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TABLE OF CONTENTS
INDEX TO THE FINANCIAL STATEMENTS

Table of Contents

As filed with the Securities and Exchange Commission on November 9, 2009

Registration No. 333-161293

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



AMENDMENT NO. 4
TO

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933



CLOUD PEAK ENERGY INC.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation)
  1221
(Primary Standard Industrial
Classification Code Number)
  26-3088162
(I.R.S. Employer
Identification Number)



505 S. Gillette Ave.
Gillette, WY 82716
(307) 687-6000
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)



Colin Marshall
Chief Executive Officer
Cloud Peak Energy Inc.
505 S. Gillette Ave.
Gillette, WY 82716
(307) 687-6000
(Name, address, including zip code, and telephone number, including area code, of agent for service)



Copies to:

Stuart H. Gelfond, Esq.
Vasiliki B. Tsaganos, Esq.
Fried, Frank, Harris, Shriver &
Jacobson LLP
One New York Plaza
New York, NY 10004
Tel: (212) 859-8000
Fax: (212) 859-4000
  Shane Orians, Esq.
Rio Tinto Services Inc.
4700 Daybreak Parkway
South Jordan, UT 84095
Tel: (801) 204-2803
Fax: (801) 204-2892
  Richard A. Drucker, Esq.
Davis Polk & Wardwell LLP
450 Lexington Avenue
New York, NY 10017
Tel : (212) 450-4000
Fax: (212) 450-3800



        Approximate date of commencement of proposed sale to the public:    As soon as practicable after this Registration Statement becomes effective.



         If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.    o

         If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

         If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

         If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

         Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act (check one):

Large accelerated filer o   Accelerated filer o   Non-accelerated filer ý
(Do not check if a smaller
reporting company)
  Smaller reporting company o

CALCULATION OF REGISTRATION FEE

               
 
Title of each class of
securities to be registered

  Amount to
be Registered(1)

  Proposed maximum
offering price
per share(2)

  Proposed maximum
aggregate
offering price(2)

  Amount of
Registration Fee(3)

 

Common stock, par value $0.01 per share

  35,190,000   $18.00   $633,420,000   $35,345

 

(1)
Includes 4,590,000 shares of common stock that the underwriters have the option to purchase to cover over-allotments, if any.

(2)
Estimated solely for the purposes of calculating the registration fee pursuant to Rule 457(a) under the Securities Act of 1933.

(3)
Previously paid.

         The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.


Table of Contents

The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED NOVEMBER 9, 2009

30,600,000 Shares

CLOUD PEAK ENERGY INC.

GRAPHIC

Common Stock



        This is the initial public offering of our common stock. We are selling 30,600,000 shares of common stock. Prior to this offering, there has been no public market for our common stock. The initial public offering price of our common stock is expected to be between $16.00 and $18.00 per share. Our common stock has been approved for listing on the New York Stock Exchange under the symbol "CLD."

        Immediately prior to this offering, we will acquire an interest in Rio Tinto America Inc.'s western U.S. coal business (other than the Colowyo mine) through the purchase of certain membership units indirectly held by Rio Tinto America in Cloud Peak Energy Resources LLC, or CPE LLC. We will use the net proceeds of this offering to finance this acquisition from Rio Tinto America. See "Use of Proceeds" and "Structuring Transactions and Related Agreements."

        We will be a holding company and our sole asset will be our managing member interest in CPE LLC. Following the completion of the transactions described in this prospectus, we will own approximately 51.67% and Rio Tinto America will own indirectly approximately 48.33% of the economic interest in CPE LLC, assuming no exercise of the underwriters' overallotment option. Our only business will be acting as the sole manager of CPE LLC and, as such, we will operate and control all of the business and affairs of CPE LLC.

        The underwriters have an option to purchase a maximum of 4,590,000 additional shares of common stock from us to cover over-allotments of shares of common stock. If the underwriters exercise their option, we will use the net proceeds from the over-allotment option to purchase additional common membership units of CPE LLC indirectly held by Rio Tinto America.

        Investing in our common stock involves risks. See "Risk Factors" on page 24.

 
  Price to
Public
  Underwriting
Discounts and
Commissions
  Proceeds, before
expenses, to us
 
Per Share   $     $     $    
Total   $     $     $    

        Delivery of the shares of common stock will be made on or about                           , 2009.

        Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Credit Suisse   Morgan Stanley   RBC Capital Markets
Calyon Securities (USA) Inc.
    J.P. Morgan
        Scotia Capital
            Societe Generale
            Wells Fargo Securities

 

BMO Capital Markets       Citi
ING Wholesale   Natixis Bleichroeder LLC   PNC Capital Markets LLC
Raymond James   SunTrust Robinson Humphrey   Capital One Southcoast

The date of this prospectus is                           , 2009.


Table of Contents

GRAPHIC


Table of Contents


TABLE OF CONTENTS

 
  Page

PROSPECTUS SUMMARY

  1

RISK FACTORS

  24

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

  61

USE OF PROCEEDS

  63

DIVIDEND POLICY

  63

STRUCTURING TRANSACTIONS AND RELATED AGREEMENTS

  64

CAPITALIZATION

  85

DILUTION

  86

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

  88

SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA

  104

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

  109

THE COAL INDUSTRY

  141

BUSINESS

  150

ENVIRONMENTAL AND OTHER REGULATORY MATTERS

  169

MANAGEMENT

  181

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

  210

PRINCIPAL STOCKHOLDERS

  214

DESCRIPTION OF CAPITAL STOCK

  216

SHARES ELIGIBLE FOR FUTURE SALE

  223

MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS

  225

UNDERWRITING

  229

LEGAL MATTERS

  233

EXPERTS

  233

EXPERTS—COAL RESERVES

  233

WHERE YOU CAN FIND ADDITIONAL INFORMATION

  233

GLOSSARY OF SELECTED TERMS

  235

INDEX TO THE FINANCIAL STATEMENTS

  F-1



        You should rely only on the information contained in this document or any free writing prospectus prepared by or on behalf of us or to which we have referred you. We have not authorized anyone to provide you with information that is different from the information contained in this document or any free writing prospectus prepared by or on behalf of us or to which we have referred you. This document may only be used where it is legal to sell these securities. The information in this document may only be accurate on the date of this document.

Dealer Prospectus Delivery Obligation

        Until                        , 2009 (25 days after the commencement of this offering), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealer's obligation to deliver a prospectus when acting as an underwriter and with respect to unsold allotments or subscriptions.



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PROSPECTUS SUMMARY

        This summary highlights information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our common stock. You should read the entire prospectus carefully, including the section describing the risks of investing in our common stock under "Risk Factors" and the consolidated financial statements of our predecessor, Rio Tinto Energy America Inc., contained elsewhere in this prospectus before making an investment decision. Some of the statements in this summary constitute forward-looking statements. See "Special Note Regarding Forward-Looking Statements."

        In this prospectus, unless the context otherwise requires, references to:

    "Cloud Peak Energy," "we," "us," "our" or the "Company" refer to Cloud Peak Energy Inc., which was incorporated on July 31, 2008 in preparation for this offering, and its consolidated subsidiary CPE LLC and the businesses that CPE LLC will operate after giving effect to the structuring transactions described in this prospectus and assuming completion of this offering;

    "CPE LLC" refers to Cloud Peak Energy Resources LLC, a Delaware limited liability company, formerly known as Rio Tinto Sage LLC, that will be the operating company for our business, and in which the Company will acquire a managing member interest and become a member and the sole manager in connection with this offering;

    "Rio Tinto Energy America" or "RTEA" refers to Rio Tinto Energy America Inc., our predecessor for accounting purposes, which contributed certain assets used in the operations of CPE LLC;

    "Rio Tinto America" refers to Rio Tinto America Inc., which indirectly contributed certain assets used in the operations of CPE LLC through its subsidiaries and is the owner of RTEA;

    "Rio Tinto" refers to Rio Tinto plc and Rio Tinto Limited and their subsidiaries, collectively, one of the largest mining companies in the world. Rio Tinto plc is the ultimate parent company of Rio Tinto America and RTEA; and

    "KMS" refers to Kennecott Management Services Company, a wholly-owned subsidiary of Rio Tinto America.

        Certain industry and other technical terms used throughout this prospectus relating primarily to our business, including terms related to the coal industry, coal reserves, mining equipment and coal regions in the U.S. are defined under "Glossary of Selected Terms" beginning on page 235 of this prospectus.

Cloud Peak Energy Inc.

        We are the third largest producer of coal in the U.S. and in the Powder River Basin, or PRB, based on 2008 coal production. We operate some of the safest mines in the industry. According to data from the Mine Safety and Health Administration, or MSHA, in 2008 we had the lowest employee all injury incident rate among the five largest U.S. coal producing companies. We operate solely in the PRB, the lowest cost coal producing region of the major coal producing regions in the U.S., and operate two of the five largest coal mines in the region and in the U.S. Our operations include three wholly-owned surface coal mines, two of which are in Wyoming and one in Montana. We also own a 50% interest in a fourth surface coal mine in Montana. We produce sub-bituminous steam coal with low sulfur content and sell our coal primarily to domestic electric utilities. Steam coal is primarily consumed by electric utilities and industrial customers as fuel for electricity generation. In 2008, the coal we produced generated approximately 4.4% of the electricity produced in the U.S.

        Following the completion of this offering, Cloud Peak Energy Resources LLC, or CPE LLC, will own Rio Tinto America's western U.S. coal business, except for the Colowyo coal mine in Colorado. Cloud Peak Energy will be a holding company that manages CPE LLC, and our only business and sole asset will be our managing member interest in CPE LLC. Following the completion of the transactions described in this prospectus, we will own approximately 51.67% and Rio Tinto America indirectly will

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own approximately 48.33% of the economic interest in CPE LLC, assuming no exercise of the underwriters' overallotment option and including approximately 831,000 shares of restricted common stock to be issued to directors and employees in connection with this offering.

        On October 1, 2009, CPE LLC sold the Jacobs Ranch mine to Arch Coal, Inc. and did not retain the proceeds from that sale. We refer to this transaction as the Jacobs Ranch Sale. The Colowyo and Jacobs Ranch mines are reflected as discontinued operations in the consolidated financial statements of our predecessor, RTEA, contained elsewhere in this prospectus.

        For the year ended December 31, 2008 and the nine months ended September 30, 2009 we:

    produced 97.1 million and 69.9 million tons of coal, respectively;

    generated revenues of $1.24 billion and $1.06 billion, respectively; and

    had income from continuing operations of $88.3 million and $147.3 million, respectively.

        The tables below summarize the tons of coal produced and proven and probable coal reserves by mine as of December 31, 2008 and other data regarding our reserve and non-reserve coal:

Mine
  Tons Produced in 2008   Proven Coal Reserves   Probable Coal
Reserves
  Total Proven and
Probable
Coal Reserves
 
 
  (in millions)
  (nearest million)
  (nearest million)
  (nearest million)
 

Antelope

    35.8     286     40     326  

Cordero Rojo

    40.0     331     72     402  

Spring Creek

    18.0     263     54     317  

Decker(1)

    3.3     5         5  
                   

Total

    97.1     885     165     1,050  
                   

      (1)
      Based on our 50% interest in our Decker mine.
Non-reserve Coal Deposits
  Million Tons  

Other Non-reserve Coal Deposits as of December 31, 2008 (includes 108 million tons of non-reserve coal deposits acquired in April 2008 with the South Maysdorf LBA tract). 

    261  

Additional Acquired Tonnage in May 2009 relating to our Cordero Rojo mine (according to Bureau of Land Management estimates)

    55  

        The following chart sets out our total sales commitments for the stated years, including the weighted average price per ton for those tons for which the prices have been established:


Contracted Sales as of September 30, 2009(1)

 
  2009   2010   2011   2012   2013  

Total committed tons (in millions)

    93     90     54     32     19  
 

Committed tons with fixed prices (in millions)

    89     80     41     20     5  
 

Committed tons with variable pricing (in millions)

    4     10     13     12     14  

Weighted-average sold-to price for committed tons with fixed prices (dollars per ton)

 
$

11.89
 
$

12.80
 
$

13.68
 
$

13.00
 
$

12.37
 

(1)
Excludes contracted sales from Decker.

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        Our business and operations, including our strengths and strategy listed below, are subject to numerous risks and uncertainties, including risks related to coal prices and mining operations, coal consumption, including electricity demand, and economic and financial conditions, among others, any or all of which could materially and adversely affect our business and market position. See "Risk Factors" beginning on page 24 of this prospectus.

Our Strengths

        We believe that the following strengths enhance our market position:

        We are the third largest coal producer in the U.S. and in the PRB and have a significant reserve base.    Based on 2008 production of 97.1 million tons, we are the third largest coal producer in the U.S. and in the PRB. As of December 31, 2008, we controlled approximately 1.3 billion tons of coal, consisting of approximately 1.05 billion tons of proven and probable coal reserves and approximately 261 million tons of non-reserve coal deposits.

        We operate highly productive mines located solely in the PRB, the lowest cost coal producing region of the major coal producing regions in the U.S.    All of our mines are located in the PRB, which is the lowest cost coal producing region of the major coal producing regions in the U.S. We operate two of the five largest mines in the PRB and the U.S. We believe that our large PRB mines provide us with significant economies of scale. We benefit from the fact that our mines are among the lowest cost and highest producing mines in the U.S. Because the operational costs of PRB mines are low relative to other major coal producing regions, we believe that we are better able to maintain production levels at low costs despite the adverse impact of economic downturns on our coal prices. However, our coal mining operations are subject to numerous operating risks which could result in materially increased operating expenses or decreased production levels.

        Our acquisition of additional LBAs and surface rights and our substantial capital investments in our mines in recent years have positioned us well for the future.    We have focused on strategic acquisitions and subsequent expansions of large, low operating cost, low-sulfur operations in the PRB and replacement of, and additions to, our reserves through the federal coal leasing process, also known as the Lease by Application, or LBA, process and the acquisition of related surface rights. From January 1, 2005 to September 1, 2009, we acquired 444 million tons of reserves, in addition to the North Maysdorf tract that the BLM estimates to contain 55 million tons of non-reserve coal deposits. We acquired the North Maysdorf tract for a total commitment of $48.1 million, of which we have already made cash installment payments of $9.6 million. From January 1, 2006 to September 30, 2009, we have also made significant capital expenditures in our mining facilities and equipment, investing $371.3 million. These investments have increased our existing mines' capacity and productivity. We have also nominated LBA tracts of land that we believe contain, as applied for, approximately 800 million tons of non-reserve coal deposits according to our estimates and subject to final determination by the BLM of the final boundaries and tonnage for these tracts. Accordingly, we believe we are well-positioned for the future through the strategic acquisition of additional LBAs and surface rights. If we are unable to acquire additional LBAs or surface rights, our business, financial condition or results of operations could be adversely affected.

        We are well-positioned to take advantage of favorable long-term industry trends in the U.S. and in the PRB region.    Historically, increases in U.S. coal consumption have been driven primarily by increased use of existing electricity generation capacity and the construction of new coal-fired power plants. While demand for electricity in our target markets has decreased since mid-2008, it is expected to recover as the economy strengthens. According to the U.S. Energy Information Administration, or EIA (report released April 2009), annual U.S. coal demand is projected to reach 1.24 billion tons by 2020, compared to demand of 1.12 billion tons in 2008. Production constraints and increased export demand for eastern U.S. coal reduces the availability of eastern U.S. coal to the U.S. domestic market.

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As a result, we expect coal consumers may increasingly substitute their use of eastern U.S. coal with PRB coal. Increasingly stringent air quality laws, safety regulations and the related costs of scrubbers may favor low-sulfur PRB coal over other types of coal, which may increase domestic demand for PRB coal. According to the EIA, the western U.S. represented 54% of U.S. coal production in 2008 and is expected to represent approximately 57% of U.S. coal production in 2020. PRB coal demand is expected to increase during this same time period by 70 million tons. The EIA's projections take into account the provisions of the American Recovery and Reinvestment Act of 2009, or ARRA, and assume that no pending or proposed federal or state carbon emissions legislation is enacted and that a number of additional coal-fired power plants will be built during this period. If greenhouse gas emissions from coal-fired power plants are subject to extensive new regulation in the U.S. pursuant to future U.S. treaty obligations, statutory or regulatory changes under the Clean Air Act, or federal or additional state adoption of a greenhouse gas regulatory scheme, or if reductions in greenhouse gas emissions are mandated by courts or through other legally enforceable mechanisms, absent other factors, the EIA's projections with respect to the demand for coal may not be met. If the increased demand for electricity is met by new power plants fueled by alternative energy sources, such as natural gas, or if additional state or federal mandates are implemented to support or mandate the use of alternative energy sources, these long-term industry trends may not continue.

        Our employee-related liabilities are low for our industry.    We only operate surface mines. As a result, our exposure to certain health claims and post-retirement liabilities, such as black-lung disease, is lower relative to some of our publicly traded competitors that operate underground mines. Following the completion of this offering, the obligations for future pension and post-retirement welfare for active employees will be assumed by us, and obligations for employees who have retired as of the date of the completion of this offering will be retained by Rio Tinto.

        We have a strong safety and environmental record.    We operate some of the industry's safest mines. According to data from MSHA, in 2008 we had the lowest employee all injury incident rate among the five largest U.S. coal producing companies. All of the mines we operate are certified to the international standard for environmental management systems (ISO 14001). We are committed to continuing to maintain a system that controls and reduces the environmental impacts of mining operations. We have also won numerous state and federal awards for our strong safety and environmental record.

        We have longstanding relationships with our customers, a majority of whom have an investment grade credit rating.    We focus on building long-term relationships with creditworthy customers through our reliable performance and commitment to customer service. We supply coal to over 46 electric utilities and over 80% of our sales were to customers with an investment grade credit rating as of September 2009. Moreover, over 74% of our 2008 sales were to customers with whom we have had relationships for more than 10 years.

        Our senior management team has extensive industry experience.    Our named executive officers have significant work experience in the mining and energy industries, with an average of 20 years of relevant mining experience. Most of our named executive officers gained this experience through various positions held within Rio Tinto, one of the largest mining companies in the world.

Our Strategy

        Our business strategy is to:

        Capitalize on favorable long-term market conditions for PRB coal producers.    Subject to market conditions and other factors, we have the ability to take advantage of potential growth capacity in our existing mines. We believe our managed mines have the capacity to increase their total annual production by up to 8 million tons over the next four years with minimal additional capital expenditures. The long-term market dynamics for coal producers in the PRB remain favorable. The EIA estimates that

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PRB coal demand is expected to grow by 70 million tons between 2008 and 2020. Production constraints and increased export demand for eastern U.S. coal reduces the availability of eastern U.S. coal to the U.S. domestic market. As a result, we expect coal consumers may increasingly substitute their use of eastern U.S. coal with PRB coal. Increasingly stringent air quality laws, safety regulations and the related cost of scrubbers may favor low-sulfur PRB coal over other types of coal. We intend to continue to capitalize on these market dynamics. By seeking additional expansion opportunities in existing and new mines in the PRB, we aim to maintain or improve our market position in the PRB. Furthermore, while only a small percentage of PRB coal is currently exported, we intend to seek opportunities to increase exports for our higher Btu coal from our Spring Creek mine.

        Continue to build our reserves.    We have historically focused on strategic acquisitions and subsequent expansions of large, low-cost, low-sulfur operations in the PRB and replacement of, and additions to, our reserves through the acquisition of companies, mines and reserves. We will continue to seek to increase our reserve position to maintain our existing production capacity by acquiring federal coal through the LBA process and by purchasing surface rights for land adjoining our current operations in Wyoming and Montana. We have applications outstanding for two LBAs that we anticipate to be bid at some time during the next four years. These LBAs cover, as applied for, approximately 800 million tons of non-reserve coal deposits according to our estimates and subject to final determination by the BLM of the final boundaries and tonnage for these LBA tracts. We will continue to explore additional opportunities to increase our reserve base; however, if we are unable to do so, we may be unable to maintain our current production capacity.

        Focus on operating efficiency and leverage our economies of scale.    We seek to control our costs by continuing to improve on our operating efficiency. Following this offering, we will remain the third largest producer of coal in the U.S. based on 2008 production statistics. We believe we will continue to benefit from significant economies of scale through the integrated management and operation of our three wholly-owned mines, although our results as a stand-alone public company could be significantly different from our historical financial results as part of Rio Tinto. We have historically improved our existing operations and evaluated and implemented new mining equipment and technologies to improve our efficiency. Our large fleet of mining equipment, information technology systems and coordinated equipment utilization and maintenance management functions allow us to enhance our efficiency. Our experienced and well-trained workforce is key in identifying and implementing business improvement initiatives.

        Leverage our excellence in safety and environmental compliance.    We operate some of the safest coal mines in the U.S. We have also achieved recognized standards of environmental stewardship. We continue to implement safety measures and environmental initiatives to promote safe operating practices and improved environmental stewardship. We believe the ability to minimize injuries and maintain our focus on environmental compliance improves our productivity, lowers our costs, helps us attract and retain our employees and makes us an attractive candidate for ventures with third parties.

        Opportunistically pursue acquisitions that will create value and expand our core business.    We intend to pursue acquisition opportunities that are consistent with our business strategy and that we believe will create value for our shareholders. However, we may be unable to successfully integrate these acquired companies or realize the benefits we anticipate from an acquisition. In the long term and subject to market conditions, we may pursue international acquisitions.

Coal Market Outlook

        Coal markets and coal prices are influenced by a number of factors and vary materially by region and quality. Coal consumption in the U.S., particularly with respect to coal produced in the PRB, has

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been driven in recent periods by several market dynamics and trends, which may or may not continue, including the following:

        Favorable long-term outlook for the U.S. steam coal market.    Growth in electricity demand continues to drive domestic demand for steam coal. The recent economic slowdown has reduced electricity and coal demand since mid-2008 and the demand for, and consumption of, coal in the electric power sector in 2009 is projected to decline. The long-term demand for electricity, however, is projected to increase at an average annual rate of approximately 0.5% from 2008 through 2020, according to the EIA. The EIA's projections that were issued in April 2009 take into account the provisions of the ARRA and assume that no pending or proposed federal or state carbon emissions legislation is enacted and that a number of additional coal-fired power plants will be built during the period. The EIA projects that increased utilization rates by existing power plants and new power plant construction will be drivers of coal demand. For 2010, the EIA is forecasting that total electricity generation will increase by 1.3% over 2009, assuming a recovering economy. Coal consumption for the electric power sector is projected to increase to 968.3 million tons in 2010, a 22.3 million ton increase over estimated 2009 consumption of 946.0 million tons. However, a smaller number of plants than projected may be built, existing plants may not be able to significantly increase capacity or utilization rates and the number of planned plant retirements may increase more than expected. In addition, if greenhouse gas emissions from coal-fired power plants are subject to extensive new regulation in the U.S. pursuant to future U.S. treaty obligations, statutory or regulatory changes under the Clean Air Act, or federal or additional state adoption of a greenhouse gas regulatory scheme, or if reductions in greenhouse gas emissions are mandated by courts or through other legally enforceable mechanisms, absent other factors, the EIA's projections with respect to the demand for coal may not be met.

        Expected long-term increases in international demand and the U.S. export market.    International demand for coal continues to be driven by rapid growth in electrical power generation capacity in Asia, particularly in China and India. China and India represented approximately 48% of total world coal consumption in 2006 and are expected to account for approximately 59% by 2030, according to the EIA. During 2007 and the first half of 2008, coal exports increased significantly as demand for U.S. steam and metallurgical coal from the Appalachian and PRB regions increased. Demand for steam and metallurgical coal has declined since mid-2008, as the United States economy and most international economies deteriorated due to the global economic downturn. We expect that these economic challenges will result in lower U.S. exports of coal in 2009 than in 2008. If global economic conditions improve, we anticipate that U.S. exports of coal would eventually increase; however, future exports of coal may not meet or exceed 2008 levels. To the extent that production constraints and increased export demand for eastern U.S. coal reduces the availability of eastern U.S. coal to the U.S. domestic market, we expect coal consumers may increasingly substitute their use of eastern U.S. coal with PRB coal.

        Changes in U.S. regional production.    Coal production in the Central Appalachian region of the U.S. has declined in recent years because of production difficulties, reserve degradation and difficulties acquiring permits needed to conduct mining operations. In addition, underground mining operations have become subject to additional, more costly and stringent safety regulations, increasing their operating costs and capital expenditure requirements. We believe that many eastern utilities are considering blending coals as an option to offset production issues and meet more stringent environmental requirements. Shortages and decreases in supply in the eastern U.S. continue to affect pricing in the entire U.S. market.

