Peabody reported first-quarter earnings down 32 percent to $88.5 million, or 33 cents a share, from $130.2 million, or 48 cents a share, a year ago.

The company's stock closed down 1.3 percent at $45.59 following the Appalachian announcement and earnings report but rose to close at $49.10 after an April 23 A.G. Edwards upgrade from hold to buy.