        Coal remains a cost-competitive energy source relative to alternative fossil fuels and other alternative energy sources.    Coal generally, and PRB coal in particular, has historically been a low-cost source of energy relative to its substitutes because of the high prices for alternative fossil fuels. Coal also has a lower all-in cost relative to other alternative energy sources, such as nuclear, hydroelectric, wind and solar power. Although the price for certain alternative fuels, such as natural gas, has recently declined, PRB coal continues to be a cost-competitive energy source because it exists in greater abundance and

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is easier and cheaper to mine than coal produced in other regions. Changes in the prices for other fossil fuels or alternative energy sources in the future could impact the price of coal. Current low natural gas prices in the U.S. and Europe are expected to lower demand for coal and lead to reduced demand for exports in the near term. In addition, if greenhouse gas emissions from coal-fired power plants are subject to extensive new regulation in the U.S. pursuant to future U.S. treaty obligations, statutory or regulatory changes under the Clean Air Act, or federal or additional state adoption of a greenhouse gas regulatory scheme, or if reductions in greenhouse gas emissions are mandated by courts or through other legally enforceable mechanisms, alternative energy sources may become more cost-competitive with coal, which may lead to lower demand for coal. See "Risk Factors—Risks Related to Our Business—New and potential future regulatory requirements relating to greenhouse gas emissions could affect our customers and could reduce the demand for coal as a fuel source and cause coal prices and sales of our coal to materially decline" and "Environmental and Other Regulatory Matters—Climate Change."

        Developments in clean coal technology and related regulatory initiatives.    The U.S. government has recently accelerated its investment in clean coal technology development with the ARRA signed into law by President Obama in February 2009. The ARRA targets $3.4 billion for U.S. Department of Energy fossil fuel programs, including $1.52 billion for carbon capture and sequestration, or CCS, research, $800 million for the Clean Coal Power Initiative, a 10-year program supporting commercial CCS, and $50 million for geology research. Although laws regulating greenhouse gas emissions may result in decreased demand for coal in the short-term, we believe that the successful development and funding of these technologies through the ARRA could result in stable demand for coal in the long term. However, cost-effective technologies may not be developed and deployed in a timely manner.

        Near-term pricing volatility.    U.S. coal markets have recently experienced significant volatility. By the end of 2008, published thermal coal prices in most major markets declined from their mid-2008 highs, largely reversing gains from the first half of 2008. Declining coal demand, coupled with increasing customer stockpiles and spurred by the onset of the global economic downturn, has further softened pricing in 2009. The EIA projects that domestic electricity demand in 2009 may decline from 2008 levels. In addition, the prices for alternative fossil fuels, such as oil and natural gas, have declined relative to the recent highs. Future decreases in the price of alternative fuels could impact the price of coal. See "Risk Factors—Risks Related to Our Business—Coal prices are subject to change and a substantial or extended decline in prices could materially and adversely affect our revenues and results of operations, as well as the value of our coal reserves."

        Increasingly stringent air quality regulations.    A series of more stringent requirements related to particulate matter, ozone, haze, mercury, sulfur dioxide, nitrogen oxide and other air pollutants have been proposed and/or enacted by federal and/or state regulatory authorities in recent years. As a result of some of these regulations, demand for western U.S. coal has increased as coal-fired electricity producers have switched from bituminous coal to lower sulfur sub-bituminous coal. The PRB has benefited from this switch and its market share has increased accordingly. However, increasingly stringent air regulations may lead some coal-fired plants to install additional pollution control equipment, such as scrubbers, thereby reducing the need for low-sulfur coal. Considerable uncertainty is associated with these air emission regulations, some of which have been the subject of legal challenges in courts, and the actual timing of implementation remains uncertain. As a result, it is not possible to determine the impact of such regulatory initiatives on coal demand nationwide, but it may be materially adverse. See "Risk Factors—Risks Related to Our Business—Extensive environmental regulations, including existing and potential future regulatory requirements relating to air emissions, affect our customers and could reduce the demand for coal as a fuel source and cause coal prices and sales of our coal to materially decline" and "—Because we produce and sell coal with low-sulfur content, a reduction in the price of sulfur dioxide emission allowances or increased use of technologies to reduce

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sulfur dioxide emissions could materially and adversely affect the demand for our coal and our results of operations" and "Environmental and Other Regulatory Matters."

        See "The Coal Industry" and "The Coal Industry—Special Note Regarding the EIA's Market Data and Projections."

Our Corporate History and Structure

        Rio Tinto initially formed RTEA in 1993 as Kennecott Coal Company which was subsequently renamed Kennecott Energy and Coal Company. Between 1993 and 1998, Kennecott Energy and Coal Company acquired the Antelope, Colowyo, Jacobs Ranch and Spring Creek coal mines and the Cordero coal mine and Caballo Rojo coal mine, which are currently operated together as the Cordero Rojo coal mine, and a 50% interest in the Decker coal mine, which is operated by a third-party mine operator. In 2006, Kennecott Energy and Coal Company was renamed Rio Tinto Energy America Inc., as part of Rio Tinto's global branding initiative. In order to separate certain businesses from RTEA, in December 2008, RTEA contributed Rio Tinto America's western U.S. coal business to CPE LLC (other than the Colowyo mine, which was not contributed to CPE LLC due to restrictions contained in its existing financing arrangements and which is now owned indirectly by Rio Tinto America). On October 1, 2009, CPE LLC sold the Jacobs Ranch mine to Arch Coal, Inc. and did not retain the proceeds from that sale.

        Cloud Peak Energy Inc. was incorporated in Delaware on July 31, 2008. Prior to this offering, it did not engage in any activities, except in preparation for this offering, and has had no operations.

        The following simplified diagram depicts our organizational structure prior to the structuring transactions contemplated by this offering.

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GRAPHIC

        See "Structuring Transactions and Related Agreements—History" for a more complete diagram depicting our organizational structure prior to this offering.

        Immediately prior to the completion of this offering, Cloud Peak Energy will enter into an acquisition agreement, or the Acquisition Agreement, with RTEA pursuant to which we will acquire a portion of RTEA's interest in Rio Tinto America's western U.S. coal business (other than the Colowyo mine) represented by common membership units of CPE LLC in exchange for a promissory note that we will issue to RTEA, or the CPE Note. The Acquisition Agreement will require us to use the net proceeds of this offering to immediately repay the CPE Note. After the completion of this offering, we will be a holding company that manages CPE LLC, and our only business and material asset will be our managing member interest in CPE LLC. Following the completion of the transactions described in this prospectus, we will own approximately 51.67% and Rio Tinto America indirectly will own approximately 48.33% of the economic interest in CPE LLC, assuming no exercise of the underwriters' overallotment option. Our only source of cash flow from operations will be distributions from CPE LLC pursuant to its LLC Agreement and management fees and cost reimbursements pursuant to a management services agreement between us and CPE LLC.

        Concurrently with this offering, CPE LLC is expected to enter into a $400 million senior secured revolving credit facility, or CPE LLC's revolving credit facility, and to issue $600 million aggregate principal amount of senior unsecured notes to be issued in two tranches maturing in 2016 and 2019, in accordance with Rule 144A under the Securities Act of 1933, as amended, which we refer to collectively as the senior notes. CPE LLC will also enter into a registration rights agreement with

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respect to the senior notes. We estimate that the net proceeds of the senior notes offering, after deducting estimated original issue discount and initial purchasers' discounts and commissions, will be approximately $572.6 million. We expect that CPE LLC will use the net proceeds from the senior notes offering together with the net proceeds of this offering as described under "Use of Proceeds." This offering, the senior notes offering and the closing of CPE LLC's revolving credit facility are each conditioned upon the closing of each transaction.

        The concurrent offering of the senior notes will not be registered under the Securities Act of 1933, as amended, or the Securities Act, or the securities laws of any other jurisdiction, and the senior notes may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. The senior notes will only be offered to qualified institutional buyers in the United States pursuant to Rule 144A under the Securities Act and outside the United States pursuant to Regulation S under the Securities Act. This description and the other information in this prospectus regarding the concurrent offering of the senior notes is included in this prospectus solely for informational purposes. Nothing in this prospectus should be construed as an offer to sell, or the solicitation of an offer to buy, the senior notes.

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        The following simplified diagram depicts our organizational structure immediately after the transactions described in this prospectus (assuming no exercise of the underwriters' overallotment option):

GRAPHIC


      (1)
      Certain of CPE LLC's domestic restricted subsidiaries will serve as guarantors of CPE LLC's debt in connection with the debt financing transactions.

        See "Structuring Transactions and Related Agreements—Holding Company Structure" for a more complete diagram depicting our organizational structure following this offering and additional information regarding these transactions. References to Cloud Peak Energy's managing member interest means the management and ownership interest as the managing member in CPE LLC, which will, following the completion of the transactions described in this prospectus, include membership interests equivalent to approximately 51.67% of the outstanding common membership units (assuming no exercise of the underwriters' overallotment option), and includes any and all benefits to which the managing member is entitled as provided in CPE LLC's LLC Agreement, together with all obligations of the managing member to comply with the terms and provisions of CPE LLC's LLC Agreement.

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Company Information

        Our principal executive office is located at 505 S. Gillette Avenue, Gillette, Wyoming 82716, and our telephone number at that address is (307) 687-6000. Following the completion of this offering, we intend to maintain a website at www.cloudpeakenergy.com. The information that will be contained on, or that will be accessible through, our website is not part of this prospectus.



        "Cloud Peak Energy" and the Cloud Peak Energy logo are trademarks and service marks of Cloud Peak Energy Inc. All other trademarks, service marks or trade names appearing in this prospectus are owned by their respective holders.


Presentation of Historical Financial Information, Pro Forma Financial Information,
Coal Data and Coal Market Data

Our Historical Financial Information

        Rio Tinto Energy America Inc., or RTEA, is considered to be our predecessor for accounting purposes and its consolidated financial statements are our historical consolidated financial statements. Unless otherwise indicated, historical references contained in this prospectus in "—Summary Historical and Pro Forma Consolidated Financial Data," "Selected Consolidated Financial and Operating Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations," and our historical consolidated financial statements contained elsewhere in this prospectus, relate to RTEA and include, as discontinued operations, results from the Colowyo mine, the Jacobs Ranch mine and the uranium mining venture, which will not be owned by CPE LLC after this offering.

Pro Forma Financial Information

        When we refer to our pro forma financial information we are giving effect to:

    the structuring transactions and related agreements, including the separation from Rio Tinto to be completed in connection with this offering as described in "Structuring Transactions and Related Agreements";

    the $400 million revolving credit facility and $600 million aggregate principal amount of senior unsecured notes to be issued in two tranches maturing in 2016 and 2019, which CPE LLC will enter into and issue concurrently with this offering, and which we refer to as the debt financing transactions;

    the issuance of approximately 831,000 shares of restricted common stock to be issued to our directors and employees in connection with this offering, which vest three years after the pricing of our initial public offering (assuming an estimated public offering price of $17.00 per share, the midpoint of the range set forth on the cover page of this prospectus); and

    the issuance of the shares of our common stock in this offering and subsequent use of proceeds.

The pro forma consolidated statements of operations present financial information through income (loss) from continuing operations. Accordingly, the income (loss) from discontinued operations related to the Colowyo mine, the Jacobs Ranch mine and the uranium mining venture are not reflected in continuing operations and no pro forma adjustment will be necessary in the pro forma consolidated statements of operations.

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Our Coal Data

        References to our coal production, sales and purchases and our reserves and similar items contained in this prospectus exclude the Colowyo mine and the Jacobs Ranch mine which will not be owned by CPE LLC after this offering.

        References to BLM estimates are given as of the date we acquired the lease for the related LBA tract.

        Through our indirect, wholly-owned subsidiary, we currently hold a 50% interest in the Decker mine in Montana through a joint-venture agreement with an indirect, wholly-owned subsidiary of Level 3 Communications, Inc., or Level 3. The Decker mine is operated by a third-party mine operator. Information related to our coal production, reserves, purchases and revenues, contained in this prospectus and information in our consolidated financial statements contained elsewhere in this prospectus, unless otherwise indicated, includes amounts reflecting our 50% interest in the Decker mine.

Coal Market Data

        Market data used in this prospectus has been obtained from governmental and independent industry sources and publications, such as the U.S. Energy Information Administration, or EIA, the National Mining Association, or NMA, and the Mine Safety and Health Administration, or MSHA, and, unless otherwise indicated, is based on data and reports published in 2008 or 2009 but may relate to prior years. We have not independently verified the data obtained from these sources, and we cannot assure you of the accuracy or completeness of the data. Industry projections of the EIA's report released in April 2009 reflect provisions of the ARRA that were enacted in mid-February 2009. In addition, industry projections of the EIA are subject to numerous assumptions and methodologies chosen by the EIA, including that laws and regulations in effect at the time of the projections remain unchanged and that no pending or proposed federal or state carbon emissions legislation has been enacted and that a number of additional coal-fired power plants will be built during the period. Therefore, the EIA's projections do not take into account potential regulation of greenhouse gas emissions pursuant to proposed or future U.S. treaty obligations, statutory or regulatory changes under the Clean Air Act, or federal or additional state adoption of a greenhouse gas regulatory scheme or reductions in greenhouse gas emissions mandated by courts or through other legally enforceable mechanisms. The EIA's projections with respect to the demand for coal may not be met, absent other factors, if comprehensive carbon emissions legislation is enacted. In addition, the economic conditions accounted for in the EIA's industry projections reflect existing and projected economic conditions at the time the projections were made and do not necessarily reflect current economic conditions or any subsequent deterioration of economic conditions. Forward-looking information obtained from these sources is subject to the same qualifications and the additional uncertainties regarding the other forward-looking statements contained in this prospectus. See "Special Note Regarding Forward-Looking Statements" and "The Coal Industry—Special Note Regarding the EIA's Market Data and Projections."

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The Offering

Common stock offered by us

  30,600,000 shares

Restricted common stock to be issued to directors and employees in connection with this offering

 

831,000 shares (assuming an estimated public offering price of $17.00 per share, the midpoint of the range set forth on the cover page of this prospectus)

Common stock to be outstanding after this offering

 

31,431,000 shares

Over-allotment option

 

We have granted the underwriters a 30-day option to purchase on a pro rata basis up to 4,590,000 additional shares of our common stock at the initial public offering price less underwriting discounts and commissions. The option may be exercised only to cover any over-allotments of common stock. If the underwriters exercise their option in full, we will use the net proceeds from the over-allotment to purchase additional common membership units in CPE LLC held by RTEA, at a price per unit equal to the public offering price per share, less underwriting discounts and commissions.

Common membership units in CPE LLC to be held by us and Rio Tinto immediately after this offering

 

31,431,000 common membership units (36,021,000 common membership units if the underwriters exercise their overallotment option). RTEA and KMS will hold 29,400,000 common membership units immediately after this offering (24,810,000 common membership units if the underwriters exercise their overallotment option in full).

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Redemption rights

 

RTEA and KMS have the right to require CPE LLC to acquire by redemption each common membership unit in CPE LLC owned by them in exchange for a cash payment equal to, on a per unit basis, the market price of one share of our common stock. If RTEA and KMS exercise their redemption right, we are entitled to assume CPE LLC's rights and obligations to acquire common membership units held by them and instead acquire such common membership units from them in exchange for, at our election, shares of our common stock on a one-for-one basis or a cash payment equal to, on a per unit basis, the market price of one share of our common stock or a combination of shares of our common stock and cash. We refer to this entitlement as our Assumption Right. If, following the completion of the transactions described in this prospectus, RTEA and KMS exercised their right to require CPE LLC to acquire by redemption all of their common membership units in CPE LLC and we exercised our Assumption Right to acquire their membership units in exchange only for shares of our common stock, Rio Tinto America would indirectly own approximately 48.33% of all outstanding shares of our common stock (or approximately 40.79% if the underwriters exercised their over-allotment option in full).

Use of proceeds

 

We estimate that we will receive net proceeds of approximately $491.6 million, assuming an estimated public offering price of $17.00 per share (the midpoint of the range set forth on the cover page of this prospectus), after deducting underwriting discounts and commissions, all of which will be used to finance our acquisition of an interest in Rio Tinto America's western U.S. coal business (other than the Colowyo mine) represented by common membership units held by RTEA in CPE LLC. We will purchase a number of common membership units from RTEA equal to the number of shares of common stock sold in this offering at a price per unit equal to the public offering price per share, less underwriting discounts and commissions. We expect the net proceeds from CPE LLC's offering of senior notes to be $572.6 million, after deducting estimated original issue discount and initial purchasers' discounts and commissions, approximately $284.6 million of which CPE LLC will distribute to RTEA immediately following the completion of that offering. The amount of this distribution to RTEA may increase if the amount of restricted cash required as collateral for our surety bonds decreases. We estimate that the amount of required restricted cash could decline by up to $25 million from current estimates. See "Use of Proceeds" and "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources After this Offering."

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Dividend policy

 

We currently do not intend to pay dividends on our common stock. Upon completion of this offering, we will become a member and the sole manager of CPE LLC. We will be a holding company, will have no direct operations and will be able to pay dividends only from our available cash on hand and funds received from CPE LLC. See "Dividend Policy."

Risk factors

 

See "Risk Factors" on page 24 of this prospectus for a discussion of factors you should carefully consider before deciding to invest in our common stock.

New York Stock Exchange symbol

 

"CLD"

        Unless otherwise indicated, all information in this prospectus:

    reflects the consummation of the structuring transactions described in "Structuring Transactions and Related Agreements";

    gives effect to the debt financing transactions which CPE LLC will enter into concurrently with this offering; and

    assumes an initial public offering of our shares of common stock at a price of $17.00 per share, the midpoint of the estimated public offering price range set forth on the cover page of this prospectus.

        A nominal amount of shares of our common stock are outstanding prior to the completion of this offering. The number of shares to be outstanding after completion of this offering is based on 30,600,000 shares of our common stock to be sold in this offering and, except where we state otherwise, the common stock information we present in this prospectus:

    excludes up to 29,400,000 shares (assuming no exercise of the underwriters' overallotment option) of our common stock issuable upon, at our election, our assumption of CPE LLC's rights and obligations to acquire common membership units of CPE LLC from RTEA and KMS upon exercise of their redemption right, as described under "Structuring Transactions and Related Agreements—Structure-Related Agreements—CPE LLC Agreement";

    includes approximately 831,000 shares of restricted common stock to be issued to our directors and employees in connection with this offering, which vest three years after the pricing of our initial public offering (assuming an estimated public offering price of $17.00 per share, the midpoint of the range set forth on the cover page of this prospectus);

    excludes 958,000 options to be granted to our named executive officers and other employees in connection with this offering and 1,611,000 shares of our common stock authorized but unissued under our long term incentive plan (assuming an estimated public offering price of $17.00 per share, the midpoint of the range set forth on the cover page of this prospectus and which amounts may be adjusted based on the final public offering price); and

    assumes no exercise by the underwriters of their right to purchase a maximum of 4,590,000 additional shares of common stock to cover over-allotments of shares.

In addition, unless otherwise indicated, the information regarding common membership units of CPE LLC presented in this prospectus excludes any common membership units that will be issued to us on a one-for-one basis upon the exercise of options to acquire our common stock.

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SUMMARY HISTORICAL AND UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA

        The following table provides a summary of our historical and unaudited pro forma consolidated financial data for the periods indicated. This information should be read in conjunction with the sections of this prospectus entitled "Selected Consolidated Financial and Operating Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and our historical consolidated and unaudited pro forma consolidated financial information and related notes thereto included elsewhere in this prospectus.

        RTEA is considered to be our predecessor for accounting purposes and its consolidated financial statements are our historical consolidated financial statements. Our historical consolidated financial statements include, as discontinued operations, financial information for certain operations that will not be owned by Cloud Peak Energy after this offering, including the Colowyo mine, the Jacobs Ranch mine and the uranium mining venture. Our historical consolidated financial statements are not comparable to the unaudited pro forma condensed consolidated financial information included elsewhere in this prospectus or to the results investors should expect after the offering. To date, Cloud Peak Energy Inc. has had no operations. As described in "Structuring Transactions and Related Agreements—Holding Company Structure," following the completion of this offering we will be a holding company and our sole asset will be our managing member interest in Cloud Peak Energy Resources LLC. The consolidated financial statements of RTEA are provided elsewhere in this prospectus.

        We have derived the historical consolidated financial data as of December 31, 2007 and 2008 and for each of the three years in the period ended December 31, 2008 from the audited consolidated financial statements of RTEA, included elsewhere in this prospectus. We have derived the historical consolidated balance sheet data as of December 31, 2006 from the audited consolidated financial statements of RTEA, not included in this prospectus. We have derived the historical consolidated financial data as of September 30, 2009 and for the nine months ended September 30, 2008 and 2009 from the unaudited consolidated financial statements of RTEA, included elsewhere in this prospectus. The unaudited consolidated financial information was prepared on a basis consistent with that used in preparing our audited consolidated financial statements and includes all adjustments, consisting of normal and recurring items, that we consider necessary for a fair presentation of the financial position and results of operations for the unaudited periods. The interim results of operations are not necessarily indicative of operations for a full fiscal year.

        Prior to the consummation of the offering, our consolidated financial statements were prepared on a carve-out basis from our ultimate parent company, Rio Tinto and its subsidiaries. The carve-out consolidated financial statements include allocations of certain general and administrative costs and Rio Tinto's headquarters costs. We do not expect to continue to incur some of these charges as a stand-alone public company. These allocations were based upon various assumptions and estimates and actual results may differ from these allocations, assumptions and estimates. However, the carve-out consolidated financial statements do not reflect additional expenses we expect to incur as a stand-alone public company. Accordingly, the carve-out consolidated financial statements should not be relied upon as being representative of our financial position or operating results had we operated on a stand-alone basis, nor are they representative of our financial position or operating results following the offering.

        We have derived the unaudited pro forma consolidated financial data as of September 30, 2009 and for the year ended December 31, 2008 and for the nine months ended September 30, 2009, from the unaudited pro forma condensed consolidated financial information, included elsewhere in this prospectus. See "Unaudited Pro Forma Condensed Consolidated Financial Information." The unaudited pro forma condensed consolidated financial information is based on our historical consolidated financial statements, included elsewhere in this prospectus. The unaudited pro forma adjustments are based on available information and certain assumptions that we believe are reasonable

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and are described below in the accompanying notes. The unaudited pro forma condensed consolidated balance sheet as of September 30, 2009 and the unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2008 and for the nine months ended September 30, 2009 are presented on a pro forma basis to give effect, in each case, to the following adjustments as if they occurred on September 30, 2009 for balance sheet adjustments and January 1, 2008 for statement of operations adjustments:

    the structuring transactions and related agreements, including the separation from Rio Tinto to be completed in connection with this offering as described in "Structuring Transactions and Related Agreements";

    the debt financing transactions which CPE LLC will enter into concurrently with this offering;

    the issuance of approximately 831,000 shares of restricted common stock to be issued to our directors and employees in connection with this offering, which vest three years after our initial public offering (assuming an estimated public offering price of $17.00 per share, the midpoint of the range set forth on the cover page of this prospectus); and

    the issuance of the shares of our common stock in this offering and subsequent use of proceeds.

The pro forma condensed consolidated statement of operations presents financial information through income (loss) from continuing operations. Accordingly, the income (loss) from discontinued operations related to the Colowyo mine, the Jacobs Ranch mine and the uranium mining venture are not reflected in continuing operations and no pro forma adjustment will be necessary in the pro forma condensed consolidated statement of operations.

        The unaudited pro forma consolidated financial data is for informational purposes only, and is not intended to represent what our results of operations would be after giving effect to the offering, or to indicate our results of operations for any future period. Therefore, investors should not place undue reliance on the unaudited pro forma consolidated financial data.

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Summary Unaudited Pro Forma Consolidated Financial Data
(dollars in thousands)

 
  For the Year Ended
December 31,
2008(10)
  For the Nine
Months Ended
September 30,
2009(10)
 
 
  Pro Forma
  Pro Forma
 

Statement of Operations Data

             

Revenues(1)

  $ 1,239,711   $ 1,061,286  
           

Costs and expenses

             
   

Cost of product sold (exclusive of depreciation, depletion, amortization and accretion, shown separately)(3)

    892,649     702,569  
   

Depreciation and depletion

    88,972     68,383  
   

Amortization(2)

    45,989     24,770  
   

Accretion

    12,742     8,402  
   

Exploration costs

    1,387     1,156  
   

Selling, general and administrative expenses(3)

    70,601     49,490  
   

Asset impairment charges(4)

    2,551      
           

Total costs and expenses

    1,114,891     854,770  
 

Total other expense

    (66,898 )   (51,333 )
           

Income from continuing operations before income tax provision and earnings from unconsolidated affiliates

    57,922     155,183  

Income tax provision

    (2,726 )   (22,751 )

Earnings from unconsolidated affiliates, net of tax

    5,763     1,262  
           

Income from continuing operations

    60,959     133,694  

Income from continuing operations attributable to noncontrolling interest

    (31,382 )   (75,692 )
           

Income from continuing operations attributable to controlling interest

  $ 29,577   $ 58,002  
           

Income from continuing operations per share

             
 

Basic

  $ 0.97   $ 1.90  
           
 

Diluted

  $ 0.89   $ 1.83  
           

Weighted-average shares outstanding

             
 

Basic

    30,600,000     30,600,000  
           
 

Diluted

    60,138,500     60,380,875  
           

 

 
  As of
September 30,
2009
 
 
  Pro Forma
 

Balance Sheet Data

       

Cash and cash equivalents

  $ 199,319  

Accounts receivable, net

    81,390  

Inventories, net

    62,996  

Property, plant and equipment, net

    981,248  

Intangible assets, net

    42,780  

Total assets

    1,688,845  

Total long-term debt (including current portion)(6)

    760,226  

Total liabilities

    1,231,260  

Shareholders' equity attributable to controlling interest

    275,080  

 

 
  For the Year Ended
December 31,
2008
  For the Nine
Months Ended
September 30,
2009
 
 
  Pro Forma
  Pro Forma
 

Other Data

             

EBITDA(7)

  $ 280,001   $ 309,348  

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Summary Historical Consolidated Financial Data
(dollars in thousands)

 
  For the Years Ended December 31,   For the Nine
Months Ended
September 30,
 
 
  2006   2007   2008   2008   2009  

Statement of Operations Data

                               

Revenues(1)

  $ 942,841   $ 1,053,168   $ 1,239,711   $ 904,627   $ 1,061,286  
                       

Costs and expenses

                               
 

Cost of product sold (exclusive of depreciation, depletion, amortization and accretion, shown separately)(3)

    699,121     754,464     892,649     653,544     702,569  
 

Depreciation and depletion

    59,352     80,133     88,972     69,258     68,383  
 

Amortization(2)

    34,957     34,512     45,989     37,027     24,770  
 

Accretion

    10,088     12,212     12,742     8,926     8,402  
 

Exploration costs

    2,325     816     1,387     787     1,156  
 

Selling, general and administrative expenses(3)

    48,130     50,003     70,485     50,833     49,075  
 

Asset impairment charges(4)

        18,297     2,551     1,014      
                       

Total costs and expenses

    853,973     950,437     1,114,775     821,389     854,355  
                       

Operating income

    88,868     102,731     124,936     83,238     206,931  
                       

Other income (expense)

                               
 

Interest income

    3,604     7,302     2,865     2,682     228  
 

Interest expense

    (38,785 )   (40,930 )   (20,376 )   (19,974 )   (1,007 )
 

Other, net

    2     274     1,715     1,631     15  
                       

Total other expense

    (35,179 )   (33,354 )   (15,796 )   (15,661 )   (764 )
                       

Income from continuing operations before income tax provision and earnings (losses) from unconsolidated affiliates

    53,689     69,377     109,140     67,577     206,167  

Income tax provision

    (11,717 )   (18,050 )   (25,318 )   (15,676 )   (59,888 )

(Losses) earnings from unconsolidated affiliates, net of tax

    (1,435 )   2,462     4,518     3,109     989  
                       

Income from continuing operations

    40,537     53,789     88,340     55,010     147,268  

(Loss) income from discontinued operations, net of tax

    (2,599 )   (21,482 )   (25,215 )   (29,189 )   42,790  
                       

Net income

  $ 37,938   $ 32,307   $ 63,125   $ 25,821   $ 190,058  
                       

Net income (loss) per share—basic and diluted:

                               

Income from continuing operations

  $ 40,537   $ 53,789   $ 88,340   $ 55,010   $ 147,268  

(Loss) income from discontinued operations

    (2,599 )   (21,482 )   (25,215 )   (29,189 )   42,790  
                       

Net income per share

  $ 37,938   $ 32,307   $ 63,125   $ 25,821   $ 190,058  
                       

Weighted-average shares outstanding, basic and diluted

    1     1     1     1     1  
                       

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  As of December 31,    
 
 
  As of
September 30,
2009
 
 
  2006   2007   2008  
 
  (dollars in thousands)
 

Balance Sheet Data

                         

Cash and cash equivalents

  $ 19,585   $ 23,616   $ 15,935   $ 18,319  

Accounts receivable, net

    74,541     92,060     79,451     81,390  

Inventories, net

    42,771     49,816     55,523     62,996  

Property, plant and equipment, net

    703,726     719,743     927,910     981,248  

Intangible assets, net

    117,031     82,518     31,916     7,146  

Assets of discontinued operations(5)

    694,066     721,835     587,168     582,304  

Total assets

    1,723,335     1,781,201     1,785,191     1,977,312  

Total long-term debt (including current portion)(6)

    665,735     571,559     209,526     175,604  

Liabilities of discontinued operations(5)

    269,987     270,049     127,220     139,359  

Total liabilities

    1,433,480     1,446,240     800,025     796,924  

Shareholder's equity(5)(11)

    289,855     334,961     985,166     1,180,388  

 

 
  For the Years Ended
December 31,
  For the Nine
Months Ended
September 30,
 
 
  2006   2007   2008   2008   2009  
 
  (dollars in thousands)
 

Other Data

                               
 

EBITDA(8)

  $ 191,832   $ 232,324   $ 278,872   $ 203,189   $ 309,490  
 

Tons of coal sold from production (millions)

    91.8     94.2     97.0     72.0     69.7  
 

Tons of coal purchased and resold (millions)

    8.1     8.1     8.1     6.0     8.0  
 

Tons of coal sold (millions)(9)

    99.9     102.3     105.1     78.0     77.7  

(1)
Freight revenues accounted for 2.6%, 1.4% and 4.5% of our total revenues for the years ended December 31, 2006, 2007 and 2008, respectively, and 2.7% and 6.9% of our total revenues for the nine months ended September 30, 2008 and 2009, respectively. As a general matter, our customers pay their own freight costs. We pay the freight costs, however, for shipping coal to some of our customers and in these cases the customers pay us in respect of these freight costs and the payments are included in our revenues. See Note 3 of Notes to Consolidated Financial Statements included elsewhere in this prospectus.

(2)
Primarily reflects amortization under our brokerage contract related to the Spring Creek mine.

(3)
Allocations of corporate, general and administrative expenses incurred by Rio Tinto America and other Rio Tinto affiliates were $18.3 million, $24.4 million and $25.4 million for the years ended December 31, 2006, 2007 and 2008, respectively, and $17.6 million and $19.8 million for the nine months ended September 30, 2008 and 2009, respectively. Of this total, $15.1 million, $20.2 million and $21.0 million, for the years ended December 31, 2006, 2007 and 2008, respectively, and $14.5 million and $16.0 million for the nine months ended September 30, 2008 and 2009, respectively, is included in selling, general and administrative expenses in the consolidated statements of operations. The remaining $3.2 million, $4.2 million and $4.4 million, for the years ended December 31, 2006, 2007 and 2008, respectively, and $3.1 million and $3.8 million for the nine months ended September 30, 2008 and 2009, respectively, are included in cost of product sold. Also included in selling, general and administrative expenses are costs incurred as a result of actions to divest RTEA, either through a trade sale or an initial public offering, of $25.8 million, $21.0 million, and $11.3 million for the year ended December 31, 2008, and the nine months ended September 30, 2008 and 2009, respectively.

(4)
Asset impairment charges for the year ended December 31, 2007 reflects capitalized cost of an abandoned enterprise resource planning, or ERP, systems implementation. The ERP systems implementation was a worldwide Rio Tinto initiative designed to align processes, procedures, practices and reporting across all Rio Tinto business units. The implementation would have taken our stand-alone ERP system and moved it to a shared Rio Tinto platform, which could not be transferred to a new stand-alone company. We do not currently use, and will not use following this offering, this ERP system. Asset impairment charges for the year ended December 31, 2008 included a $4.6 million charge to write-off certain contract rights, a $1.0 million

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    charge for an abandoned cost efficiency project, and a $3.0 million favorable adjustment to the ERP system costs that were included in the 2007 asset impairment charge.

(5)
Certain operations will not be owned by Cloud Peak Energy following the completion of this offering, including the Colowyo coal mine, the Jacobs Ranch coal mine and the uranium mining venture. Accordingly, the consolidated financial statements report the financial position, results of operations and cash flows of the Colowyo mine, the Jacobs Ranch mine and the uranium mining venture as discontinued operations. Amounts presented as discontinued operations as of December 31, 2008 and September 30, 2009 and for the nine months ended September 30, 2009 reflect the Jacobs Ranch mine only, as the Colowyo mine and uranium mining venture were distributed to Rio Tinto America on October 7, 2008. See Note 4 of Notes to Consolidated Financial Statements included elsewhere in this prospectus.

(6)
Total long-term debt includes the current and long-term portions of the long-term debt—related party, federal coal leases and long-term debt—other. See Note 9 of Notes to Consolidated Financial Statements included elsewhere in this prospectus for additional information on our long-term debt.

(7)
Pro forma EBITDA is derived from the unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2008 and nine months ended September 30, 2009, included elsewhere in this prospectus. A reconciliation of pro forma EBITDA to pro forma net income for the periods presented, is as follows:
 
  For the Year
Ended
December 31,
2008
  For the Nine
Months Ended
September 30,
2009
 
 
  (dollars in thousands)
 

Pro forma EBITDA Reconciliation

             

Income from continuing operations

  $ 60,959   $ 133,694  

Depreciation and depletion

    88,972     68,383  

Accretion

    12,742     8,402  

Amortization

    45,989     24,770  

Interest expense

    71,478     51,576  

Interest income

    (2,865 )   (228 )

Income tax provision

    2,726     22,751  
           

Pro forma EBITDA(a)

  $ 280,001   $ 309,348  
           

    (a)
    Pro forma EBITDA includes revenues from our significant broker sales contract. Final deliveries are expected to be made under this contract in 2010, at which time we expect the contract to expire. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Revenues."

      See Note 8 below for a discussion of our use of EBITDA.

(8)
EBITDA, a performance measure used by management, is defined as income (loss) from continuing operations plus interest expense, income tax provision, depreciation and depletion, amortization and accretion less interest income as shown in the table above. EBITDA, as presented for the years ended December 31, 2006, 2007 and 2008 and for the nine months ended September 30, 2008 and 2009, is not defined under accounting principles generally accepted in the United States of America, or U.S. GAAP, and does not purport to be an alternative to net income as a measure of operating performance. Because not all companies use identical calculations, this presentation of EBITDA may not be comparable to other similarly titled measures of other companies. We use, and we believe investors benefit from the presentation of, EBITDA in evaluating our operating performance because it provides us and our investors with an additional tool to compare our operating performance on a consistent basis by removing the impact of certain items that management believes do not directly reflect our core operations. We believe that EBITDA is useful to investors and other external users of our consolidated financial statements in evaluating our operating performance because EBITDA is widely used by investors to measure a company's operating performance without regard to items such as interest expense, taxes, depreciation and depletion, amortization and accretion, which can vary substantially from company to company depending upon accounting methods and book value of assets and liabilities, capital structure and the method by which assets were acquired.

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    However, using EBITDA as a performance measure has material limitations as compared to net income, or other financial measures as defined under U.S. GAAP, as it excludes certain recurring items which may be meaningful to investors. EBITDA excludes interest expense and interest income; however, as we have historically borrowed money from our parent in order to finance transactions and operations and following the completion of this offering, CPE LLC will have $600 million aggregate principal amount of senior notes outstanding and a $400 million revolving credit facility. We have also invested available cash to generate interest income. Interest expense and interest income are elements of our cost structure and influence our ability to generate revenue and returns for shareholders. Further, EBITDA excludes depreciation and depletion and amortization; however, as we use capital and intangible assets to generate revenues, depreciation and depletion, as well as amortization are a necessary element of our costs and ability to generate revenue. EBITDA also excludes accretion expense; however, as we are legally obligated to pay for costs associated with the reclamation and closure of our mine sites, the periodic accretion expense relating to these reclamation costs is a necessary element of our costs and ability to generate revenue. Finally, EBITDA excludes income taxes; however, as we are organized as a corporation, the payment of taxes is a necessary element of our operations. As a result of these exclusions from EBITDA, any measure that excludes interest expense, interest income, depreciation and depletion, amortization, accretion and income taxes has material limitations as compared to net income. When using EBITDA as a performance measure, management compensates for these limitations by comparing EBITDA to net income in each period, so as to allow for the comparison of the performance of the underlying core operations with the overall performance of the Company on a full-cost, after-tax basis. Using both EBITDA and net income to evaluate the business allows management and investors to (a) assess our relative performance against our competitors and (b) ultimately monitor our liquidity and cash position and capacity to generate returns for shareholders.

    A reconciliation of EBITDA to income from continuing operations for each of the periods presented is as follows:

 
  For the Years Ended December 31,   For the Nine
Months Ended
September 30,
 
 
  2006   2007   2008   2008   2009  
 
  (dollars in thousands)
 

Income from continuing operations

  $ 40,537   $ 53,789   $ 88,340   $ 55,010   $ 147,268  

Depreciation and depletion

    59,352     80,133     88,972     69,258     68,383  

Amortization

    34,957     34,512     45,989     37,027     24,770  

Accretion

    10,088     12,212     12,742     8,926     8,402  

Interest expense

    38,785     40,930     20,376     19,974     1,007  

Interest income

    (3,604 )   (7,302 )   (2,865 )   (2,682 )   (228 )

Income tax provision

    11,717     18,050     25,318     15,676     59,888  
                       

EBITDA

  $ 191,832   $ 232,324   $ 278,872   $ 203,189   $ 309,490  
                       
(9)
Tons of coal sold includes amounts sold under our brokerage contract relating to the Spring Creek mine.

(10)
The pro forma condensed consolidated statement of operations presents financial information through income (loss) from continuing operations. Accordingly, the income (loss) from discontinued operations related to the Colowyo mine, Jacobs Ranch mine and the uranium mining venture will not be reflected and no pro forma adjustment will be necessary in the pro forma condensed consolidated statements of operations.

(11)
Effective September 24, 2008, the outstanding borrowings and related interest of $547.4 million under the revolving credit facility with Rio Tinto America was converted to equity. Such amount is reflected as a capital contribution in shareholder's equity.

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RISK FACTORS

        You should carefully consider the risk factors described below and all other information contained in this prospectus before you decide to invest in our common stock. If any of the following risk factors, as well as other risks and uncertainties that are not currently known to us or that we currently believe are not material, actually occur, our business, financial condition and results of operations could be materially and adversely affected. Accordingly, the trading price of our securities could decline, and you may lose part or all of your investment.

Risks Related to Our Business

The current global economic downturn and disruptions in the financial and credit markets may have a material adverse effect on our business, financial condition and results of operations.

        The recent global economic downturn, particularly with respect to the U.S. economy, coupled with the global financial and credit market disruptions, have had an impact on the coal industry generally and may continue to do so until economic conditions improve. The demand for electricity in our target markets has decreased during this period. Decreases in the demand for electricity typically lead to a decline in the demand for and prices of coal. The economic downturn has also negatively impacted the demand for U.S. exports of coal. If these trends continue, we may not be able to sell all of the coal we are capable of producing or sell our coal at prices comparable to recent years. In addition, prices for coal in the spot market, including for PRB coal, have decreased from their historic highs reached during the first half of 2008. Although we have historically sold most of our coal under long-term coal sales agreements with fixed prices, the prices in the spot market influence the price for the forward sales agreements that we are entering into now and may enter into in the future, and the prices we receive for our coal may not be as favorable as they have been in the past. In particular, the pricing for long-term contracts we are currently entering into is below the pricing for long-term contracts entered into in 2008. Although economic conditions have generally deteriorated since mid-2008, we began to feel the effects of the changes in the market during the beginning of the second quarter of 2009. In addition, stockpiles of coal by our customers have continued to increase, reaching their highest level in recent years, and our customers have been curtailing future orders until their supplies are depleted. Recent low prices for natural gas and oil, which are substitutes for coal generated power, may also lead to continued decreased coal consumption by electricity-generating utilities. Current market conditions, including tightening of the credit markets, may also impact our customers' ability to finance their operations, which may result in decreased demand for our coal, cancellation of orders or changes to the coal sales agreements with those customers. For example, in the first nine months of 2009, we have experienced a greater number of customers seeking to reduce the amount of tons taken under existing contracts and additional customers may seek to similarly reduce tons taken in future periods under their agreements with us. Decreased sales volumes could impact our revenues, cost structure and opportunities for growth in the future. We are unable to predict the duration or severity of the current global economic and financial crisis and any actions we may take in response to these conditions may be insufficient. A protracted continuation or worsening of the global economic downturn or disruptions in the financial markets could have a material adverse effect on our business, financial condition and results of operations. Furthermore, because we seek to enter into long-term arrangements for the sale of a substantial portion of our coal, it is likely that the average sales price we receive for our coal will lag behind any general economic recovery in the United States.

Coal prices are subject to change and a substantial or extended decline in prices could materially and adversely affect our revenues and results of operations, as well as the value of our coal reserves.

        Our revenues, results of operations and the value of our coal reserves are dependent in large measure upon the prices we receive for our coal. Because coal is a commodity, the prices we receive are set by the marketplace. Prices for coal generally tend to be cyclical, and over the last several years

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have become more volatile. The contract prices we may receive in the future for coal depend upon numerous factors, including:

    the domestic and foreign supply and demand for coal, including demand for U.S. coal exports from eastern U.S. markets;

    domestic demand for electricity;

    domestic and foreign economic conditions, including economic downturns and the strength of the global and U.S. economies;

    the quantity and quality of coal available from competitors;

    competition for production of electricity from non-coal sources, including the price and availability of alternative fuels, such as natural gas and oil, and alternative energy sources, such as nuclear, hydroelectric, wind and solar power, and the effects of technological developments related to these non-coal and alternative energy sources;

    domestic air emission standards for coal-fired power plants, and the ability of coal-fired power plants to meet these standards by installing scrubbers or other means;

    adverse weather, climatic or other natural conditions, including natural disasters;

    legislative, regulatory and judicial developments, environmental regulatory changes, or changes in energy policy and energy conservation measures that would adversely affect the coal industry, such as legislation that limits carbon dioxide emissions or provides for increased funding and incentives for, or mandates the use of, alternative energy sources;

    the effects of worldwide energy conservation measures;

    domestic and foreign governmental regulations and taxes;

    the quantity, quality and pricing of coal available in the resale market;

    the capacity of, cost of, and proximity to, rail transportation facilities and rail transportation delays; and

    market price fluctuations for sulfur dioxide emission allowances.

        A substantial or extended decline in the prices we receive for our future coal sales contracts could materially and adversely affect us by decreasing our revenues thereby materially and adversely affecting our results of operations.

Our coal mining operations are subject to operating risks, which could result in materially increased operating expenses and decreased production levels and could materially and adversely affect our results of operations.

        We mine coal at surface mining operations located in Wyoming and Montana. Our coal mining operations are subject to a number of operating risks. Because we maintain very little produced coal inventory, certain conditions or events could disrupt operations, adversely affect production and shipments and increase the cost of mining at particular mines for varying lengths of time, which could have a material adverse effect on our results of operations. These conditions and events include, among others:

    poor mining conditions resulting from geological, hydrologic or other conditions, which may cause instability of highwalls or spoil-piles or cause damage to nearby infrastructure;

    mining and plant equipment failures and unexpected maintenance problems;

    adverse weather and natural disasters, such as heavy rains, flooding and other natural events affecting operations, transportation or customers;

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    the unavailability of qualified labor and contractors;

    the unavailability of raw materials, equipment (including heavy mobile equipment) or other critical supplies such as tires and explosives, fuel, lubricants and other consumables of the type, quantity and/or size needed to meet production expectations;

    the capacity of, and proximity to, rail transportation facilities and rail transportation delays or interruptions, including derailments;

    delays, challenges to, and difficulties in acquiring, maintaining or renewing necessary permits, including environmental permits, or mining or surface rights;

    delays or difficulties in, the unavailability of, or unexpected increases in the cost of acquiring, developing and permitting new LBA acquisitions from the federal government and other new mining reserves and surface rights;

    competition and/or conflicts with other natural resource extraction activities and production within our operating areas, such as coalbed methane extraction or oil and gas development;

    a major incident at a mine site that causes all or part of the operations of a mine to cease for some period of time;

    current and future health, safety and environmental regulations or changes in interpretations of current regulations, including the classification of plant and animal species near our mines, including the potential listing of the sage grouse, as endangered or threatened species;

    inability to acquire or maintain adequate financial sureties for mining and reclamation purposes or to meet other governmental or private bonding requirements; and

    the value of the U.S. dollar relative to other currencies, particularly where imported products are required for the mining process, such as tires and petroleum products.

        These changes, conditions and events may materially increase our cost of mining and delay or halt production at particular mines either permanently or for varying lengths of time.

Competition within the coal production industry and with producers of competing energy sources may materially and adversely affect our ability to sell coal at a favorable price.

        We compete with numerous other coal producers in various regions of the U.S. for domestic sales. International demand for U.S. coal also affects competition within our industry. The demand for U.S. coal exports depends upon a number of factors, including the overall demand for electricity in foreign markets, currency exchange rates, ocean freight rates, port and shipping capacity, the demand for foreign-produced steel, both in foreign markets and in the U.S. market, general economic conditions in foreign countries, technological developments and environmental and other governmental regulations. Foreign demand for eastern U.S. coal increased significantly during 2008 but declined during the first nine months of 2009. If foreign demand for U.S. coal continues to decline, this decline could cause competition among coal producers for sales in the U.S. to intensify, potentially resulting in significant additional downward pressure on domestic coal prices, including in the PRB.

        In addition to competing with other coal producers, we compete generally with producers of other fuels, such as natural gas and oil. A decline in price for these fuels, could cause demand for coal to decrease and adversely affect the price of our coal. For example, the price for natural gas has recently declined from $8.81 per thousand cubic feet in the third quarter of 2008 to $3.17 per thousand cubic feet in the third quarter of 2009, leading to, in some instances, decreased coal consumption by electricity-generating utilities. If alternative energy sources, such as nuclear, hydroelectric, wind or solar, become more cost-competitive on an overall basis, demand for coal could decrease and the price of coal could be materially and adversely affected, including in the PRB. Further, legislation requiring the

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use of these alternative energy sources and fuels or legislation providing financing or incentives to encourage continuing technological advances in this area could further enable alternative energy sources to become more competitive with coal.

Excess production and production capacity in the coal production industry could put downward pressure on coal prices and, as a result, materially and adversely affect our revenues and profitability.

        During the mid-1970s and early 1980s, increased demand for coal attracted new investors to the coal industry in the PRB, spurred the development of new mines and resulted in additional production capacity throughout the industry, all of which led to increased competition and lower coal prices. Increases in coal prices during recent periods encouraged the development of expanded capacity by coal producers. Some of these planned capacity increases and existing production plans have been delayed or reduced due to coal price reductions since mid-2008 and the global economic downturn. However, these capacity increases may be restarted in the future. Any overcapacity and increased production in the future could materially reduce coal prices and therefore materially reduce our revenues and profitability.

Decreases in demand for electricity resulting from economic, weather changes or other conditions could adversely affect coal prices and materially and adversely affect our results of operations.

        Our coal customers primarily use our coal as fuel for domestic electricity generation. Overall economic activity and the associated demands for power by industrial users can have significant effects on overall electricity demand. An economic slowdown can significantly slow the growth of electrical demand and could result in contraction of demand for coal. See "—The current global economic downturn and disruptions in the financial and credit markets may have a material adverse effect on our business, financial condition and results of operations." Weather patterns can also greatly affect electricity demand. Extreme temperatures, both hot and cold, cause increased power usage and, therefore, increased generating requirements from all sources. Mild temperatures, on the other hand, result in lower electrical demand, which allows generators to choose the sources of power generation when deciding which generation sources to dispatch. Any downward pressure on coal prices, due to decreases in overall demand or otherwise, including changes in weather patterns, would materially and adversely affect our results of operations.

The use of alternative energy sources for power generation could reduce coal consumption by U.S. electric power generators, which could result in lower prices for our coal, which could reduce our revenues and materially and adversely affect our business and results of operations.

        In 2008, we sold approximately 93% of our coal to domestic electric power generators. Domestic electric power generation accounted for approximately 93% of all U.S. coal consumption in 2008, according to the EIA. The amount of coal consumed for U.S. electric power generation is affected by, among other things:

    the location, availability, quality and price of alternative energy sources for power generation, such as natural gas, fuel oil, nuclear, hydroelectric, wind and solar power; and

    technological developments, including those related to alternative energy sources.

        Gas-fired generation has the potential to displace coal-fired generation, particularly from older, less efficient coal-powered generators. We expect that many of the new power plants needed to meet increasing demand for domestic electricity generation will be fired by natural gas because gas-fired plants are cheaper to construct and permits to construct these plants are easier to obtain as natural gas is seen as having a lower environmental impact than coal-fired generators. In recent periods, governmental regulators at the federal, state and local levels have shown increased interest in limiting greenhouse gas emissions. This has resulted in increased regulation of coal mining and of coal-fired

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power plants and other end-users of coal, increasing the cost of burning coal compared to alternative energy sources. In addition, environmental activists concerned with climate change issues have attempted to use the regulatory and judicial processes to block the construction of new coal-fired plants or capacity expansions to existing plants. Further, state and federal mandates for increased use of electricity from renewable energy sources could have an impact on the market for our coal. More than twenty states have enacted legislative mandates requiring electricity suppliers to use renewable energy sources to generate a certain percentage of power. There have been numerous proposals to establish a similar uniform, national standard. Although none of these federal proposals have been enacted to date, the Obama Administration has indicated its support for a federal renewable energy standard, and federal legislation imposing such a mandate is currently under consideration by Congress. Possible advances in technologies and incentives, such as tax credits, to enhance the economics of renewable energy sources could make these sources more competitive with coal. Any reduction in the amount of coal consumed by North American electric power generators could reduce the price of coal that we mine and sell, thereby reducing our revenues and materially and adversely affecting our business and results of operations.

New and potential future regulatory requirements relating to greenhouse gas emissions could affect our customers and could reduce the demand for coal as a fuel source and cause coal prices and sales of our coal to materially decline.

        One major by-product of burning coal is carbon dioxide, which is considered a greenhouse gas and is a major source of concern with respect to global warming, also known as climate change. Climate change continues to attract public and scientific attention, and increasing government attention is being paid to reducing greenhouse gas emissions, including from coal-fired power plants.

        There are many regulatory approaches currently in effect or being considered to address greenhouse gases, including possible future U.S. treaty commitments, new federal or state legislation that may impose a carbon emissions tax or establish a cap-and-trade program, and regulation by the U.S. Environmental Protection Agency, or the EPA.

    The Obama Administration has indicated its support for a mandatory cap and trade program to reduce greenhouse gas emissions and the U.S. Congress is actively considering various proposals to reduce greenhouse gas emissions, mandate electricity suppliers to use renewable energy sources to generate a certain percentage of power, and require energy efficiency measures. In June 2009, the U.S. House of Representatives passed a comprehensive climate change and energy bill, the American Clean Energy and Security Act, and the U.S. Senate is considering similar legislation that would, among other things, impose a nationwide cap on greenhouse gas emissions and require major sources, including coal-fired power plants, to obtain "allowances" to meet that cap.

    In September 2009, the EPA promulgated a rule requiring certain emitters of greenhouse gases, including coal-fired power plants, to monitor and report their greenhouse gas emissions to the EPA. In addition, in response to the 2007 U.S. Supreme Court ruling in Massachusetts v. EPA that the EPA has authority to regulate carbon dioxide emissions under the Clean Air Act, the EPA has issued and is considering several additional proposals, including one that would require best available control technology for greenhouse gas emissions whenever certain stationary sources, such as a power plants, are built or significantly modified.

    State and regional climate change initiatives intended to limit or affect the emission of greenhouse gas emissions from certain sources, such as the Regional Greenhouse Gas Initiative covering certain northeastern and mid-Atlantic states, the Western Climate Initiative, the Midwestern Greenhouse Gas Reduction Accord, and the California Global Warming Solutions Act (AB32), either have already taken effect or may take effect before federal action.

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    The State of California recently approved a fee to be paid by certain emitters of greenhouse gases, and other jurisdictions have or are also considering imposing similar fees or taxes.

        The permitting of new coal-fired power plants has also recently been contested, at times successfully, by state regulators and environmental organizations due to concerns related to greenhouse gas emissions from the new plants. Additionally, two U.S. federal appeals courts have reinstated lawsuits permitting individuals, state attorneys general and others to pursue claims against major utility, coal, oil and chemical companies on the basis that those companies have created a public nuisance due to their emissions of carbon dioxide.

        Climate change initiatives and other efforts to reduce greenhouse gas emissions like those described above or otherwise may require additional controls on coal-fired power plants and industrial boilers, may cause some users of coal to switch from coal to a lower carbon fuel and may result in the closure of coal-fired power plants or in reduced construction of new plants. Any switching of fuel sources away from coal, closure of existing coal-fired power plants, or reduced construction of new coal-fired power plants could have a material adverse effect on demand for and prices received for our coal. See "Environmental and Other Regulatory Matters."

Our business requires substantial capital investment and maintenance expenditures, which we may be unable to provide, and our cost of capital will be higher as a stand-alone public company.

        Our business plan and strategy are dependent upon our acquisitions of additional reserves, which require substantial capital expenditures. We also require capital for, among other purposes, acquisition of surface rights, equipment and the development of our mining operations, capital renovations, maintenance and expansions of plants and equipment and compliance with environmental laws and regulations. As part of Rio Tinto, our operations and growth have been funded in large part through capital investments by Rio Tinto America. Upon completion of this offering, we will be an independent company, and we will no longer have access to capital from Rio Tinto America or be able to take advantage of the borrowing capacity, assets and consolidated investment grade credit rating of Rio Tinto.

        We will need to develop and maintain our own sources of capital and establish and maintain our credit rating as a stand-alone public company. Following the completion of this offering, we and CPE LLC will have a higher cost of capital than we and CPE LLC would as a part of Rio Tinto. To the extent that cash on hand, cash generated internally and cash available under the debt financing transactions are not sufficient to fund capital requirements, we and CPE LLC will require additional debt and/or equity financing. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources After this Offering." Debt or equity financing may not be available or, if available, may not be available on satisfactory terms. The recent tightening and volatility of the credit markets has resulted in more stringent lending standards and terms and higher volatility in interest rates. These trends together with significant write-offs in the financial services sector, re-pricing of credit risk and weak economic conditions generally could adversely impact our and CPE LLC's ability to obtain additional debt financing or impact the cost of debt if obtained. If we and CPE LLC are unable to obtain additional capital, we may not be able to maintain or increase our existing production rates and we could be forced to reduce or delay capital expenditures or change our business strategy, sell assets or restructure or refinance CPE LLC's indebtedness, all of which could have a material adverse effect on our business or financial condition.

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CPE LLC's substantial indebtedness could adversely affect our results of operations and financial condition and prevent us from fulfilling our financial obligations.

        Concurrently with this offering, CPE LLC will enter into the debt financing transactions, which will include a $400 million revolving credit facility and $600 million aggregate principal amount of senior notes. After giving effect to the debt financing transactions, at September 30, 2009 we would have had approximately $584.6 million of total debt outstanding on a pro forma basis (excluding the discounted obligations payable under our coal leases and approximately $3.3 million of other long-term debt incurred in connection with land acquisitions), including the senior notes. We also expect that in the near-term CPE LLC will use up to $150 million of the capacity under CPE LLC's revolving credit facility for letters of credit securing our reclamation obligations. Any outstanding indebtedness could have important consequences to us and CPE LLC, such as:

    limiting CPE LLC's ability to obtain additional financing to fund growth, such as mergers and acquisitions, working capital, capital expenditures, debt service requirements or other cash requirements;

    requiring much of CPE LLC's cash flow to be dedicated to interest obligations and making it unavailable for other purposes;

    with respect to any indebtedness under the revolving credit facility or other variable rate debt, exposing CPE LLC to the risk of increased interest costs if the underlying interest rates rise on CPE LLC's variable rate debt;

    limiting CPE LLC's ability to invest operating cash flow in its business (including to obtain new LBAs or make capital expenditures) due to debt service requirements;

    causing CPE LLC to need to sell assets and properties at an inopportune time;

    limiting CPE LLC's ability to compete with companies that are not as leveraged and that may be better positioned to withstand economic downturns;

    limiting CPE LLC's ability to acquire new coal reserves and/or LBAs and plant and equipment needed to conduct operations; and

    limiting our and CPE LLC's flexibility in planning for, or reacting to, and increasing our vulnerability to, changes in our business, the industry in which we operate and general economic and market conditions.

        If the indebtedness of CPE LLC is further increased, the related risks that we and CPE LLC now face, including those described above, could intensify. Moreover, these risks will also apply to certain of CPE LLC's domestic restricted subsidiaries that are guarantors of CPE LLC's indebtedness and may apply to Cloud Peak Energy if we become a guarantor of CPE LLC's debt in the future, although the covenants applicable to the guarantors of CPE LLC's debt will not apply to us in the event we guarantee the senior notes. In addition to the principal repayments on outstanding debt, CPE LLC has other demands on its cash resources, including significant maintenance and other capital expenditures and operating expenses and distributions to Cloud Peak Energy to fund required payments under the Tax Receivable Agreement and the required pro rata distribution to RTEA and KMS under the LLC Agreement. The ability of CPE LLC to pay its debt depends upon the operating performance of our business. In particular, economic conditions could cause revenues to decline, and hamper CPE LLC's ability to repay indebtedness. If CPE LLC does not have enough cash to satisfy its debt service obligations, CPE LLC may be required to refinance all or part of its debt, sell assets, limit certain capital expenditures, including LBAs, or reduce spending or we may be required to issue equity. CPE LLC may not be able to, at any given time, refinance its debt or sell assets and we may not be able to, at any given time, issue equity, in either case on acceptable terms or at all.

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If we and CPE LLC are unable to comply with the covenants or restrictions contained in CPE LLC's debt instruments, the lenders could declare all amounts outstanding under those instruments to be due and payable, which could materially and adversely affect our financial condition.

        Under our prior credit arrangements with Rio Tinto America, we were not subject to covenants or other restrictions on our ability to operate our business. However, the debt financing transactions will include covenants that, among other things, will restrict our and CPE LLC's ability to dispose of assets, incur additional indebtedness, pay dividends or make other restricted payments, create liens on assets, make investments, loans or advances, make acquisitions, engage in mergers or consolidations, and engage in certain transactions with affiliates (including with Rio Tinto or its affiliates). CPE LLC's debt instruments will also include change of control provisions that accelerate or may require the repurchase of CPE LLC's indebtedness in the event of certain change of control events. The debt financing arrangements will also require CPE LLC to comply with various financial covenants. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources After this Offering." Because CPE LLC will be our only direct operating subsidiary, complying with these restrictions may prevent CPE LLC from taking actions that we believe would help us to grow our business. As a cyclical business it may be difficult to comply with these financial covenants. These restrictions could limit our ability to plan for or react to market conditions or meet extraordinary capital needs or otherwise restrict corporate activities. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources After this Offering" for additional information regarding our credit arrangements.

        The breach of any of the covenants or restrictions unless cured within the applicable grace period, would result in a default under the debt instruments that would permit the lenders to declare all amounts outstanding to be due and payable, together with accrued and unpaid interest. In such an event, CPE LLC may not have sufficient assets to repay such indebtedness. As a result, any default could have serious consequences to our financial condition. An event of default or an acceleration under one of CPE LLC's debt instruments could also cause a cross-default or cross-acceleration of another debt instrument or contractual obligation, which would adversely impact our liquidity.

        In addition, failure to comply with any of the covenants in CPE LLC's existing or future financing agreements could result in a default under those agreements and under other agreements containing cross-default provisions. A default would permit lenders to accelerate the maturity of the debt under these agreements and to foreclose upon any collateral securing the debt. Under these circumstances, CPE LLC might not have sufficient funds or other resources to satisfy all of its obligations. In addition, the limitations imposed by the financing agreements on our ability to incur additional debt and to take other actions might significantly impair CPE LLC's ability to obtain other financing. CPE LLC may not be granted waivers or amendments to these agreements if for any reason it is unable to comply with these agreements, and CPE LLC may not be able to refinance its debt on terms acceptable to it, or at all.

Failure to obtain, maintain or renew our security arrangements, such as surety bonds or letters of credit, in a timely manner and on acceptable terms could affect our ability to secure reclamation and coal lease obligations, and materially and adversely affect our ability to mine or lease coal.

        Federal and state laws require us to secure the performance of certain long-term obligations, such as mine closure or reclamation costs and federal and state workers' compensation costs, including black lung. The amount of these security arrangements is substantial with total amounts of surety bonds and letters of credit in place for such obligations at December 31, 2008 and September 30, 2009, respectively, of $524.3 million and $548.1 million. Certain business transactions, such as coal leases and other obligations, may also require bonding. We may have difficulty procuring or maintaining our surety bonds. Our bond issuers may demand higher fees, additional collateral, including putting up letters of credit, posting cash collateral or other terms less favorable to us upon those renewals. Because we are

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required by state and federal law to have these bonds in place before mining can commence or continue, our failure to maintain surety bonds, letters of credit or other guarantees or security arrangements would materially and adversely affect our ability to mine or lease coal. That failure could result from a variety of factors including lack of availability, our lack of affiliation with Rio Tinto, higher expense or unfavorable market terms, the exercise by third-party surety bond issuers of their right to refuse to renew the surety bonds and restrictions on availability of collateral for current and future third-party surety bond issuers under the terms of any credit arrangements then in place. Surety bond issuers may demand terms that are less favorable to us than the terms we currently receive and there may be fewer companies willing to issue these bonds. In addition, because we will no longer be part of Rio Tinto, surety bond issuers will likely require significantly more collateral than prior to the offering while we were a part of Rio Tinto. Due to current economic conditions and the volatility of the financial markets, surety bond providers may be less willing to provide us with surety bonds or maintain existing surety bonds and we may have greater difficulty satisfying the liquidity requirements under our existing surety bond contracts. If we do not maintain sufficient borrowing capacity or have other resources to satisfy our surety and bonding requirements, our ability to mine or lease coal could be materially and adversely affected.

        While we were a part of Rio Tinto, portions of our surety bonds were secured by guarantees from Rio Tinto with no additional credit support. At December 31, 2008 and September 30, 2009, there were $297.4 million and $319.1 million, respectively, of Rio Tinto guaranteed surety bonds in place (including our obligations with respect to the Decker mine). We have also historically used letters of credit issued under Rio Tinto's pre-existing credit facilities to secure our obligations or, occasionally, serve as collateral for reclamation surety bonds. At December 31, 2008 and September 30, 2009, there were $226.9 million and $229.0 million, respectively, of letters of credit in place under Rio Tinto's credit facilities and other arrangements between RTEA and various counterparties (including our obligations with respect to the Decker mine). These letters of credit are typically renewable annually at various times throughout a given year.

        We and CPE LLC will agree to use our commercially reasonable efforts following the completion of this offering to obtain new surety bonds, letters of credit or other credit arrangements and to obtain the full release of Rio Tinto and its affiliates with respect to any existing surety bonds, letters of credit and other guarantees or credit arrangements. We expect that at the closing of this offering we will be required to post collateral supporting at least 40% of our reclamation obligations, which we expect to accomplish through cash collateral or letters of credit. This percentage may change based on our financial condition. We will need to have credit facilities or other resources to meet our surety and bonding requirements and we expect CPE LLC to use a portion of its $400 million revolving credit facility from time to time for letter of credit arrangements to secure our reclamation obligations or to provide cash collateral for our surety bonds. We also expect that CPE LLC will retain a portion of the net proceeds from its offering of $600 million aggregate principal amount of senior notes as cash reserves for, among other things, securing our reclamation obligations. See "Use of Proceeds," "Structuring Transactions and Related Agreements—Structure-Related Agreements—Master Separation Agreement" and "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources After this Offering."

If we are unable to acquire or develop additional coal reserves that are economically recoverable, our profitability and future success and growth may be materially and adversely affected.

        Our profitability depends substantially on our ability to mine, in a cost-effective manner, coal reserves that possess the quality characteristics our customers desire. Because our reserves decline as we mine our coal, our future success and growth depend upon our ability to acquire additional coal that is economically recoverable. If we fail to acquire or develop additional reserves, our existing reserves will eventually be depleted. As a result, to maintain our production capacity and competitive position, we will need to acquire significant additional coal through the federal competitive leasing

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process that can be mined on an economically recoverable basis. We also lease or purchase a smaller portion of our reserves from the states of Montana and Wyoming and from private third parties. See "—Because most of the coal in the vicinity of our mines is owned by the U.S. federal government, our future success and growth could be materially and adversely affected if we are unable to acquire additional reserves through the federal competitive leasing process" and "—We may be unable to acquire state leases for coal reserves, or to do so on a cost-effective basis, which could materially and adversely affect our business strategy and growth plans."

        Our ability to obtain additional coal reserves in the future could also be limited by the availability of cash we generate from our operations or available financing, restrictions under CPE LLC's debt instruments, competition from other coal companies for properties, the lack of suitable acquisition or LBA opportunities or the inability to acquire coal properties or LBAs on commercially reasonable terms. In addition, we may not be able to mine future reserves as profitably as we do at our current operations. Due to the recent global economic downturn, the prices we are currently receiving for new 2010 coal sales agreements are currently below the average price we are receiving for tons sold in 2009. The economic recoverability of our existing coal and our ability to acquire or develop additional economically recoverable reserves will be materially adversely impacted if prices for coal sold continue to decrease.

Because most of the coal in the vicinity of our mines is owned by the U.S. federal government, our future success and growth could be materially and adversely affected if we are unable to acquire additional reserves through the federal competitive leasing process.

        The U.S. federal government owns most of the coal in the vicinity of our mines. Accordingly, the LBA process is the most significant means of acquiring additional reserves. There is no requirement that the federal government lease coal subject to an LBA, lease its coal at all or give preference to any LBA applicant, and our bids may compete with other coal producers' bids in the PRB. In the current coal pricing environment, LBAs are becoming increasingly more competitive and expensive to obtain, and the review process to submit an LBA for bid continues to lengthen. We expect that this trend may continue. The increasing size of potential LBA tracts may make it easier for new mining operators to enter the market on economical terms and may, therefore, increase competition for LBAs. Increased opposition from non-governmental organizations and other third parties may also lengthen, delay, or complicate the LBA process. In order to win a lease in the LBA process and acquire additional coal, our bid for a coal tract must meet or exceed the fair market value of the coal based on the internal estimates of the Bureau of Land Management, or BLM, which they do not publish. We have maintained a history of timely payments related to our LBAs. If we are unable to maintain our "good payor" status, we would be required to seek bonding for any remaining payments. If we are required to purchase bonding for lease obligations this would significantly increase our costs and materially and adversely affect our profitability. See "Business—Reserve Acquisition Process" for a more detailed description of the LBA process.

        Earlier this year the U.S. House of Representatives approved a Department of Interior appropriations bill that included a provision to require an up-front payment of the entire bonus bid for coal leases awarded in 2010. Normally we pay bonus bids in five yearly installments, with the first installment being due when we submit the bid for the coal lease to the BLM. The appropriations bill ultimately passed Congress but without this bonus bid provision. If Congress determines in the future to similarly amend the bonus bid payment method, it could require us to make a single up-front bonus bid payment equal to 100% of the bonus bid for the LBAs for which we intend to bid, which would materially and adversely affect our cash position, future profitability and results of operations. See "Business—Reserve Acquisition Process."

        The LBA process also requires us to acquire rights to mine from surface owners overlying the coal, and these rights are becoming increasingly more difficult and costly to acquire. Certain federal

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regulations provide a specific class of surface owners, also known as qualified surface owners, or QSOs, with the ability to prohibit the BLM from leasing its coal. If a QSO owns the land overlying a coal tract, federal laws prohibit us from leasing the coal tract without first securing surface rights to the land, or purchasing the surface rights from the QSO, which would allow us to conduct our mining operations. This right of QSOs allows them to exercise significant influence over negotiations to acquire surface rights and can delay the LBA process or ultimately prevent the acquisition of an LBA. If we are unable to successfully negotiate access rights with QSOs at a price and on terms acceptable to us, we may be unable to acquire LBAs for coal on land owned by the QSO. If the prices to acquire land owned by QSOs increase, it could materially and adversely affect our profitability.

If we are unable to acquire surface rights to access our coal reserves, we may be unable to obtain a permit to mine coal we own and may be required to employ expensive techniques to mine around those sections of land we cannot access in order to access other sections of coal reserves, which could materially and adversely affect our business and our results of operations.

        After we acquire coal reserves through the LBA process or otherwise, we are required to obtain a permit to mine the reserves through the applicable state agencies prior to mining the acquired coal. In part, the permitting requirements provide that, under certain circumstances, we must obtain surface owner consent if the surface estate has been split from the mineral estate, which is commonly known as a "split estate." At certain of our mines where we have obtained the underlying coal and the surface is held by one or more owners, we are engaged in negotiations for surface access with multiple parties. If we are unable to successfully negotiate surface access with any or all of these surface owners, or do so on commercially reasonable terms, we may be denied a permit to mine some or all of our coal or may find that we cannot mine the coal at a profit. If we are denied a permit, this would create significant delays in our mining operations and materially and adversely impact our business and results of operations. Furthermore, if we determine to alter our plans to mine around the affected areas, we could incur significant additional costs to do so, which could increase our operating expenses considerably and could materially and adversely affect our results of operations.

We may be unable to acquire state leases for coal reserves, or to do so on a cost-effective basis, which could materially and adversely affect our business strategy and growth plans.

        We acquire a small percentage of our reserves through state leasing processes. Not including the Decker mine, we typically lease approximately 15% of our reserves from state leases, the majority of which involve our Spring Creek mine. Nearly all of the state leases in Wyoming have already been acquired by various mining operations in the PRB, including ours. If, as part of our growth strategy, we desire to expand our operations into areas requiring state leases, we may be required to negotiate with competing Wyoming mining operations to acquire these reserves. If we are unable to do so on a cost-effective basis, our business strategy could be adversely affected. We do not typically acquire state leases in Montana significantly in advance of mining operations due to the complexity of the leasing process in Montana.

Conflicts of interest with competing holders of mineral rights could materially and adversely affect our ability to mine coal or do so on a cost-effective basis.

        In addition to federal coal leases through the competitive leasing process, the federal government also leases rights to other minerals such as coalbed methane, natural gas and oil reserves in the western U.S., including in the PRB. Some of these minerals are located on, or are adjacent to, some of our coal reserves and LBA areas, potentially creating conflicting interests between us and the lessees of those interests. From time to time we acquire these minerals ourselves to prevent conflicting interests from arising. If, however, conflicting interests arise and we do not acquire the competing mineral rights, we may be required to negotiate our ability to mine with the holder of the competing mineral rights. If we are unable to reach an agreement with these holders, or do so on a cost-effective basis, we may incur

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increased costs and our ability to mine could be impaired which could materially and adversely affect our business and results of operations.

Our management team does not have experience managing our business as a stand-alone public company and if they are unable to manage our business as a stand-alone public company, our business may be harmed.

        We have historically operated as part of Rio Tinto. Following the completion of this offering, we will operate as a stand-alone public company. The majority of our management team does not have experience managing a business on a stand-alone basis or as a public company. If we are unable to manage and operate our company as a stand-alone public company, our business and results of operations will be adversely affected.

We have identified material weaknesses in our internal controls over financial reporting as a stand-alone public company that have contributed to a restatement of our 2005, 2006 and 2007 consolidated financial statements and June 30, 2008 interim consolidated financial statements. If not remediated satisfactorily, these material weaknesses could result in further material misstatements in our consolidated financial statements in future periods.

        During the preparation of our consolidated financial statements as of December 31, 2007 and 2008 and for each of the three years in the period ended December 31, 2008, we identified material weaknesses in our internal controls over financial reporting as a stand-alone public company that contributed to a restatement of our 2005, 2006 and 2007 consolidated financial statements and June 30, 2008 interim consolidated financial statements. If not remediated satisfactorily, these material weaknesses could result in further material misstatements in our consolidated financial statements in future periods. Specifically, we have not been required to have, and as a result did not maintain, a sufficient complement of personnel with an appropriate level of accounting, taxation, and financial reporting knowledge, experience and training in the application of U.S. GAAP commensurate with our financial reporting requirements on a stand-alone basis and the complexity of our operations and transactions. We also did not maintain an adequate system of processes and internal controls sufficient to support our financial reporting requirements and produce timely and accurate U.S. GAAP consolidated financial statements consistent with being a stand-alone public company.

        A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. A deficiency in internal control over financial reporting exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis.

        Our remediation actions may not be effective to correct material weaknesses. If we continue to experience material weaknesses, investors could lose confidence in our financial reporting, particularly if such weaknesses result in a restatement of our financial results, and our stock price could decline. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Internal Controls."

Inaccuracies in our estimates of our coal reserves could result in decreased profitability from lower than expected revenues or higher than expected costs.

        Our future performance depends on, among other things, the accuracy of our estimates of our proven and probable coal reserves. We base our estimates of reserves on engineering, economic and geological data assembled and analyzed by our internal engineers. In connection with this offering, these estimates were reviewed by John T. Boyd Company, mining and geological consultants, for the year ended December 31, 2008. Non-reserve coal deposit estimates related to our January 2009 LBA were estimated by the BLM and have not been independently reviewed or verified. The amount of

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non-reserve coal deposits on this LBA, and additional LBAs we may acquire, or contained in our non-reserve coal deposits may be less than the stated estimates. Coal acquired through the LBA process is not included as proven or probable coal reserves unless assessed by our staff of geologists and engineers to verify that such classification is appropriate. Our estimates of proven and probable coal reserves as to both quantity and quality are updated annually to reflect the production of coal from the reserves, updated geological models and mining recovery data, the tonnage contained in new lease areas acquired and estimated costs of production and sales prices. There are numerous factors and assumptions inherent in estimating the quantities and qualities of, and costs to mine, coal reserves, any one of which may vary considerably from actual results. These factors and assumptions include:

    quality of the coal;

    geological and mining conditions, which may not be fully identified by available exploration data and/or may differ from our experiences in areas where we currently mine;

    the percentage of coal ultimately recoverable;

    the assumed effects of regulation, including the issuance of required permits, and taxes, including severance and excise taxes and royalties, and other payments to governmental agencies;

    assumptions concerning the timing for the development of the reserves; and

    assumptions concerning equipment and productivity, future coal prices, operating costs, including for critical supplies such as fuel, tires and explosives, capital expenditures and development and reclamation costs.

        As a result, estimates of the quantities and qualities of economically recoverable coal attributable to any particular group of properties, classifications of reserves based on risk of recovery, estimated cost of production, and estimates of future net cash flows expected from these properties as prepared by different engineers, or by the same engineers at different times, may vary materially due to changes in the above factors and assumptions. Actual production recovered from identified reserve areas and properties, and revenues and expenditures associated with our mining operations, may vary materially from estimates. Any inaccuracy in our estimates related to our reserves could result in decreased profitability from lower than expected revenues and/or higher than expected costs.

If our highwalls or spoil-piles fail, our mining operations and ability to ship our coal could be impaired and our results of operations could be materially and adversely affected.

        Our operations could be adversely affected and we may be unable to produce coal if our highwalls fail due to conditions which may include geological abnormalities, poor ground conditions, water or blasting shocks, among others. In addition to making it difficult and more costly to recover coal, a highwall failure could also damage adjacent infrastructure such as roads, power lines, railways and gas pipelines. Further, in-pit spoil-pile failure due to conditions such as material type, water ingress, floor angle, floor roughness, spoil volume or otherwise, can impact coal removal, reduce coal recovery, increase our costs, or interrupt our production and shipments. Highwall and spoil-pile failures could materially and adversely affect our operations thereby reducing our profitability.

Major equipment and plant failures could reduce our ability to produce and ship coal and materially and adversely affect our results of operations.

        We depend on several major pieces of equipment and plant to produce and ship our coal, including draglines, shovels, coal crushing plants, critical conveyors, major transformers and coal silos. If any of these pieces of equipment or plant suffered major damage or were destroyed by fire, abnormal wear, flooding, incorrect operation, damage from highwall or spoil-pile failures, or otherwise, we may be unable to replace or repair them in a timely manner or at a reasonable cost which would

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impact our ability to produce and ship coal and materially and adversely affect our results of operations.

Significant increases in the royalty and production taxes we pay on the coal we produce could materially and adversely affect our results of operations.

        We pay federal, state and private royalties and federal, state and county production taxes on the coal we produce. A substantial portion of our royalties and production taxes are levied as a percentage of gross revenues with the remaining levied on a per ton basis. For example, we pay production royalties of 12.5% of gross proceeds to the federal government. We incurred royalties and production taxes which represented 29.5% and 28.8% of proceeds from the coal we produced for the year ended December 31, 2008 and the nine months ended September 30, 2009, respectively. If the royalty and production tax rates were to significantly increase, our results of operations could be materially and adversely affected.

        In addition, the Wyoming state severance tax is significantly less than the state severance tax in Montana. Because a substantial portion of our operations are in Wyoming and therefore subject to the more favorable Wyoming severance tax rate, if Wyoming were to increase this tax or any other tax applicable solely to our Wyoming operations, we may be significantly impacted and our results of operations could be materially and adversely affected.

Increases in the cost of raw materials and other industrial supplies, or the inability to obtain a sufficient quantity of those supplies, could increase our operating expenses, disrupt or delay our production and materially and adversely affect profitability.

        We use considerable quantities of explosives, petroleum-based fuels, tires, steel and other raw materials, as well as spare parts and other consumables in the mining process. If the prices of steel, explosives, tires, petroleum products or other materials increase significantly or if the value of the U.S. dollar continues to decline relative to foreign currencies with respect to certain imported supplies or other products, our operating expenses will increase, which could materially and adversely impact our profitability. Additionally, a limited number of suppliers exist for certain supplies, such as explosives and tires as well as certain mining equipment, and any of our suppliers may divert their products to buyers in other mines or industries or divert their raw materials to produce other products that have a higher profit margin. Shortages in raw materials used in the manufacturing of supplies and mining equipment, which, in some cases, do not have ready substitutes, or the cancellation of our supply contracts under which we obtain these raw materials and other consumables, could limit our ability to obtain these supplies or equipment. As a stand-alone public company, we may experience more difficulty in acquiring supplies, particularly where there are shortages, than we otherwise would have experienced as part of Rio Tinto. As a consequence, we may not be able to acquire adequate replacements for these supplies or equipment on a cost-effective basis or at all, which could also materially increase our operating expenses or halt, disrupt or delay our production. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Cost of Product Sold."

Significant increases in the price of diesel fuel could materially and adversely affect our earnings.

        Operating expenses at our mining locations are sensitive to changes in diesel fuel prices. Our weighted average price for diesel fuel was $3.31 per gallon for the year ended December 31, 2008. Since December 2008, our weighted average price for diesel fuel increased from $1.63 per gallon in December 2008 to $2.11 per gallon in September 2009. Diesel fuel expenses represented 9.8% of our cost of product sold for the year ended December 31, 2008, and 5.0% for the nine months ended September 30, 2009. We have not entered into any hedge or other arrangements to reduce the volatility in the price of diesel fuel for our operations, although we may do so in the future. In addition, the supply contract under which we purchase all of our diesel fuel expires at the end of 2009. As a result, if

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we are unable to extend the term of this agreement, or enter into a new supply contract on the same or similar terms or if the price of diesel fuel continues to increase, we will incur higher expenses for diesel fuel and, therefore, potentially materially lower earnings. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Cost of Product Sold."

As a stand-alone public company, we will need to enter into new supply contracts for the raw materials and other mining consumables used in our mining operations. If we are unable to do so, or to do so on a cost-effective basis, our operating expenses could materially increase and our ability to conduct our business could be materially and adversely affected.

        As part of Rio Tinto, we historically obtained explosives, petroleum-based fuels, tires, steel and other raw materials, as well as spare parts and other mining consumables used in the mining process through various Rio Tinto global and regional supply contracts. Upon completion of this offering, we will no longer be a party to these Rio Tinto supply contracts. Some of our supplies and equipment will be obtained under purchase orders or other arrangements entered into prior to termination. Additionally, we have begun entering into new supply contracts with our suppliers and expect to continue to enter into new supply contracts prior to the completion of this offering to replace the Rio Tinto supply contracts. Any new contracts may not be on the same or similar terms to those contracts with Rio Tinto. The prices for those supplies and equipment may be more expensive, because we will not be part of Rio Tinto or have access to their supply arrangements. If we are unable to enter into new supply contracts or if the new supply contracts contain materially different terms relative to Rio Tinto supply contracts, including with respect to costs, our operating expenses could materially increase and our mining operations could be materially and adversely affected.

The majority of our coal sales contracts are forward sales contracts at fixed prices. If the production costs underlying these contracts increase, our results of operations could be materially and adversely affected.

        The majority of our coal sales contracts are forward sales contracts under which customers agree to pay a specified price under their contracts for coal to be delivered in future years. The profitability of these contracts depends on our ability to adequately control the costs of the coal production underlying the contracts. These production costs are subject to variability due to a number of factors, including increases in the cost of labor, supplies or other raw materials, such as diesel fuel. As part of Rio Tinto, we did not enter into hedge or other arrangements to offset the cost variability underlying these forward sale contracts. In the future, we may enter into these types of arrangements but we may not be successful in hedging the volatility of our costs. To the extent our costs increase but pricing under these coal sales contracts remains fixed, we will be unable to pass increasing costs on to our customers. If we are unable to control our costs, our profitability under our forward sales contracts may be impaired and our results of operations could be materially and adversely affected.

Our ability to operate our business effectively could be impaired if we fail to attract and retain key personnel.

        Our ability to operate our business and implement our strategies depends, in part, on the continued contributions of our executive officers and other key employees. The loss of any of our key senior executives could have a material adverse effect on our business unless and until we find a qualified replacement. A limited number of persons exist with the requisite experience and skills to serve in our senior management positions. We may not be able to locate or employ qualified executives on acceptable terms. In addition, we believe that our future success will depend on our continued ability to attract and retain highly skilled personnel with coal industry experience. Competition for these persons in the coal industry is intense and we may not be able to successfully recruit, train or retain qualified managerial personnel. As a public company, our future success also will depend on our ability to hire and retain management with public company experience. We may not be able to continue to employ key personnel or attract and retain qualified personnel in the future. Our failure to retain or

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attract key personnel could have a material adverse effect on our ability to effectively operate our business.

As a stand-alone U.S. public company, we will be required to comply with certain financial reporting and other requirements on a basis that is different than our reporting requirements as a subsidiary of Rio Tinto. If we are unable to comply with these requirements, our business could be materially and adversely affected.

        Prior to this offering, we operated as an indirect, wholly-owned subsidiary of Rio Tinto, which requires us to provide them financial information for inclusion in their consolidated financial reports. We provided this information in accordance with International Financial Reporting Standards, or IFRS, at a level of materiality commensurate with their consolidated financial statements and necessary to meet their regulatory financial reporting requirements. As a stand-alone public company, we will be required to comply with the record keeping, financial reporting, corporate governance and other rules and regulations of the SEC, including the requirements of the Sarbanes-Oxley Act, the Public Company Accounting Oversight Board, or PCAOB, and other regulatory bodies. These entities generally require that financial information be reported in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP, which differs from IFRS. We will also be required to report at a level of materiality commensurate with our stand-alone consolidated financial statements and necessary to meet our regulatory financial reporting requirements, which is lower than that of Rio Tinto.

        As an indirect, wholly-owned subsidiary of Rio Tinto, we were not required to and did not have personnel with SEC, Sarbanes-Oxley Act, PCAOB and U.S. GAAP financial reporting expertise. In addition, we were not required to comply with the internal control design, documentation and testing requirements imposed by the Sarbanes-Oxley Act on a stand-alone basis, but rather only complied to the extent required as a part of Rio Tinto. Following the completion of this offering, as a stand-alone public company, we will become directly subject to these requirements. If we fail to comply with these requirements, our business and stock price could be materially and adversely affected, including, among other things, through the loss of investor confidence, adverse publicity, investigations and sanctions imposed by regulatory authorities.

We will be required by Section 404 of the Sarbanes-Oxley Act to evaluate the effectiveness of our internal controls. If we are unable to achieve and maintain effective internal controls, our operating results and financial condition could be harmed.

        We will be required to comply with Section 404 of the Sarbanes-Oxley Act beginning with the year ending December 31, 2010. Section 404 will require that we evaluate our internal control over financial reporting to enable management to report on, and our independent registered public accounting firm to audit, the effectiveness of those controls. Management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our consolidated financial statements in accordance with U.S. GAAP. While we have begun the lengthy process of evaluating our internal controls, we are in the early phases of our review and will not complete our review until well after this offering is completed. We cannot predict the outcome of our review at this time. During the course of the review, we may identify additional control deficiencies of varying degrees of severity, in addition to the material weaknesses discussed above.

        Management has taken steps to improve and continues to improve our internal control over financial reporting, including identification of the gaps in skills base and expertise of staff required in the finance group to operate as a public company. We will incur significant costs to remediate our material weaknesses and deficiencies and improve our internal controls. To comply with these requirements, we may need to upgrade our systems, including information technology, implement additional financial and management controls, reporting systems and procedures and hire additional accounting, finance and legal staff. If we are unable to upgrade our systems and procedures in a timely and effective fashion, we may not be able to comply with our financial reporting requirements and other rules that apply to public companies.

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        As a public company, we will be required to report control deficiencies that constitute a material weakness in our internal control over financial reporting. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Internal Controls." We will also be required to obtain an audit report from our independent registered public accounting firm regarding the effectiveness of our internal controls over financial reporting. If we fail to implement the requirements of Section 404 in a timely manner, if we or our independent registered public accounting firm are unable to conclude that our internal control over financial reporting are effective or if we fail to comply with our financial reporting requirements, investors may lose confidence in the accuracy and completeness of our financial reports. In addition, we or members of our management could be the subject of adverse publicity, investigations and sanctions by regulatory authorities, including the SEC and the NYSE, and be subject to shareholder lawsuits. Any of the above consequences could cause our stock price to decline materially and could impose significant unanticipated costs on us.

We will incur higher costs as a result of being a stand-alone public company, which may be significant. If we fail to accurately predict or effectively manage these costs, our operating results could be materially and adversely affected.

        As a stand-alone public company, we will incur higher accounting, purchasing, treasury, legal, risk management, corporate governance and other support expenses than we did as a part of Rio Tinto, which may be significant. The SEC and the New York Stock Exchange have imposed substantial requirements on public companies, including requirements for corporate governance practices and for internal controls over financial reporting under Section 404 of the Sarbanes-Oxley Act. We expect these rules and regulations to increase our accounting, legal and other costs and to make some activities more time-consuming. While additional personnel have been retained, we also will need to recruit additional accounting, legal and administrative staff with experience working for public companies. We may have to enter into short-term arrangements with third-party service providers for certain services, such as legal, external financial reporting, and other functions. These arrangements may not be available on favorable terms. In addition, these service providers may not provide these services at levels sufficient to comply with regulatory requirements. We also may not be able to successfully transition away from these third-party service providers. Moreover, the rules that will be applicable to us as a public company after this offering could make it more difficult and expensive for us to attract and retain qualified members of our board of directors and qualified executive officers. In addition, we expect to incur additional costs associated with obtaining new insurance arrangements, including increased premiums and deductible amounts. If we fail to predict these costs accurately or to manage these costs effectively, our operating results could be adversely affected. See Note 1(k) in "Unaudited Pro Forma Condensed Consolidated Financial Information" and "Management's Discussion and Analysis of Financial Condition and Results of Operations—Post-offering Cost Structure."

Extensive environmental regulations, including existing and potential future regulatory requirements relating to air emissions, affect our customers and could reduce the demand for coal as a fuel source and cause coal prices and sales of our coal to materially decline.

        The operations of our customers are subject to extensive environmental regulation particularly with respect to air emissions. For example, the federal Clean Air Act and similar state and local laws extensively regulate the amount of sulfur dioxide, particulate matter, nitrogen oxides, mercury and other compounds emitted into the air from electric power plants, which are the largest end-users of our coal. A series of more stringent requirements relating to particulate matter, ozone, haze, mercury, sulfur dioxide, nitrogen oxide and other air pollutants is expected to be proposed or become effective in the near future. In addition, federal and state mandates and incentives designed to encourage energy efficiency and the use of alternative energy sources have been proposed and implemented in recent years. Concerted conservation efforts that result in reduced electricity consumption could cause coal prices and sales of our coal to materially decline.

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        Considerable uncertainty is associated with these air emissions initiatives. New regulations are in the process of being developed, and many existing and potential regulatory initiatives are subject to review by federal or state agencies or the courts. Stringent air emissions limitations are either in place or are likely to be imposed in the short to medium term, and these limitations will likely require significant emissions control expenditures for many coal-fired power plants. As a result, these power plants may switch to other fuels that generate fewer of these emissions or may install more effective pollution control equipment that reduces the need for low-sulfur coal, possibly reducing future demand for coal and resulting in a reduced need to construct new coal-fired power plants. The EIA's expectations for the coal industry assume there will be a significant number of as-yet-unplanned coal-fired plants built in the future, which may not occur. Any switching of fuel sources away from coal, closure of existing coal-fired plants, or reduced construction of new plants could have a material adverse effect on demand for, and prices received for, our coal. Alternatively, less stringent air emissions limitations, particularly related to sulfur, to the extent enacted, could make low-sulfur coal less attractive, which could also have a material adverse effect on the demand for, and prices received for, our coal. See "Environmental and Other Regulatory Matters."

Extensive environmental laws and regulations impose significant costs on our mining operations, and future laws and regulations could materially increase those costs or limit our ability to produce and sell coal.

        The coal mining industry is subject to increasingly strict regulation by federal, state and local authorities with respect to environmental matters such as:

    limitations on land use;

    mine permitting and licensing requirements;

    reclamation and restoration of mining properties after mining is completed;

    management of materials generated by mining operations;

    the storage, treatment and disposal of wastes;

    remediation of contaminated soil and groundwater;

    air quality standards;

    water pollution;

    protection of human health, plant-life and wildlife, including endangered or threatened species;

    protection of wetlands;

    the discharge of materials into the environment;

    the effects of mining on surface water and groundwater quality and availability; and

    the management of electrical equipment containing polychlorinated biphenyls.

        The costs, liabilities and requirements associated with the laws and regulations related to these and other environmental matters may be significant and time-consuming and may delay commencement or continuation of exploration or production operations. We may not have complied and in the future may not comply with these applicable laws and regulations. Failure to comply with these laws and regulations may result in the assessment of administrative, civil and criminal penalties, the imposition of cleanup and site restoration costs and liens, the issuance of injunctions to limit or cease operations, the suspension or revocation of permits and other enforcement measures that could have the effect of limiting production from our operations. We may incur material costs and liabilities resulting from claims for damages to property or injury to persons arising from our operations. If we are pursued for

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sanctions, costs and liabilities in respect of these matters, our mining operations and, as a result, our profitability could be materially and adversely affected.

        New legislation or administrative regulations or new judicial interpretations or administrative enforcement of existing laws and regulations, including proposals related to the protection of the environment that would further regulate and tax the coal industry, may also require us to change operations significantly or incur increased costs. Such changes could have a material adverse effect on our financial condition and results of operations. See "Environmental and Other Regulatory Matters."

Our operations may affect the environment or cause exposure to hazardous substances, and our properties may have environmental contamination, any of which could result in material liabilities to us.

        Our operations currently use, and in the past have used, hazardous materials and generate, and in the past have generated, hazardous wastes. In addition, many of the locations that we own, lease or operate were used for coal mining and/or involved hazardous materials either before or after we were involved with these locations. We may be subject to claims under federal and state statutes and/or common law doctrines for toxic torts, natural resource damages and other damages, as well as for the investigation and clean up of soil, surface water, groundwater, and other media. These claims may arise, for example, out of current or former conditions at sites that we own, lease or operate currently, as well as at sites that we or predecessor entities owned, leased or operated in the past, and at contaminated third-party sites at which we have disposed of waste. As a matter of law, and despite any contractual indemnity or allocation arrangements or acquisition agreements to the contrary, our liability for these claims may be joint and several, so that we may be held responsible for more than our share of any contamination, or even for the entire share.

        These and similar unforeseen impacts that our operations may have on the environment, as well as human exposure to hazardous substances or wastes associated with our operations, could result in costs and liabilities that could materially and adversely affect us.

Extensive governmental regulations pertaining to employee safety and health impose significant costs on our mining operations, which could materially and adversely affect our results of operations.

        Federal and state safety and health regulations in the coal mining industry are among the most comprehensive and pervasive systems for protection of employee safety and health affecting any segment of U.S. industry. Compliance with these requirements imposes significant costs on us and can result in reduced productivity. Moreover, the possibility exists that new health and safety legislation and/or regulations and orders may be adopted that may materially and adversely affect our mining operations.

        We must compensate employees for work-related injuries. If we do not make adequate provisions for our workers' compensation liabilities, it could harm our future operating results. In addition, the erosion through tort liability of the protections we are currently provided by workers' compensation laws could increase our liability for work-related injuries and materially and adversely affect our operating results. Under federal law, each coal mine operator must secure payment of federal black lung benefits to claimants who are current and former employees and contribute to a trust fund for the payment of benefits and medical expenses to claimants who last worked in the coal industry before January 1, 1970. The trust fund is funded by an excise tax on coal production. If this tax increases, or if we could no longer pass it on to the purchasers of our coal under our coal sales agreements, our operating costs could be increased and our results could be materially and adversely harmed. If new laws or regulations increase the number and award size of claims, it could materially and adversely harm our business. See "Environmental and Other Regulatory Matters—Mine Safety and Health."

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Federal or state regulatory agencies have the authority to order certain of our mines to be temporarily or permanently closed under certain circumstances, which could materially and adversely affect our ability to meet our customers' demands.

        Federal or state regulatory agencies have the authority under certain circumstances following significant health and safety incidents, such as fatalities, to order a mine to be temporarily or permanently closed. If this occurred, we may be required to incur capital expenditures to re-open the mine. In the event that these agencies order the closing of our mines, our coal sales contracts generally permit us to issue force majeure notices which suspend our obligations to deliver coal under these contracts. However, our customers may challenge our issuances of force majeure notices. If these challenges are successful, we may have to purchase coal from third-party sources, if it is available, to fulfill these obligations, incur capital expenditures to re-open the mines and/or negotiate settlements with the customers, which may include price reductions, the reduction of commitments or the extension of time for delivery or terminate customers' contracts. Any of these actions could have a material adverse effect on our business and results of operations.

We may be unable to obtain, maintain or renew permits or leases necessary for our operations, which would materially reduce our production, cash flow and profitability.

        Mining companies must obtain a number of permits that impose strict regulations on various environmental and operational matters in connection with coal mining. These include permits issued by various federal, state and local agencies and regulatory bodies. The permitting rules, and the interpretations of these rules, are complex, change frequently, and are often subject to discretionary interpretations by the regulators, all of which may make compliance more difficult or impractical, and may possibly preclude the continuance of ongoing operations or the development of future mining operations. The public, including non-governmental organizations, anti-mining groups and individuals, have certain statutory rights to comment upon and submit objections to requested permits and environmental impact statements prepared in connection with applicable regulatory processes, and otherwise engage in the permitting process, including bringing citizens' lawsuits to challenge the issuance of permits, the validity of environmental impact statements or performance of mining activities. Recently environmental groups made extensive comments to an environmental impact statement prepared in connection with one of our federal mining lease applications. These groups argued that the statement failed to satisfactorily consider climate change risks. If this or any other permits or leases are not issued or renewed in a timely fashion or at all, or if permits or leases issued or renewed are conditioned in a manner that restricts our ability to efficiently and economically conduct our mining activities, we could suffer a material reduction in our production, and our cash flow or profitability could be materially and adversely affected.

Because we produce and sell coal with low-sulfur content, a reduction in the price of sulfur dioxide emission allowances or increased use of technologies to reduce sulfur dioxide emissions could materially and adversely affect the demand for our coal and our results of operations.

        Our customers' demand for our low-sulfur coal, and the prices that we can obtain for it, are affected by, among other things, the price of sulfur dioxide emissions allowances. The Clean Air Act places limits on the amounts of sulfur dioxide that can be emitted by an electric power plant in any given year. If a plant exceeds its allowable limits, it must purchase allowances, which are tradeable in the open market. Regulatory uncertainty following the action by the U.S. Court of Appeals for the District of Columbia Circuit to vacate the Clean Air Interstate Rule, or CAIR, in July 2008, and its subsequent temporary reinstatement, which established a cap-and-trade program for sulfur dioxide and nitrogen oxide emissions from power plants in certain states, caused a significant decrease in the price of sulfur dioxide allowances in 2008 and 2009 and delayed the installation of technology to reduce emissions at some power plants. Low prices of these emissions allowances could make our low-sulfur

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coal less attractive to our customers. In addition, more widespread installation by electric utilities of technology that reduces sulfur emissions, which could be accelerated by increases in the prices of sulfur dioxide emissions allowances, may make high sulfur coal more competitive with our low-sulfur coal. This competition could materially and adversely affect our business and results of operations.

Our ability to collect payments from our customers could be impaired if their creditworthiness deteriorates.

        Our ability to receive payment for coal sold and delivered depends on the continued creditworthiness of our customers. The current economic volatility and tightening credit markets increase the risk that we may not be able to collect payments from our customers or be required to continue to deliver coal even if the customer's creditworthiness deteriorates. A continuation or worsening of current economic conditions or a prolonged global or U.S. recession could also impact the creditworthiness of our customers. If we determine that a customer is not creditworthy, we may not be required to deliver coal under the customer's coal sales contract. If we are able to withhold shipments, we may decide to sell the customer's coal on the spot market, which may be at prices lower than the contracted price, or we may be unable to sell the coal at all. Furthermore, the bankruptcy of any of our customers could materially and adversely affect our financial position. In addition, our customer base may change with deregulation as utilities sell their power plants to their non-regulated affiliates or third parties that may be less creditworthy, thereby increasing the risk we bear for customer payment default. These new power plant owners may have credit ratings that are below investment grade, or may become below investment grade after we enter into contracts with them. In addition, competition with other coal suppliers could force us to extend credit to customers and on terms that could increase the risk of payment default.

Our ability to mine and ship coal is affected by adverse weather conditions, which could have an adverse effect on our revenues.

        Adverse weather conditions can impact our ability to mine and ship our coal and our customers' ability to take delivery of our coal. Lower than expected shipments by us during any period could have an adverse effect on our revenues and profitability. For example, in 2005, our volume of coal shipments was impacted by severe heavy rain, which reduced the capacity of the railroads by which our customers contract to transport coal from our mines. In addition, severe weather, including droughts and dust, may affect our ability to conduct our mining operations.

The availability and reliability of transportation and increases in transportation costs, particularly for rail systems, could materially and adversely affect the demand for our coal or impair our ability to supply coal to our customers.

        Transportation costs, particularly rail transportation costs, represent a significant portion of the total cost of coal for our customers, and the cost of transportation is a key factor in a customer's purchasing decision. Increases in transportation costs or the lack of sufficient rail capacity or availability could make coal a less competitive source of energy or could make the coal produced by us less competitive than coal produced from other regions, either of which could lead to reduced coal sales and/or reduced prices we receive for the coal.

        Our ability to sell coal to our customers depends primarily upon third-party rail systems. If our customers are unable to obtain rail or other transportation services, or to do so on a cost-effective basis, our business and growth strategy could be adversely affected. Alternative transportation and delivery systems are generally inadequate and not suitable to handle the quantity of our shipments or to ensure timely delivery to our customers. In particular, much of the PRB is served by two rail carriers, and the Northern PRB is only serviced by one rail carrier. The loss of access to rail capacity in the PRB could create temporary disruption until this access was restored, significantly impairing our ability to supply coal and resulting in materially decreased revenues. Our ability to open new mines or

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expand existing mines may also be affected by the availability and cost of rail or other transportation systems available for servicing these mines.

        We are a party to certain transportation contracts. During the past twelve months we have entered into an increasing number of export deals whereby we enter into transportation agreements pursuant to which we arrange for rail transport and port charges. However, typically our coal customers contract for, and pay directly for transportation of coal from the mine or port to the point of use. Disruption of these transportation services because of weather-related problems, mechanical difficulties, train derailment, bridge or structural concerns, infrastructure damage, whether caused by ground instability, accidents or otherwise, strikes, lock-outs, lack of fuel or maintenance items, fuel costs, transportation delays, accidents, terrorism or domestic catastrophe or other events could temporarily or over the long term impair our ability to supply coal to our customers and our customers' ability to take our coal and, therefore, could materially and adversely affect our business and results of operations.

Due to the long-term nature of our coal sales agreements, the prices we receive for our coal at any given time may not reflect the then-existing current market prices for coal.

        We have historically sold most of our coal under long-term coal sales agreements, which we generally define as contracts with a term of one to five years. The remaining amount not subject to long-term coal sales agreements is sold as spot sales in term allotments of less than twelve months. For the year ended December 31, 2008 and the nine months ended September 30, 2009, approximately 94.6% and 98.6%, respectively, of our revenues was derived from coal sales that were made under long-term coal sales agreements. The prices for coal sold under these agreements are typically fixed for an agreed amount of time. Pricing in some of these contracts is subject to certain adjustments in later years or under certain circumstances, and may be below the current market price for similar type coal at any given time, depending on the timeframe of the contract. As a consequence of the substantial volume of our forward sales, we have less coal available to sell under short-term contracts with which to immediately capitalize on higher coal prices, if and when they arise. Spot market prices have recently fallen below the prices established in many of our long-term coal sales agreements and we are currently realizing prices for our coal that are higher than the prices we would receive from sales in the spot market. However, to the extent spot market prices increase and become higher than the prices established in our long-term coal sales agreements, our ability to realize those higher prices may be restricted when customers elect to purchase additional volumes allowable under some contracts at contract prices that are lower than current spot prices.

Changes in purchasing patterns in the coal industry may make it difficult for us to enter into new contracts with customers, or do so on favorable terms, which could materially and adversely affect our business and results of operations.

        Although we currently sell the majority of our coal under long-term coal sales agreements, as electric utilities customers continue to adjust to increased price volatility, increased fungibility of coal products, frequently changing regulations and the increasing deregulation of their industry, they are becoming less willing to enter into long-term coal sales contracts. In addition, in recent months the prices for coal in the spot market have decreased and are currently lower than the prices previously set under many of our existing long-term coal sales agreements. As our current contracts with customers expire or are otherwise renegotiated, our customers may be less willing to extend or enter into new long-term coal sales agreements under their existing or similar pricing terms or our customers may decide to purchase fewer tons of coal than in the past. We have one significant broker sales contract which contributed $135.1 million and $103.1 million of revenues for the year ended December 31, 2008 and the nine months ended September 30, 2009, and income before tax of $38.4 million and $30.5 million for the same periods, respectively, after other related costs including amortization charges for the related contract rights of $33.3 million and $24.8 million, respectively. Final deliveries are

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expected to be made under this contract in the first quarter of 2010 at which time we expect the contract to expire. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Revenues."

        These trends in purchasing patterns in the coal industry could continue in the future and, to the extent our customers shift away from long-term supply contracts, it will be more difficult to predict our future sales. As a result, we may not have a market for our future production at acceptable prices. The prices we receive in the spot market may be less than the contractual price an electric utility is willing to pay for a committed supply. Furthermore, spot market prices tend to be more volatile than contractual prices, which could result in decreased revenues.

If the assumptions underlying our reclamation and mine closure obligations are materially inaccurate, our costs could be significantly greater than anticipated.

        All of our mines are surface mining operations. The Surface Mining Control and Reclamation Act of 1977, or SMCRA, and counterpart state laws and regulations establish operational, reclamation and closure standards for all aspects of surface mining. We estimate our total reclamation and mine-closing liabilities based on permit requirements, engineering studies and our engineering expertise related to these requirements. The estimate of ultimate reclamation liability is reviewed periodically by our management and engineers. At the Decker mine, the reclamation liability is estimated by the third party operator. The estimated liability can change significantly if actual costs vary from our original assumptions or if governmental regulations change significantly. U.S. GAAP requires that asset retirement obligations be recorded as a liability based on fair value, which reflects the present value of the estimated future cash flows. In estimating future cash flows, we consider the estimated current cost of reclamation and apply inflation rates and a third-party profit, as necessary. The third-party profit is an estimate of the approximate markup that would be charged by contractors for work performed on behalf of us. The resulting estimated reclamation and mine closure obligations could change significantly if actual amounts change significantly from our assumptions, which could have a material adverse effect on our results of operation, and financial condition. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources After this Offering—Off-Balance Sheet Arrangements" for a description of our estimated costs of these liabilities.

If the third-party sources we use to supply coal are unable to fulfill the delivery terms of their contracts, our results of operations could be materially and adversely affected.

        To fulfill deliveries under our coal sales agreements, we may from time to time purchase coal through third-party sources. For the year ended December 31, 2008 and the nine months ended September 30, 2009, we purchased 8.1 million tons and 8.0 million tons, respectively, from third-party sources for delivery during those periods. We also from time to time use third-party sources to sell our coal. Our profitability and exposure to loss on these transactions or relationships is dependent upon the reliability, including the financial viability, of the third-party coal producer, and on the price of the coal supplied by the third-party or sold by us. Operational difficulties, changes in demand and other factors could affect the availability, pricing and quality of coal purchased by us. Disruptions in the quantities or qualities of coal purchased by us could affect our ability to fill our customer orders or require us to purchase coal, including at higher prices, from other sources in order to satisfy those orders. If we are unable to fill a customer order or if we are required to purchase coal from other sources in order to satisfy a customer order, we could lose existing customers, and our results of operations could be adversely affected.

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Certain provisions in our coal sales contracts may provide limited protection during adverse economic conditions or may result in economic penalties or suspension upon a failure to meet contractual requirements, any of which may cause our revenues and profits to suffer.

        Most of our sales contracts contain provisions that allow for the base price of our coal in these contracts to be adjusted due to new statutes, ordinances or regulations that affect our costs related to performance. Because these provisions only apply to the base price of coal these terms may provide only limited protection due to changes in regulations. A few of our sales contracts also contain provisions that allow for the purchase price to be renegotiated at periodic intervals. Index-based pricing, "price re-opener" and other similar provisions in sales contracts may reduce the protection available under long-term contracts from short-term coal price volatility. Price re-opener and index provisions, which can permit renegotiation by either party, including at pre-determined times, or based on a fixed formula, are present in contracts covering approximately 42% of our future tonnage commitments as of September 30, 2009. Price re-opener provisions may automatically set a new price based on the prevailing market price or, in some instances, require the parties to negotiate a new price, sometimes between a specified range of prices. In some circumstances, a significant adjustment in base price or the failure of the parties to agree on a price under a price re-opener provision can lead to termination of the contract. Any adjustment or renegotiations leading to a significantly lower contract price could result in decreased revenues.

        Quality and volumes for the coal are stipulated in coal sales agreements. In most cases, the annual pricing and volume obligations are fixed although in some cases the volume specified may vary depending on the quality of the coal. In a relatively small number of contracts customers are allowed to vary the amount of coal taken under the contract. Most of our coal sales agreements contain provisions requiring us to deliver coal within certain ranges for specific coal characteristics such as heat content, sulfur, ash and ash fusion temperature. Failure to meet these specifications can result in economic penalties, including price adjustments, suspension, rejection or cancellation of deliveries or termination of the contracts.

        Many of our contracts contain clauses which require us and our customers to maintain a certain level of creditworthiness or provide appropriate credit enhancement upon request. The failure to do so can result in a suspension of shipments under the contract. A number of our contracts also contain clauses which, in some cases, may allow customers to terminate the contract in the event of certain changes in environmental laws and regulations.

Upon the occurrence of a force majeure, we or our customers may be permitted to temporarily suspend performance under our coal sales contracts which could cause our revenues and profits to suffer.

        Our coal sales agreements typically contain force majeure provisions allowing temporary suspension of performance by us or our customers during the duration of specified events beyond the control of the affected party, including events such as strikes, adverse mining conditions, mine closures, serious transportation problems that affect us or the buyer or unanticipated plant outages that may affect the buyer. Some contracts stipulate that this tonnage can be made up by mutual agreement or at the discretion of the buyer. In the first nine months of 2009, some of our customers have sought to reduce the amount of tons delivered to them under our coal sales agreements through contractual remedies such as force majeure provisions. Agreements between our customers and the railroads servicing our mines may also contain force majeure provisions. Generally, our coal sales agreements allow our customer to suspend performance in the event that the railroad fails to provide its services due to circumstances that would constitute a force majeure. In the event that we are required to suspend performance under any of our coal sales contracts, or we are required to purchase additional tonnage during the period in which performance under the contract is suspended, our revenues and profits could be materially and adversely affected.

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Acquisitions that we may undertake in the future involve a number of risks, any of which could cause us not to realize the anticipated benefits.

        We have focused on strategic acquisitions and subsequent expansions of large, low-cost, low-sulfur operations in the PRB and replacement of, and additions to, our reserves through the acquisition of companies, mines and reserves. We intend to pursue acquisition opportunities in the future. If we are unable to successfully integrate the businesses or properties we acquire, or reserves that we lease or otherwise acquire, our business, financial condition or results of operations could be negatively affected. Acquisition transactions involve various risks, including:

    uncertainties in assessing the strengths and potential profitability, and the related weaknesses, risks, contingent and other liabilities, of acquisition candidates;

    changes in business, industry, market, or general economic conditions that affect the assumptions underlying our rationale for pursuing the acquisition;

    the inability to achieve identified operating and financial synergies anticipated to result from an acquisition;

    the potential loss of key customers, management or employees of an acquired business;

    the nature and composition of the workforce, including the acquisition of a unionized workforce;

    diversion of our management's attention from other business concerns;

    regulatory challenges for completing and operating the acquired business, including opposition from environmental groups or regulatory agencies;

    environmental or geological problems in the acquired properties, including factors that make the coal unsuitable for intended customers due to ash, heat value, moisture or contaminants;

    inability to acquire sufficient surface rights to enable extraction of the coal resources;

    outstanding permit violations associated with acquired assets; and

    risks related to operating in foreign jurisdictions, including increased exposure to foreign government and currency risks with respect to any international acquisitions.

        Any one or more of these factors could cause us not to realize the benefits we might anticipate from an acquisition. Moreover, any acquisition opportunities we pursue could materially increase our liquidity and capital resource needs and may require us to incur indebtedness, seek equity capital or both. In addition, future acquisitions could result in our assuming significant long-term liabilities relative to the value of the acquisitions.

We do not currently operate the Decker mine, in which we hold a 50% interest, and our results of operations could be adversely affected if the third-party mine operator fails to effectively operate the mine. In addition, our future credit arrangements may limit our ability to contribute cash to the Decker mine.

        Through our indirect, wholly-owned subsidiary, we hold a 50% interest in the Decker mine in Montana through a joint venture agreement with an indirect, wholly-owned subsidiary of Level 3. The Decker mine is operated by a third-party mine operator. While we participate in the management committee of the Decker mine under the terms of the joint venture agreement, we do not control and our employees do not participate in the day-to-day operations of the Decker mine. If the third-party mine operator fails to operate the Decker mine effectively, our results of operations could be adversely affected.

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        While capital contributions to the Decker joint venture have historically been made at the discretion of the management committee, under the terms of the joint venture agreement we may be required to contribute our proportional share of funds to carry on the business of the joint venture or to cover liabilities. In the event that either joint venture partner does not contribute its share of operating expenses, including reclamation expenses when due, or other liabilities, the other partner is not required to assume their obligation. However, we may have joint and several liability as a matter of law for these expenses and other liabilities, including for operational liabilities. Accordingly, our financial obligations with respect to the Decker mine may be impacted by the creditworthiness of our joint venture partner. In addition, if we do not provide our proportional share or our joint venture partner does not provide its proportional share, our interest in the Decker mine will be adjusted proportionally. The debt financing transactions and CPE LLC's future credit arrangements may include provisions limiting our and CPE LLC's ability to make contributions to the Decker joint venture. The Decker joint venture will not be considered a "subsidiary" and will not guarantee or be subject to the restrictive covenants under the debt financing transactions.

A shortage of skilled labor in the mining industry could reduce labor productivity and increase costs, which could materially and adversely affect our business and results of operations.

        Efficient coal mining using modern techniques and equipment requires skilled laborers in multiple disciplines such as electricians, equipment operators, mechanics, engineers and welders, among others. We have from time to time encountered shortages for these types of skilled labor. If we experience shortages of skilled labor in the future, our labor and overall productivity or costs could be materially and adversely affected. In the future we may utilize a greater number of external contractors for portions of our operations. The costs of these contractors has historically been higher than that of our employed laborers. If coal prices decrease in the future and/or our labor and contractor prices increase, or if we experience materially increased health and benefit costs with respect to our employees, our results of operations could be materially and adversely affected.

Our work force could become unionized in the future, which could adversely affect the stability of our production and materially reduce our profitability.

        All of our mines, other than the Decker mine, which we do not operate, are operated by non-union employees. Our employees have the right at any time under the National Labor Relations Act to form or affiliate with a union, and in the past unions have conducted limited organizing activities in this regard. If our employees choose to form or affiliate with a union and the terms of a union collective bargaining agreement are significantly different from our current compensation and job assignment arrangements with our employees, these arrangements could adversely affect the stability of our production and materially reduce our profitability. In addition, even if our managed operations remain non-union, our business may still be adversely affected by work stoppages at unionized companies or unionized transportation and service providers.

        We hold a 50% interest in the Decker mine, which is a union-based operation. These union-represented employees could strike, which could adversely affect production at the Decker mine, increase Decker's costs and disrupt shipments of coal from the Decker mine to its customers, all of which could materially and adversely affect Decker's profitability and the value of our investment in Decker.

Provisions in our federal and state lease agreements, or defects in title or the loss of a leasehold interest in certain property or reserves or related surface rights, could limit our ability to mine our coal reserves.

        We conduct a significant part of our coal mining operations on federal coal that is leased through the LBA process. We also conduct a portion of our operations on coal that is leased from the states of Montana or Wyoming, as applicable. Under these federal and state leases, if the leased coal reserves

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are not diligently developed during the initial 10 years of the leases or if certain other terms of the leases are not complied with, including the requirement to produce a minimum quantity of coal or pay a minimum advance production royalty, if applicable, the BLM or the applicable state regulatory agency can terminate the lease prior to the expiration of its term. If any of our leases are terminated, we would be unable to mine the affected coal and our business and results of operations could be materially adversely affected.

        We also lease from private third parties or own outright a smaller portion of our reserves. A title defect or the loss of any of these private leases or the surface rights related to any of our reserves, including reserves acquired through the LBA process, could adversely affect our ability to mine the associated coal reserves. Consistent with industry practice, we conduct only limited investigations of title to our coal properties prior to leasing. Title to properties leased from private third parties is not usually fully verified until we make a commitment to develop a property, which may not occur until we have obtained the necessary permits and completed exploration of the property. In addition, these leasehold interests may be subject to superior property rights of other third parties. Title or other defects in surface rights held by us or other third parties could impair our ability to mine the associated coal reserves or cause us to incur unanticipated costs.

Terrorist attacks and threats, escalation of military activity in response to these attacks or acts of war may materially and adversely affect our business and results of operations.

        Terrorist attacks and threats, escalation of military activity or acts of war may have significant effects on general economic conditions, fluctuations in consumer confidence and spending and market liquidity, each of which could materially and adversely affect our business. Future terrorist attacks, rumors or threats of war, actual conflicts involving the U.S. or its allies, or military or trade disruptions affecting our customers may significantly affect our operations and those of our customers. Strategic targets such as energy-related assets and transportation assets may be at greater risk of future terrorist attacks than other targets in the U.S. Disruption or significant increases in energy prices could result in government-imposed price controls. It is possible that any of these occurrences, or a combination of them, could have a material adverse effect on our business and results of operations, including from delays or losses in transportation, decreased sales of our coal or extended collections from customers that are unable to timely pay us in accordance with the terms of their supply agreement.

Risks Related to Our Relationship with Rio Tinto Following this Offering

We will be required to pay RTEA for most of the benefits we may claim as a result of the tax basis step-up we receive in connection with this offering and related transactions. In certain cases payments to RTEA may be accelerated or exceed our actual cash tax savings.

        We will enter into a tax receivable agreement, or the Tax Receivable Agreement, with RTEA that will generally require us to pay to RTEA approximately 85% of the amount of cash tax savings, if any, that we will realize as a result of the increases in tax basis that we expect to obtain in connection with this offering and related transactions, subsequent acquisitions of RTEA's units in CPE LLC by us or CPE LLC, as well as payments made by us under the Tax Receivable Agreement. Due to the size of the increases in tax basis in our share of CPE LLC's tangible and intangible assets, as well as the increase in our basis in the equity of CPE LLC's subsidiaries and assets held by those subsidiaries, we expect to make substantial payments to RTEA under the Tax Receivable Agreement. Based on the tax basis of our assets as of September 30, 2009 and CPE LLC's operating plan which takes into account only our existing LBAs, the future payments under the Tax Receivable Agreement with respect to the controlling interest in CPE LLC we will acquire in the initial public offering and related transactions are estimated to be approximately $65.2 million in the aggregate and will be payable over the next 18 years (assuming an initial public offering price of $17.00, the midpoint of the range set forth on the cover page of this prospectus and no exercise of the underwriters' overallotment option). This estimate

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is based on assumptions related to our business that could change and the actual payments could differ materially from this estimate. Payments would be significantly greater if we generate income significantly in excess of the amounts used in our operating plan, for example, because we acquire additional LBAs beyond our existing LBAs and as a result we realize the full tax benefit of such increased tax basis (or an increased portion thereof). In addition, when we or CPE LLC acquire RTEA's remaining units in CPE LLC (or a significant portion thereof), we would likely receive a further step-up in our tax basis based on the value we or CPE LLC pay for RTEA's units at such time and, accordingly, our obligations under the Tax Receivable Agreement to pay RTEA 85% of any benefits we receive as a result of such further step-up would significantly increase. Our obligation may also increase if there are changes in law, including the increase of current corporate income tax rates. The payment obligations under the Tax Receivable Agreement will not be conditioned upon RTEA's or its affiliate's continued ownership of an interest in CPE LLC or our available cash resources.

        Distributions from CPE LLC to enable us to fulfill our obligations under the Tax Receivable Agreement must be made pro-rata to all holders of units of CPE LLC. As managing member, we intend to cause CPE LLC to distribute cash to us to enable us to fulfill all of our obligations under the Tax Receivable Agreement. These distributions will be made on a per-unit basis, meaning corresponding distributions will be made to all holders of units in CPE LLC, including RTEA, in proportion to their percentage interests on the date of the distribution. These distributions will affect CPE LLC's available cash, which may impact CPE LLC's ability to fund capital expenditures or may result in CPE LLC needing to draw down on its existing credit facility or incur debt to finance these distributions to the extent that its cash resources are insufficient to make such distributions as a result of timing discrepancies or otherwise.

        Certain changes in control require us to make payments to RTEA which could exceed our actual cash savings and could require us to provide credit support. If we or CPE LLC undergo a change in control other than a change in control caused by RTEA and within 180 days of such change in control RTEA no longer holds any units in CPE LLC, and we do not otherwise elect to terminate the Tax Receivable Agreement as discussed below, payments to RTEA under the Tax Receivable Agreement will continue on a yearly basis but will be based on an agreed upon set of assumptions. In this case, our assumed cash tax savings, and consequently our payments due under the Tax Receivable Agreement, could exceed our actual cash tax savings each year by material amounts. If we undergo such a change in control and our credit rating is impaired, we will be required to provide credit support to Rio Tinto. The change of control provisions may deter a potential sale of the Company to a third party and may otherwise make it less likely a third party would enter into a change of control transaction with us.

        Certain asset transfers outside the ordinary course of our business may require us to make additional or accelerated payments under the Tax Receivable Agreement. In addition to our obligations to make payments to RTEA with respect to our actual cash tax savings, if CPE LLC sells any asset with a gross value greater than $10 million outside the ordinary course of its business in a wholly or partially taxable transaction, we will be required to make yearly payments to RTEA equal to RTEA's deemed cost of financing its accelerated tax liabilities with respect to such sale and after such assets sales we will be required to make certain adjustments to the calculation of our actual cash tax savings for taxable years following sales or redemptions of RTEA's units in CPE LLC See "Structuring Transactions and Related Agreements—Structure-Related Agreements—Tax Receivable Agreement." These adjustments could result in an acceleration of our obligations under the Tax Receivable Agreement. In addition, the debt financing transactions contain limitations on CPE LLC's ability to make distributions, which could affect our ability to meet these payment obligations. These limitations on CPE LLC's ability to make distributions may limit our ability to engage in certain taxable asset sales or dispositions outside the ordinary course of our business.

        Default under the Tax Receivable Agreement will permit RTEA to accelerate our obligations. If we default on our obligations under the Tax Receivable Agreement (including by reason of insufficient

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cash distributions from CPE LLC), such default will permit RTEA to enforce its rights under the Tax Receivable Agreement, including by acceleration of our obligations thereunder.

        Our ability to achieve benefits from any tax basis increase, and, therefore, the payments expected to be made under the Tax Receivable Agreement, will depend upon a number of factors, as discussed above, including the timing and amount of our future income. The U.S. Internal Revenue Service could challenge one or more of our or CPE LLC's tax positions relevant to the Tax Receivable Agreement and a court could sustain such a challenge. Such a challenge could result in a decrease in our tax benefits as well as our obligations under the Tax Receivable Agreement. We must obtain RTEA's consent prior to settlement of any such challenge if it may affect RTEA's rights and obligations under the Tax Receivable Agreement.

Our results as a separate stand-alone public company will be significantly different from those portrayed in our historical financial results.

        The historical financial information included in this prospectus has been derived from the consolidated financial statements of Rio Tinto and does not reflect what our financial position, results of operations, cash flows, costs or expenses would have been had we been a separate, stand-alone public company during the periods presented. Rio Tinto did not account for us, and we were not operated, as a separate, stand-alone public company for the historical periods presented. The historical costs and expenses reflected in our consolidated financial statements also include allocations of certain general and administrative costs and Rio Tinto's headquarters costs. These expenses are estimates and were based on what we and Rio Tinto considered to be reasonable allocations of the historical costs incurred by Rio Tinto to provide these services required in support of our business. These allocations will not continue when we are a stand-alone public company.

        As a separate stand-alone public company, our cost structure will be different and will include both additional recurring costs and nonrecurring costs that we will incur during our transition to being a stand-alone public company. Accordingly, our historical consolidated financial information is not reflective of our financial position, results of operations or cash flows or costs had we been a separate, stand-alone public company during the periods presented, and the historical financial information is not a reliable indicator of what our financial position, results of operations or cash flows will be in the future. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Post-offering Cost Structure."

The pro forma condensed consolidated financial information in this prospectus is based on estimates and assumptions that may prove to be materially different from our actual experience as a separate, stand-alone public company.

        In preparing the pro forma condensed consolidated financial information included elsewhere in this prospectus, we have made certain adjustments to the historical consolidated financial information based upon currently available information and upon estimates and assumptions that our management believes are reasonable in order to reflect, on a pro forma basis, the impact of the structuring transactions described in "Structuring Transactions and Related Agreements," the debt financing transactions, the issuance of restricted stock to our directors and employees in connection with this offering and the issuance of common stock in this offering. However, these estimates are predicated on assumptions, judgments and other information which are inherently uncertain.

        These estimates and assumptions used in the preparation of the pro forma condensed consolidated financial information in this prospectus may be materially different from our actual experience as a stand-alone public company. The pro forma condensed consolidated financial information included elsewhere in this prospectus does not purport to represent what our results of operations would actually have been had we operated as a stand-alone public company during the periods presented, nor

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do the pro forma data give effect to any events other than those discussed in the unaudited pro forma condensed consolidated financial information and related notes. See "Unaudited Pro Forma Condensed Consolidated Financial Information."

We will rely on an affiliate of RTEA to provide CPE LLC with certain key services for our business pursuant to the terms of a transition services agreement for a limited transition period. If this RTEA affiliate fails to perform its obligations under the agreement or if we do not find equivalent replacement services, we may be unable to provide these services or implement substitute arrangements on a timely and cost-effective basis on terms favorable to us.

        As part of Rio Tinto certain key services are currently provided by various members of Rio Tinto, including services related to treasury, accounting, procurement, legal services, information technology, employee benefit and welfare plans. Prior to the completion of this offering, we and CPE LLC will enter into a Transition Services Agreement, whereby an affiliate of RTEA will provide CPE LLC with certain of these key services for a transition period generally of nine months (with a one time extension) with the exception of certain benefit administration services which will continue through December 31, 2009. In some cases, such services will be provided on a more limited basis than we have received previously. We believe it is necessary for the RTEA affiliate to provide these services to CPE LLC to facilitate the efficient operation of our business as we transition to becoming a public company. See "Structuring Transactions and Related Agreements—Structure-Related Agreements—Transition Services Agreement." Once the transition period specified in the Transition Services Agreement has expired, or if the RTEA affiliate fails to perform its obligations under the Transition Services Agreement, CPE LLC will be required to provide these services ourselves or to obtain substitute arrangements with third parties. After the transition period, CPE LLC may be unable to provide these services internally because of financial or other constraints or be unable to implement substitute arrangements on a timely and cost-effective basis on terms that are favorable to CPE LLC, or at all.

Rio Tinto may benefit from corporate opportunities that might otherwise be available to us.

        Rio Tinto will continue to hold certain coal assets in the U.S. and abroad following the completion of this offering. The Colowyo mine in Colorado was not contributed to CPE LLC and will not be owned by us and will continue to operate in the coal business. Rio Tinto may expand, through development of its remaining coal business, acquisitions or otherwise, its operations that directly or indirectly compete with us or CPE LLC. For one year following the completion of this offering, RTEA and its affiliates will not pursue any competitive activity or acquisition in the coal industry within the PRB (other than activities related to the Jacobs Ranch mine in connection with the Jacobs Ranch Sale). Rio Tinto and its affiliates will not be prohibited from pursuing any competitive activity or acquisition outside of the PRB, whether during or after this one-year period, including selling coal or other goods produced outside of the PRB to customers located in the PRB or who are otherwise our customers. Following the completion of this offering, if a corporate opportunity is offered to Rio Tinto or its affiliates or one or more of Rio Tinto's or its affiliates' executive officers or directors that relates to any competitive activity or acquisition in the coal industry:

    within the PRB after the one-year period referred to above; or

    outside of the PRB,

no such person shall be liable to us or any of our shareholders or CPE LLC or any of its members for breach of any fiduciary or other duty by reason of the fact that the person, including Rio Tinto and its affiliates, pursues or acquires the business opportunity, directs the business opportunity to another person or fails to present the business opportunity, or information regarding the business opportunity, to us or CPE LLC, unless, in the case of any person who is a director or executive officer of us or

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CPE LLC, the business opportunity is expressly offered to the director or executive officer in his or her capacity as an executive officer or director of us or CPE LLC.

        In addition, Rio Tinto may have other business interests and may engage in any other businesses not specifically prohibited which could compete with us, and these potential conflicts of interest could have a material adverse effect on our business, financial condition, results of operations or prospects if attractive corporate opportunities are allocated by Rio Tinto to itself or other members of the Rio Tinto group. See "Structuring Transactions and Related Agreements—Structure-Related Agreements—Master Separation Agreement—Corporate Opportunities" and "Description of Capital Stock—Corporate Opportunities."

Our directors and executive officers have potential conflicts of interest with us and your interests as shareholders.

        Following this offering, Preston Chiaro, one of our directors, will also be an executive officer of Rio Tinto or its affiliates. Mr. Chiaro owes fiduciary duties to our shareholders, which may conflict with his role as an executive officer of Rio Tinto or its affiliates. As a result, in connection with any transaction or other relationship involving both companies, Mr. Chiaro may, but is not required to, recuse himself and would therefore not participate in any board action relating to these transactions or relationships.

        Both Colin Marshall, our chief executive officer and a director, and Mr. Chiaro own shares of Rio Tinto or options to purchase Rio Tinto common stock. Mr. Barrett, Mr. Orchard, Mr. Rivenes and Mr. Taylor, our other executive officers, also own shares of Rio Tinto or options to purchase Rio Tinto common stock. These ownership interests may be of greater value than their ownership of our common stock. Ownership of Rio Tinto shares by our directors and executive officers could create, or appear to create, potential conflicts of interest when directors and executive officers are faced with decisions that could have different implications for Rio Tinto or its affiliates than they do us.

        In connection with the approval of certain matters related to this offering and certain of the Transaction Documents, all of our directors, including Keith Bailey, William T. Fox III and Chris Tong, who are expected to qualify as "independent directors" under the applicable rules of the New York Stock Exchange, were acting as directors of a company wholly-owned by Rio Tinto owing a fiduciary duty solely to Rio Tinto and not to investors who will be our shareholders after this offering.

Our agreements with Rio Tinto and its affiliates related to this offering are likely less favorable to us than similar agreements negotiated between unaffiliated third parties.

        We and CPE LLC will enter into various agreements with Rio Tinto and its affiliates in connection with this offering and the structuring transactions which address, among other things, the allocation of assets and liabilities between Rio Tinto and us, responsibility for the disclosures made in this prospectus and in the offering memorandum used in the senior notes offering, our obligation to provide Rio Tinto financial information needed for its public filings, certain ongoing commercial relationships and our responsibility as the Manager of CPE LLC to Rio Tinto as a non-managing member. CPE LLC has agreed to indemnify Rio Tinto for any losses experienced pursuant to these agreements, in certain instances on a dollar-for-dollar basis and in certain other instances by providing additional indemnification calculated on a dollar-for-dollar basis plus a fraction of a dollar equal to the ownership interest of Rio Tinto and its affiliates in CPE LLC at the time the indemnity is payable to Rio Tinto. See "Structuring Transactions and Related Agreements—Structure-Related Agreements" for a description of these indemnification obligations, as well as the other terms and obligations of our agreements with Rio Tinto and its affiliates. Because these agreements will be entered into while we are part of Rio Tinto, some of the terms of these agreements are likely less favorable to us than similar agreements negotiated between unaffiliated third parties.

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Third parties may seek to hold us responsible for liabilities of RTEA that we did not assume.

        Third parties may seek to hold us responsible for liabilities of RTEA that we will not assume in connection with this offering, including liabilities related to the Jacobs Ranch mine and the Colowyo mine and the uranium mining venture, which will not be owned by CPE LLC after this offering. Under the Master Separation Agreement, Rio Tinto America will agree to indemnify us for certain claims and losses relating to these liabilities. If those liabilities are significant and we are ultimately held liable for them, we may not be able to recover the full amount of our losses from Rio Tinto America.

Risks Related to Our Corporate Structure

We are a holding company with no direct operations of our own, and will depend on distributions from CPE LLC to meet our ongoing obligations.

        We are a holding company with no direct operations of our own and have no independent ability to generate revenue. Consequently, our ability to obtain operating funds depends upon distributions from CPE LLC and payments under the management services agreement. Pursuant to a management services agreement between us and CPE LLC, CPE LLC will make payments to us in the form of a management fee and cost reimbursements to fund our day-to-day operating expenses, such as payroll for our officers. However, if CPE LLC cannot make the payments pursuant to the management services agreement, we may be unable to cover these expenses.

        The distribution of cash flows by CPE LLC to us will be subject to statutory restrictions under the Delaware Limited Liability Company Act and contractual restrictions under CPE LLC's debt instruments that may limit the ability of CPE LLC to make distributions. In addition, any distributions and payments of fees or costs will be based upon CPE LLC's financial performance. Any distributions of cash will be made on a pro rata basis to all holders of units in CPE LLC, including us, RTEA and KMS in accordance with each holders' respective percentage interest.

        As a member of CPE LLC, we will incur income taxes on our allocated share of any net taxable income of CPE LLC. The debt instruments CPE LLC intends to enter into in connection with this offering will allow CPE LLC to distribute cash pro rata to its members (including us and RTEA) in amounts sufficient for us to pay our tax liabilities payable to any governmental entity, and, in the ordinary course of business, our obligations under the Tax Receivable Agreement, if any. To the extent we need funds for any other purpose, and CPE LLC is unable to provide such funds because of limitations in CPE LLC's debt instruments or other restrictions, it could have a material adverse effect on our business, financial condition, results of operations or prospects.

Rio Tinto or its affiliates may have interests that differ from your interests as stockholders and they will have specified consent rights in CPE LLC.

        Following the completion of the transactions described in this prospectus, Rio Tinto America will indirectly own approximately 48.33% of the common membership units in CPE LLC (assuming no exercise of the underwriter's overallotment option) and have certain consent rights over certain actions by us and CPE LLC. Rio Tinto's interests may differ from your interests as stockholders and Rio Tinto may not consent to us and CPE LLC taking certain actions that are in your interests as stockholders. In general, so long as Rio Tinto owns, directly or indirectly, at least 30% of the common membership units of CPE LLC that are outstanding upon completion of this offering (treating for purposes of this calculation shares acquired upon exercise of the redemption rights and not disposed of by Rio Tinto as units), Rio Tinto's consent will be required prior to Cloud Peak Energy and/or CPE LLC taking certain actions, including any of the following actions:

    approval of any transaction that would result in a change of control of CPE LLC or Cloud Peak Energy or a change in the manager of CPE LLC;

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    the merger, consolidation, dissolution or liquidation of CPE LLC or any merger, consolidation, dissolution or liquidation of any subsidiary of CPE LLC (with customary exceptions);

    the direct or indirect sale, transfer, lease or other disposition of property or assets (including capital stock of any subsidiary) of CPE LLC and its subsidiaries outside of the ordinary course of business in excess of $500 million (subject to adjustment for inflation); provided, however, that Rio Tinto's consent will not be required for the creation, incurrence or assumption of (or foreclosure or other realization with respect to) any lien created, incurred or assumed in connection with indebtedness assumed, incurred or issued in connection with this offering, the debt financing transactions and the other transactions contemplated by the CPE LLC Agreement or the other structuring-related agreements;

    any fundamental change outside of the ordinary course in the nature (but not size or methods) of CPE LLC's coal business as in effect upon completion of this offering, but only insofar as such fundamental change does not relate to the normal operation or activities of CPE LLC's coal business or any business or operation reasonably related or ancillary to CPE LLC's business;

    the acquisition of any other business or asset that has a purchase price in excess of $500 million or that would result in the issuance of equity interests by us or CPE LLC in excess of $500 million (subject to adjustment for inflation);

    the assumption, incurrence or issuance of indebtedness in excess of 125% of the indebtedness amounts included in CPE LLC's operating plan (subject to adjustment for inflation), other than indebtedness to fund ordinary course business operations or to fund any capital expenditures which do not require Rio Tinto consent;

    making or committing to make, in any calendar year period, capital expenditures outside the ordinary course of business; provided that the following capital expenditures (subject to adjustment for inflation) shall be deemed to be in the ordinary course of business (x) committed LBA payments included in CPE LLC's operating plan and (y) the aggregate amount of all other capital expenditures not in excess of 125% of the sum of (1) uncommitted LBA payments included in CPE LLC's operating plan, (2) non-LBA capital payments included in CPE LLC's operating plan and (3) the cumulative amount by which the actual capital expenditures in preceding years for capital expenditures other than committed LBA payments is less than the sum of total uncommitted LBA payments and non-LBA payments for the prior years; and

    except as otherwise set forth in any other structuring-related agreement, settling claims as to which Rio Tinto would have liability.

        The consent of Rio Tinto, as a non-managing member of CPE LLC, is required for any amendment to the LLC Agreement until Rio Tinto owns less than 10% of the common membership units of CPE LLC that are outstanding upon completion of this offering. In addition, if Rio Tinto owns any common membership units, we will generally be prohibited from causing CPE LLC to make tax elections or take positions on tax issues that we know or would reasonably be expected to know would harm Rio Tinto if such election or position had not been made or taken. See "Structuring Transactions and Related Agreements—Structure-Related Agreements—CPE LLC Agreement."

Any future redemption by RTEA, KMS or Cloud Peak Energy of common membership units in CPE LLC in exchange for shares of our common stock would significantly dilute your voting power.

        Pursuant to the terms of the LLC Agreement, RTEA and KMS will have the right to have their common membership units acquired by means of redemption by CPE LLC in exchange for a cash payment equal to, on a per unit basis, the market price of one share of our common stock (based on the average price per share for the 10 consecutive trading days prior to the date notice of redemption

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is given to CPE LLC). If RTEA or KMS exercises their redemption right, we will be entitled to assume CPE LLC's rights and obligations to acquire common membership units from RTEA or KMS and instead to acquire such common membership units from RTEA or KMS in exchange for, at our election, shares of our common stock on a one-for-one basis or a cash payment equal to, on a per unit basis, the market price of one share of our common stock or a combination of shares of our common stock and cash. We refer to this entitlement as our Assumption Right. In addition, if the Rio Tinto members own in the aggregate less than 5% of the common membership units of CPE LLC that are outstanding upon completion of this offering, CPE LLC will have the right to acquire by redemption all of the common membership units then held by the Rio Tinto members for a cash payment equal to, on a per unit basis, the market price of one share of our common stock (based on the volume-weighted average price per share for the 10 consecutive trading days prior to the date notice of redemption is given by CPE LLC to the Rio Tinto members). If CPE LLC exercises this redemption right, we will be entitled to assume CPE LLC's rights and obligations to acquire the common membership units from the Rio Tinto members and instead acquire such common membership units from the Rio Tinto members in exchange for, at our election, shares of our common stock on a one-for-one basis or a cash payment equal to, on a per unit basis, the market price of one share of our common stock (based on the average price per share for the 10 consecutive trading days prior to the date notice of redemption is given to CPE LLC) or a combination of shares of our common stock and cash. We refer to this entitlement as our CPE Redemption Assumption Right.

        Following the completion of the transactions described in this prospectus, Rio Tinto America will indirectly hold approximately 48.33% of the common membership units in CPE LLC, or approximately 40.79% of the common membership units in CPE LLC if the underwriters exercise their over-allotment option in full. If RTEA or KMS exercised its redemption right with respect to a significant number of common membership units and we elected to exercise our Assumption Right and issue common stock rather than cash, the voting power of our stockholders would be significantly diluted. As a result, Rio Tinto would retain significant influence over decisions that require the approval of stockholders (such as the election of our directors) regardless of whether or not our other stockholders believe that such decisions are in our own best interests. In addition, any exercise by CPE LLC of the CPE redemption right in which we elected to exercise our CPE Redemption or Assumption Right and issue common stock rather than cash would also dilute the voting power of our stockholders in us. If, following this offering, RTEA and KMS exercised their right to require CPE LLC to acquire by redemption all of their common membership units in CPE LLC and we used our Assumption Right to acquire their common membership units in exchange only for shares of our common stock, Rio Tinto America would indirectly own approximately 48.33% of all outstanding shares of our common stock, or approximately 40.79% if the underwriters exercised their over-allotment option in full.

If we are determined to be an investment company, we would become subject to burdensome regulatory requirements and our business activities could be restricted.

        We do not believe that we are an "investment company" under the Investment Company Act of 1940, as amended. As managing member of CPE LLC, we will control CPE LLC and believe our interest in CPE LLC is neither a "security" nor an "investment security" as those terms are defined in the Investment Company Act. If we were to stop participating in the management of CPE LLC, our interest in CPE LLC could be deemed an "investment security" for purposes of the Investment Company Act. Generally, a company is an "investment company" if it owns investment securities having a value exceeding 40% of the value of its total assets (excluding U.S. government securities and cash items). Following this offering, our sole asset will be our managing membership interest in CPE LLC. A determination that this interest is an investment security could result in our being considered an investment company under the Investment Company Act. As a result, we would become subject to registration and other burdensome requirements of the Investment Company Act. In addition, the

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requirements of the Investment Company Act could restrict our business activities, including our ability to issue securities.

        We and CPE LLC intend to conduct our operations so that we are not deemed an investment company under the Investment Company Act. However, if anything were to occur that would cause us to be deemed to be an investment company, we would become subject to restrictions imposed by the Investment Company Act. These restrictions, including limitations on our capital structure and our ability to enter into transactions with our affiliates, could make it impractical for us to continue our business as currently conducted and could have a material adverse effect on our financial performance and operations.

Risks Related to This Offering and Ownership of Our Common Stock

None of the proceeds of this offering and only certain of the proceeds of the related debt financing transactions will be available to us for corporate purposes.

        Immediately prior to this offering, we will acquire a portion of RTEA's interest in Rio Tinto America's western U.S. coal business (other than the Colowyo mine) through the purchase of certain common membership units held by RTEA in CPE LLC, and, as consideration, will issue to RTEA a promissory note, or the CPE Note, in an amount equal to the purchase price for the units (which will equal the net proceeds of this offering). We will be required to use the net proceeds from this offering to immediately repay the CPE Note. RTEA will receive $491.6 million in connection with our acquisition of these common membership units. In addition, we expect that $284.6 million of the net proceeds from CPE LLC's senior notes offering will be distributed by CPE LLC to RTEA immediately following the completion of that offering. See "Use of Proceeds" included elsewhere in this prospectus. As a result, none of the proceeds from this offering and only certain of the proceeds from the debt financing will be available to CPE LLC or us for other corporate purposes, such as expanding our business, which could negatively impact the value of your investment in our common stock.

Our stock price could be volatile and could decline for a variety of reasons following this offering, resulting in a substantial loss on your investment.

        Currently, there is no public trading market for our common stock. We cannot predict the extent to which investor interest will lead to an active trading market for our common stock or the prices at which our common stock will trade following this offering. If an active trading market does not develop, you may have difficulty selling any common stock that you buy and the value of your shares may be impaired.

        The initial public offering price for our shares of common stock will be determined by negotiations between the representatives of the underwriters and us and Rio Tinto. This price may not reflect the market price of our common stock following this offering. You may be unable to resell the common stock you purchase at or above the initial public offering price.

        The stock markets generally have experienced extreme volatility, often unrelated to the operating performance of the individual companies whose securities are traded publicly. Broad market fluctuations and general economic conditions may materially adversely affect the trading price of our common stock.

        Significant price fluctuations in our common stock could result from a variety of other factors, including, among other things, actual or anticipated fluctuations in our operating results or financial condition, new laws or regulations or new interpretations of existing laws or regulations applicable to our business, sales of our common stock by our shareholders and any other factors described in this "Risk Factors" section of this prospectus.

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You will experience immediate and substantial dilution in net tangible book value per share of common stock.

        The initial public offering price of the common stock will be substantially higher than the pro forma combined net tangible book value per share of our outstanding common stock. If you purchase shares of our common stock, you will incur immediate and substantial dilution in the amount of $10.18 per share, based on an assumed initial public offering price of $17.00 per share, which is the midpoint of the initial public offering price range set forth on the cover of this prospectus. See "Dilution."

If securities analysts do not publish research or reports about our company and our industry, or if they issue unfavorable commentary about us or our industry or downgrade our common stock, the price of our common stock could decline.

        The trading market for our common stock will depend in part on the research and reports that third-party securities analysts publish about our company and our industry. One or more analysts could downgrade our stock or issue other negative commentary about our company or our industry. In addition, we may be unable or slow to attract research coverage, and the analysts who publish information about our common stock will have had relatively little recent experience with our company, which could affect their ability to accurately forecast our results or make it more likely that we fail to meet their estimates. Alternatively, if one or more of these analysts cease coverage of our company, we could lose visibility in the market. As a result of one or more of these factors, the trading price for our stock could decline.

Future sales of our common stock or other securities convertible into our common stock could cause our stock price to decline.

        Sales of substantial amounts of our common stock in the public market, including by RTEA or KMS if they exercise their right to require CPE LLC to acquire by redemption their common membership units in CPE LLC and we choose to issue shares of our common stock, or the perception that these sales may occur, could cause the market price of our common stock to decrease significantly.

        In connection with this offering, RTEA and KMS have entered into a lock-up agreement that prevents the redemption of their common membership units of CPE LLC for up to 180 days after the date of this prospectus, subject to carve outs and an extension in certain circumstances as set forth in "Underwriting." Following the expiration of the lock-up, RTEA and KMS will have the right, subject to certain conditions, to require us to register under the federal securities laws the sale of any shares of our common stock that may be issued to and held by them in connection with our Assumption Right. We may also offer additional shares of our common stock to the public in order to satisfy a redemption request by RTEA or KMS with cash in connection with our Assumption Right or for other corporate purposes. In addition, we have granted RTEA, KMS and their permitted transferees certain "piggyback" registration rights which will allow them to include their shares in any future registrations of our equity securities, whether or not that registration relates to a primary offering by us or a secondary offering by or on behalf of any of our stockholders. In particular, during the first three years following the completion of this offering, RTEA and/or KMS will have priority over us and any other of our stockholders in any registration that is an underwritten offering. See "Structuring Transactions and Related Agreements—Structure-Related Agreements—Registration Rights." Any such filing or the perception that such a filing may occur, could cause the prevailing market price of our common stock to decline and may impact our ability to sell equity to finance the operations of CPE LLC or make strategic acquisitions.

        We intend to file a registration statement with the Securities and Exchange Commission covering securities which may be issued under our stock incentive plans. A decline in the trading price of our common stock due to the occurrence of any future sales might impede our ability to raise capital

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through the issuance of additional shares of our common stock or other equity securities and may cause you to lose part or all of your investment in our shares of common stock.

Anti-takeover provisions in our charter documents and other aspects of our structure, including Rio Tinto's substantial holdings in CPE LLC and its rights to approve a change in control of CPE LLC or Cloud Peak Energy or a change in the manager of CPE LLC could discourage, delay or prevent a change in control of our company and may adversely affect the trading price of our common stock.

        Certain provisions that will be included in our amended and restated certificate of incorporation and amended and restated bylaws and other aspects of our structure, including Rio Tinto's substantial holdings in CPE LLC and its rights to approve a change in control of CPE LLC or Cloud Peak Energy or a change in the manager of CPE LLC may discourage, delay or prevent a change in our management or a change in control over us that stockholders may consider favorable. Among other things, our amended and restated certificate of incorporation and amended and restated bylaws will:

    provide for a classified board of directors, which may delay the ability of our stockholders to change the membership of a majority of our board of directors;

    authorize the issuance of "blank check" preferred stock that could be issued by our board of directors to thwart a takeover attempt;

    do not provide for cumulative voting;

    provide that vacancies on the board of directors, including newly created directorships, may be filled only by a majority vote of directors then in office;

    limit the calling of special meetings of stockholders;

    provide that stockholders may not act by written consent;

    provide that our directors may be removed only for cause;

    require supermajority voting to effect certain amendments to our certificate of incorporation and our bylaws; and

    require stockholders to provide advance notice of new business proposals and director nominations under specific procedures.

        In addition, CPE LLC's limited liability agreement will require that we conduct all our business operations through CPE LLC.

        See "Description of Capital Stock—Anti-Takeover Effects of Certain Provisions of Our Certificate of Incorporation and Bylaws and Delaware Law."

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

        This prospectus contains forward-looking statements that involve substantial risks and uncertainties. You can identify these statements by forward-looking words such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "potential," "should," "will," "would" or similar words. You should read statements that contain these words carefully because they discuss our plans, strategies, prospects and expectations concerning our business, operating results, financial condition and other similar matters. We believe that it is important to communicate our future expectations to our investors. Our forward-looking statements include, but are not limited to, information in this prospectus regarding general domestic and global economic conditions, our reserves, the LBA acquisition process, our business and growth strategy, CPE LLC's future financing plans, expectations for pricing conditions and demand in the U.S. and foreign coal industries and in the PRB, our ability to operate our business as a stand-alone public company, our cost structure as a stand-alone public company, the amount of cash or other collateral needed to secure our surety bond arrangements and market data related to the domestic and foreign coal industry. In particular, there are forward-looking statements under "Unaudited Pro Forma Condensed Consolidated Financial Information," "The Coal Industry," "Business—Business Strategy" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." There may be events in the future, however, that we are not able to predict accurately or control. The factors listed under "Risk Factors," as well as any cautionary language in this prospectus, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. Before you invest in our common stock, you should be aware that the occurrence of the events described in these risk factors and elsewhere in this prospectus could have a material adverse effect on our business, results of operation and financial position. Any forward-looking statement made by us in this prospectus speaks only as of the date on which we make it. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

        The following factors are among those that may cause actual results to differ materially from our forward-looking statements:

    future economic conditions, including the duration and severity of the global economic downturn and disruptions in global financial markets;

    the contract prices we receive for coal and our customers' ability to honor contract terms;

    market demand for domestic and foreign coal, electricity and steel;

    environmental laws and regulations, including those directly affecting our coal mining and production, and those affecting our customers' coal usage;

    future legislation and changes in regulations or governmental policies or changes in interpretations thereof, including with respect to carbon emissions;

    our ability to produce coal at existing and planned volumes and costs;

    the availability and cost of LBA acquisitions and surface rights and our ability to successfully acquire LBAs at attractive prices;

    the consummation of financing, acquisition or disposition transactions, and the effect thereof on our business;

    the impact of our structuring transactions, including resulting tax implications and changes to our valuation allowance on our deferred tax assets;

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    our assumptions regarding payments arising under the Tax Receivable Agreement and other structuring-related agreements;

    our plans and objectives for future operations and the acquisition or development of additional coal reserves or other acquisition opportunities;

    our relationships with, and other conditions affecting, our customers, including economic conditions and the credit performance and credit risks associated with our customers;

    timing of reductions or increases in customer coal inventories;

    our ability to enter into long-term coal sales arrangements at favorable prices;

    risks in coal mining;

    greater than expected environmental costs and liabilities;

    the number of coal-fired plants built in the future versus expectations;

    weather conditions or catastrophic weather-related damage;

    changes in energy policy;

    competition;

    coal's domestic and foreign market share of electricity generation;

    the availability and cost of competing energy resources, including changes in the price of oil and natural gas generally;

    railroad and other transportation performance and costs;

    disruptions in delivery or changes in pricing from third-party vendors of raw materials and other consumables which are necessary for our operations, such as explosives, petroleum-based fuel, tires, steel and rubber;

    our ability to obtain services that have otherwise been provided by members of Rio Tinto;

    our assumptions concerning coal reserve estimates;

    the terms of CPE LLC's future indebtedness;

    availability and costs of surety bonds, letters of credit and insurance and the amount of cash collateral, letters of credit and other collateral we may have to provide to secure our reclamation liabilities;

    employee workforce factors;

    regulatory and court decisions;

    changes in postretirement benefit and pension obligations;

    changes in costs that we incur as a stand-alone public company as compared to our expectations;

    underestimating the costs of our reclamation and mine closure obligations;

    liquidity constraints, including those resulting from the cost or unavailability of financing due to credit market conditions;

    our liquidity, results of operations and financial condition, including amounts of working capital that will be available following this offering and the debt financing transactions; and

    other factors, including those discussed in "Risk Factors."

        Our forward-looking statements also include estimates of the total amount of payments, including annual payments, under the Tax Receivable Agreement. These estimates are based on assumptions that are subject to change due to various factors, including, among other factors, changes in our operating plan or performance, the acquisition of new LBAs and the prices of those new LBAs, tax law changes, and/or the timing and amounts paid when Rio Tinto redeems its common membership units in CPE LLC. See "Risk Factors—Risks Related to Our Relationship with Rio Tinto Following this Offering—We will be required to pay RTEA for most of the benefits we may claim as a result of the tax basis step-up we receive in connection with this offering and related transactions. In certain cases payments to RTEA may be accelerated or exceed our actual cash tax savings."

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USE OF PROCEEDS

        Based upon an estimated initial public offering price of $17.00 per share (the midpoint of the range set forth on the cover page of this prospectus), we estimate that we will receive net proceeds from this offering of approximately $491.6 million, after deducting estimated underwriting discounts and commissions in connection with this offering of $28.6 million, all of which will be used to repay amounts owed to RTEA. See "Structuring Transactions and Related Agreements—Holding Company Structure" and "Underwriting." Immediately prior to the completion of this offering, we will enter into an acquisition agreement, or the Acquisition Agreement, with RTEA pursuant to which we will acquire a portion of RTEA's interest in Rio Tinto America's western U.S. coal business (other than the Colowyo mine) represented by 30,600,000 common membership units of CPE LLC, and, as consideration, will issue to RTEA the CPE Note. The number of common membership units of CPE LLC purchased from RTEA will equal the number of shares of common stock sold in this offering. The amount of the CPE Note will equal the public offering price of our common stock, less underwriting discounts and commissions. The Acquisition Agreement will require us to use the net proceeds of this offering to immediately repay the CPE Note. Accordingly, we will not retain any of the proceeds of this offering. This offering, the senior notes offering and the closing of CPE LLC's revolving credit facility are each conditioned upon the closing of each other transaction.

        If the underwriters exercise their over-allotment option in full to purchase up to an additional 4,590,000 shares of our common stock to cover over-allotments of shares, then the net proceeds from this offering will be approximately $565.3 million. We will use any net proceeds from the over-allotments to purchase an equivalent number of common membership units in CPE LLC held by RTEA at a price per unit equal to the public offering price per share, less underwriting discounts and commissions.

        We expect the net proceeds of CPE LLC's senior notes offering to be approximately $572.6 million, after deducting estimated original issue discount and initial purchasers' discounts and commissions. We expect that approximately $284.6 million of the net proceeds will be distributed to RTEA immediately following the closing of the senior notes offering. The amount of this distribution to RTEA may increase if the amount of restricted cash required as collateral for our surety bonds decreases. We estimate that the amount of required restricted cash could decline by up to $25 million from current estimates. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources After this Offering." The remaining net proceeds from the senior notes offering will be used for general corporate purposes, including the payment of fees under CPE LLC's revolving credit facility, as cash reserves for securing our reclamation obligations and for capital expenditure requirements.


DIVIDEND POLICY

        Upon completion of the offering, we will be a holding company, will have no direct operations and will be able to pay dividends on our common stock only from our available cash on hand and distributions received from CPE LLC. Our board of directors does not anticipate authorizing the payment of cash dividends on our common stock in the foreseeable future. Any determination to pay dividends to holders of our common stock in the future will be at the discretion of our board of directors and will depend on many factors, including our financial condition, results of operations, general business conditions, contractual restrictions, including under our debt instruments, capital requirements, business prospects, restrictions on the payment of dividends under Delaware Law, and any other factors our board of directors deems relevant.

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STRUCTURING TRANSACTIONS AND RELATED AGREEMENTS

History

        Rio Tinto initially formed RTEA in 1993 as Kennecott Coal Company in connection with the acquisition of NERCO, Inc., an Oregon corporation, and its Spring Creek coal mine, Antelope coal mine and a 50% interest in the Decker coal mine operated by a third-party mine operator. In 1993, Kennecott Coal Company also acquired the Cordero coal mine from Elk River Resources, Inc., and in 1997, it acquired the Caballo Rojo coal mine from the Drummond Company. These mines are currently operated together as the Cordero Rojo coal mine. In 1994, Kennecott Coal Company was renamed Kennecott Energy and Coal Company. Also in 1994, Kennecott Energy and Coal Company acquired the Colowyo coal mine in Colorado from the W.R. Grace Company. In 1998, Kennecott Energy and Coal Company acquired the Jacobs Ranch coal mine from the Kerr-McGee Corporation. In 2006, Kennecott Energy and Coal Company was renamed Rio Tinto Energy America Inc., as part of Rio Tinto's global branding initiative.

        Cloud Peak Energy Inc. was incorporated in Delaware on July 31, 2008. Prior to this offering, it did not engage in any activities, except in preparation for this offering, and has had no operations. Rio Tinto America currently owns the only issued and outstanding share of common stock of Cloud Peak Energy Inc. Cloud Peak Energy Resources LLC was formed as Rio Tinto Sage LLC on August 19, 2008 by RTEA, its sole member and was renamed Cloud Peak Energy Resources LLC in November 2009. Cloud Peak Energy Resources LLC, or CPE LLC, currently holds, directly or indirectly, all of the equity interests of each of our mining entities, including our 50% interest in the Decker coal mine, which is managed by a third-party mine operator. In order to separate certain businesses from RTEA, in December 2008, RTEA contributed Rio Tinto America's western U.S. coal business to CPE LLC (other than the Colowyo mine, which was not contributed to CPE LLC due to restrictions contained in its existing financing arrangements, and which is now indirectly owned by Rio Tinto America). In March 2009, CPE LLC entered into a purchase agreement pursuant to which it agreed to sell its ownership interests in the Jacobs Ranch mine to Arch Coal, Inc., or the Jacobs Ranch Sale. The Jacobs Ranch Sale closed on October 1, 2009. We did not retain the proceeds of this sale.

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        The simplified diagram below depicts our organizational structure prior to the structuring transactions contemplated by this offering:

GRAPHIC

Holding Company Structure

        The following transactions have occurred or will occur in advance of the completion of this offering to effectuate our holding company structure:

    RTEA entered into an Assignment Agreement with CPE LLC to assign any remaining assets held by RTEA related to Rio Tinto America's western U.S. coal business (other than the Colowyo mine), to CPE LLC, other than certain coal supply agreements or other contracts or arrangements which cannot be transferred or assigned and will remain with RTEA.

    Kennecott Management Services Company, or KMS, a wholly-owned subsidiary of Rio Tinto America Inc., contributed its wholly-owned subsidiary Cloud Peak Energy Services Company (formerly known as Rio Tinto Energy America Services Company), or CPESC, that owns certain assets and employs personnel related to Rio Tinto America's western U.S. coal business (other than the Colowyo mine), to CPE LLC in exchange for an interest in CPE LLC. CPE LLC will contribute a small portion of certain mining subsidiaries to CPESC in exchange for CPESC becoming a member of each mining subsidiary.

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    RTEA's and KMS' interest in CPE LLC was reclassified into common membership units.

    Any existing intercompany receivables from Rio Tinto America (or its subsidiaries other than CPE LLC and its subsidiaries) to CPE LLC (or its subsidiaries) will be cancelled and any existing intercompany receivables from CPE LLC (or its subsidiaries) to Rio Tinto America (or its subsidiaries other than CPE LLC and its subsidiaries) will be cancelled or repaid. See "Certain Relationships and Related Party Transactions."

    CPE LLC will declare a distribution of approximately $284.6 million to RTEA in part as a reimbursement of capital expenditures incurred by RTEA directly or indirectly through CPE LLC and its subsidiaries in the two years prior to the completion of this offering, which will be distributed to RTEA immediately following the completion of the senior notes offering. The amount of this distribution to RTEA may increase if the amount of restricted cash required as collateral for our surety bonds decreases. We estimate that the amount of required restricted cash could decline by up to $25 million from current estimates.

    Cloud Peak Energy will enter into the Acquisition Agreement with RTEA, pursuant to which we will acquire a portion of RTEA's interest in Rio Tinto America's western U.S. coal business (other than the Colowyo mine) through the acquisition from RTEA of the amount of common membership units in CPE LLC equal to the amount of shares of common stock we sell in this offering, and, as consideration, will issue to RTEA the CPE Note in an amount equal to the purchase price for the units, which will be, on a per unit basis, an amount equal to the per share purchase price that our common stock will be sold to the public, less underwriting discounts and commissions.

    We, RTEA and KMS will enter into an amended and restated limited liability company agreement of CPE LLC, pursuant to which we will be admitted as a member of CPE LLC and will become the sole managing member of CPE LLC. Our managing member interest in CPE LLC refers to our management and ownership interest and will include membership interests equivalent to the membership units acquired by us from RTEA.

    Cloud Peak Energy will enter into the tax receivable agreement, or the Tax Receivable Agreement, with RTEA, that will generally require us to pay RTEA approximately 85% of the cash tax savings, if any, that we realize as a result of the increases in tax basis that we expect to obtain in connection with this offering and related transactions, subsequent acquisitions of RTEA's units in CPE LLC by us or CPE LLC, as well as payments made by us under the Tax Receivable Agreement, under certain circumstances as described below.

        Upon completion of this offering, Cloud Peak Energy will cancel the initial share of our common stock held by Rio Tinto America for no consideration and use the net proceeds from this offering to repay the CPE Note. Following the completion of the transactions described in this prospectus, we will own approximately 51.67% and Rio Tinto America indirectly will own approximately 48.33% of the economic interest in CPE LLC, assuming no exercise of the underwriters' overallotment option. If the underwriters exercise their overallotment option to purchase additional shares of our common stock, pursuant to the Acquisition Agreement, immediately thereafter we will acquire from RTEA an equivalent number of additional common membership units in CPE LLC in exchange for the net proceeds we receive upon exercise of the overallotment option, after deducting underwriting discounts and commissions.

        After completion of the structuring transactions and this offering, our sole asset will be our direct ownership of our managing member interest in CPE LLC. Our only source of cash flow from operations will be distributions from CPE LLC and management fees and cost reimbursements pursuant to a management services agreement between us and CPE LLC.

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        The simplified diagram below depicts our summarized organizational structure immediately after the transactions described in this prospectus (assuming no exercise of the underwriters' overallotment option):

GRAPHIC


      (1)
      Certain of CPE LLC's domestic restricted subsidiaries will serve as guarantors of CPE LLC's debt in connection with the debt financing transactions.

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Structure-Related Agreements

        In connection with the structuring transactions referred to above and this offering, we are entering into various agreements governing the relationship among us, CPE LLC, RTEA, KMS and their respective affiliates.

        We summarize these agreements below, which summaries are qualified in their entirety by reference to the full text of the agreements which are filed as exhibits to the registration statement of which this prospectus is a part.

Acquisition Agreement and CPE Note

        As set forth above, prior to the completion of our initial public offering, Cloud Peak Energy will enter into the Acquisition Agreement with RTEA, pursuant to which we will acquire a portion of RTEA's interest in Rio Tinto America's western U.S. coal business (other than the Colowyo mine). Under the Acquisition Agreement, RTEA will sell to us, and we will buy from RTEA, 30,600,000 common membership units of CPE LLC (the number of common membership units equal to the number of shares of our common stock sold in this offering). As consideration for the common membership units, we will issue the CPE Note to RTEA in an amount equal to the purchase price for the units (which will equal the net proceeds of this offering) and will be required to use the net proceeds from this offering to immediately repay the CPE Note. The CPE Note will be immediately payable following the completion of this offering and will not bear interest unless we default on our repayment obligations, in which case interest will accrue from the date the payment was due until the payment is made at a rate of ten percent per annum. RTEA will also agree, in the event the underwriters exercise their overallotment option, to sell to us a number of common membership units equal to the number of shares of our common stock sold in the overallotment. Assuming the underwriters exercise their overallotment option in full, we will use the net proceeds of the overallotment to pay for those units and own approximately 59.21% of the common membership units of CPE LLC, taking into account the shares of restricted stock to be issued to our directors and employees in connection with this offering. The per unit purchase price we will pay for the common membership units purchased pursuant to the Acquisition Agreement will generally be equal to the per share purchase price that our common stock is sold to the public pursuant to this offering, less underwriting discounts and commissions.

Master Separation Agreement

        Prior to the completion of this offering, we will enter into a Master Separation Agreement among us, CPE LLC and Rio Tinto. The Master Separation Agreement will set forth the agreements relating to our separation from Rio Tinto and governing our relationship following the completion of this offering.

        Except as expressly set forth in the Master Separation Agreement or in any other structuring-related agreement, neither we, CPE LLC nor Rio Tinto will make any representation or warranty as to the assets, businesses or liabilities transferred, assumed or acquired in connection with this offering. Except as expressly set forth in any structuring-related agreement, all assets will be transferred on an "as is," "where is" basis, and we and our subsidiaries will agree to bear the economic and legal risks that any conveyance was insufficient to vest in us good title, free and clear of any security interest or other encumbrance, and that any necessary consents or approvals are not obtained or that any requirements of laws or judgments are not complied with.

    Intercompany Agreements

        The Master Separation Agreement generally provides that all existing agreements or arrangements between us or CPE LLC and Rio Tinto and its affiliates will terminate in connection with this offering,

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except for the agreements or arrangements set forth in the structure-related agreements, including those relating to certain insurance policies and existing surety bonds and other support arrangements. Certain CPE LLC insurance policies with Rio Tinto's captive insurance provider will continue following the completion of this offering until their expiration (unless earlier terminated by Rio Tinto).

    Financial Information

        We and CPE LLC will agree to provide certain financial information related to our business and information regarding our reserves to Rio Tinto or its affiliates for so long as RTEA or its affiliates own more than 20% of the outstanding common membership units in CPE LLC or, notwithstanding this ownership percentage, are required to account for their investment in us on a consolidated basis or under the equity method of accounting, unless otherwise agreed by us and Rio Tinto. The Master Separation Agreement will also require us to disclose on a timely basis information about us and CPE LLC to Rio Tinto or its affiliates in connection with any information needed by Rio Tinto or any of its affiliates for, and otherwise cooperate with Rio Tinto or its affiliates in connection with, the preparation of their filings or reports with any governmental authority, national securities exchange or otherwise made publicly available, among other covenants. Rio Tinto has agreed to reimburse us for our reasonable out-of-pocket costs, if any, of providing this information to Rio Tinto and has agreed to pay us a quarterly fee of $14,025 as compensation for the reasonable internal costs incurred by us in providing the information to Rio Tinto.

    Exchange of Other Information

        The Master Separation Agreement will also provide for the mutual sharing of information between us, CPE LLC and Rio Tinto and its affiliates in order to comply with reporting, filing, audit or tax requirements, for use in judicial proceedings, and in order to comply with our respective obligations after the completion of this offering. We and CPE LLC will also agree with Rio Tinto and its affiliates to provide mutual access to historical records relating to CPE LLC's or Rio Tinto's businesses that have been retained or maintained by the other party.

    Release

        Except for each party's obligations under the Master Separation Agreement, the other structuring-related agreements and certain other specified liabilities, we, CPE LLC and Rio Tinto will release and discharge each other and each of the parties' respective affiliates from all liabilities existing or arising between us and CPE LLC and all liabilities existing or arising between Rio Tinto and its affiliates on or before the completion of this offering, except to the extent the liabilities arise from the fraud, gross negligence or willful misconduct of certain of our respective directors and officers. The release does not include obligations or liabilities under any agreements among us, CPE LLC and Rio Tinto or affiliates of Rio Tinto that remain in effect following the completion of this offering.

    Indemnification

        The Master Separation Agreement sets forth various indemnification obligations of CPE LLC and Rio Tinto America.

        CPE LLC Indemnities.    CPE LLC will indemnify Rio Tinto and its affiliates for certain liabilities related to CPE LLC's historical business and the ordinary course operation of our business as well as for other liabilities related to our business following this offering and certain of the structuring-related agreements. We refer to certain indemnification obligations of CPE LLC as the "general indemnities" and certain other indemnification obligations of CPE LLC as the "special indemnities." All indemnification obligations of CPE LLC will be fully and unconditionally guaranteed by CPE LLC's wholly-owned subsidiaries. The indemnification obligations set forth in the various structuring-related

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agreements will provide that any indemnification obligations will be payable as set forth in the Master Separation Agreement.

        The general indemnities generally include liabilities arising out of or relating to:

    our business conducted prior to this offering, including with respect to any pending or threatened litigation related to the Decker mine, whether the liabilities arise before, on, or after the completion of this offering;

    all of our liabilities and claims arising out of or relating to the Jacobs Ranch Membership Interest Purchase Agreement (other than liabilities that have been assumed by RTEA), whether the liabilities arise before, on, or after the completion of this offering;

    all liabilities resulting from any claims made following the completion of this offering under the Rio Tinto insurance policies that will terminate in connection with this offering;

    all liabilities resulting from any claims made following the expiration (or earlier termination) of certain CPE LLC insurance policies with Rio Tinto's captive insurance provider;

    all liabilities arising out of or relating to the working capital adjustment (described below);

    any breach of the Master Separation Agreement (arising out of or relating to our business conducted prior to this offering) (unless the breach would constitute a special indemnity);

    any breach of the Underwriting Agreement, the Purchase Agreement or any other structuring-related agreement, other than the Agency Agreement or the RTEA Coal Supply Agreement (unless the breach would constitute a special indemnity); and

    any breach by CPE LLC of the Agency Agreement or the RTEA Coal Supply Agreement to the extent that such breach does not result from CPE LLC's gross negligence or willful misconduct.

CPE LLC will indemnify Rio Tinto and its affiliates on a dollar-for-dollar basis with respect to any of the general indemnities.

        The special indemnities generally include liabilities arising out of or relating to:

    our business conducted after this offering, including with respect to litigation related to the operations of the Decker mine following the completion of this offering, whether the liabilities arise before, on, or after the completion of this offering;

    all liabilities and claims arising out of or relating to or resulting from the use of any information provided by us or CPE LLC pursuant to the Master Separation Agreement or any breach of any representation or warranty by us or CPE LLC with respect to this information;

    all claims or demands of, or liabilities with respect to, any surety bonds or similar arrangements existing prior to this offering that remain in place following the completion of this offering;

    any liabilities, including liabilities to Rio Tinto with respect to any indemnification obligations of us or CPE LLC arising under or relating to the LLC Agreement or the Registration Rights Agreement;

    any breach by CPE LLC of the Agency Agreement or the RTEA Coal Supply Agreement, in each case, resulting from CPE LLC's gross negligence or willful misconduct;

    any breach by us or CPE LLC of the Master Separation Agreement (arising out of or relating to our business conducted after this offering);

    all liabilities arising out of or based upon any untrue statement of, or omission to state, a material fact in any registration statement or prospectus related to this offering, except for statements or omissions relating exclusively to Rio Tinto plc;

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    all liabilities arising out of or based upon any untrue statement of, or omission to state, a material fact in any offering document related to the senior notes offering except for statements or omissions relating exclusively to Rio Tinto plc; and

    all liabilities arising out of any Rio Tinto public filing, including liabilities arising out of or based upon any untrue statement of, or omission to state, a material fact in any Rio Tinto public filing, if the liabilities arise out of or are based upon information relating exclusively to us or CPE LLC furnished to Rio Tinto under the Master Separation Agreement.

CPE LLC will indemnify Rio Tinto and its affiliates on a dollar-for-dollar basis plus a fraction of a dollar equal to the ownership interest of Rio Tinto and its affiliates in CPE LLC at the time any special indemnity is payable to Rio Tinto.

        Rio Tinto Indemnities.    Rio Tinto America will indemnify us for liabilities related to the Colowyo mine and the uranium mining venture, which were not contributed to CPE LLC, and, subject to certain limitations set forth in the Master Separation Agreement, liabilities related to the Jacobs Ranch mine arising under the Jacobs Ranch membership interest purchase agreement, other than certain liabilities related to the Jacobs Ranch mine that will be retained by us and CPE LLC (including liabilities arising due to the gross negligence or willful misconduct of us or our officers or employees). Rio Tinto America will also indemnify us for any breach by Rio Tinto of the Master Separation Agreement or any other structuring-related agreement and for all liabilities resulting from actions taken by Rio Tinto after the completion of this offering on our behalf constituting gross negligence or willful misconduct.

        In addition, Rio Tinto America will indemnify us for liabilities relating to any untrue statement of, or omission to state a material fact in any registration statement or prospectus related to this offering or the offering memorandum related to the senior notes offering relating exclusively to Rio Tinto plc. Rio Tinto America will also indemnify us for liabilities arising out of or based upon any untrue statement of, or omission to state a material fact in any of our public filings if the liabilities arise out of or are based upon information relating exclusively to Rio Tinto plc furnished to us under the Master Separation Agreement.

        Rio Tinto America will indemnify us on a dollar-for-dollar basis for all of its indemnification obligations owed to us and CPE LLC.

    Expenses of Our Initial Public Offering and Debt Financing Transactions

        Rio Tinto or an affiliate of Rio Tinto will pay all of our out-of pocket costs and expenses incurred in connection with the structuring transactions referred to above, this offering and the debt financing transactions (other than fees, discounts and commissions in connection with this offering and the debt financing transactions).

    Corporate Opportunities

        Rio Tinto will continue to hold certain coal assets in the U.S. and abroad following the completion of this offering. The Colowyo mine in Colorado was not contributed to CPE LLC and, therefore, will not be owned by CPE LLC and may compete with our continuing business. Rio Tinto may expand, through development of its remaining coal business, acquisitions or otherwise, its operations that directly or indirectly compete with us. The Master Separation Agreement will provide that, except as otherwise agreed between us and Rio Tinto, for one year following the completion of this offering, RTEA or its affiliates will not pursue any competitive activity or acquisition in the coal industry within the PRB (other than activities related to the Jacobs Ranch mine in connection with the Jacobs Ranch Sale). Rio Tinto and its affiliates will not be prohibited from pursuing any competitive activity or acquisition outside of the PRB, whether during or after this one-year period including selling coal or other goods produced outside of the PRB to customers located in the PRB or who are otherwise our

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customers. Following the completion of this offering, if a corporate opportunity is offered to Rio Tinto or its affiliates or one or more of Rio Tinto's or its affiliates' executive officers or directors that relates to any competitive activity or acquisition in the coal industry:

    within the PRB after the one-year period referred to above; or

    outside of the PRB,

no such person shall be liable to us or any of our shareholders or CPE LLC or any of its members for breach of any fiduciary or other duty by reason of the fact that the person, including Rio Tinto and its affiliates, pursues or acquires the business opportunity, directs the business opportunity to another person or fails to present the business opportunity, or information regarding the business opportunity, to us or CPE LLC, unless, in the case of any person who is a director or officer of us or CPE LLC, the business opportunity is expressly offered to the director or executive officer in his or her capacity as an executive officer or director of our us or CPE LLC. See "Description of Capital Stock—Corporate Opportunities."

    Continuance of Surety Bonds, Letters of Credit and Other Arrangements

        Our existing surety bonds, letters of credit and other guarantees or credit arrangements, including with respect to our reclamation obligations, have been provided historically by Rio Tinto and its affiliates. These arrangements will not terminate upon completion of this offering. We and CPE LLC will agree to use our commercially reasonable efforts to obtain new surety bonds, letters of credit or other credit arrangements and to obtain the full release of Rio Tinto and its affiliates with respect to any existing surety bonds, letters of credit and other guarantees or credit arrangements. We, CPE LLC and our respective affiliates will agree to indemnify Rio Tinto and its affiliates for all liabilities arising out of or relating to any such existing surety bonds, letters of credit and other guarantees or credit arrangements that remain in place following the completion of this offering.

        Certain of our existing reclamation obligations are secured by letters of credit issued under Rio Tinto's pre-existing credit facilities. As part of the transition to our own surety bond arrangements, we and CPE LLC will place up to approximately $92.5 million in escrow for the benefit of Rio Tinto with respect to Rio Tinto's liabilities under the existing surety arrangements. If any payment obligation is triggered under any of these arrangements prior to the time that Rio Tinto and its affiliates are fully released with respect to these obligations, any amounts payable by Rio Tinto will be released to Rio Tinto from escrow. As we obtain new surety bonds to replace our existing surety bonds, this restricted cash amount will be released in accordance with the terms of the escrow agreement to CPE LLC from time to time in amounts, as needed, to secure our new surety bond arrangements. The amount of restricted cash is based on current estimates of restricted cash required as collateral for our new surety bonds that will replace the existing surety arrangements securing our reclamation obligations. As the terms of these surety bonds are negotiated, the amount of restricted cash required may be adjusted downward prior to the closing of this offering. We estimate that the amount of required restricted cash could decline by up to $25 million from the current estimates. The amount of any such decline would be added to the distribution paid to RTEA from the proceeds of the senior notes offering and would not be retained by us as unrestricted cash. In addition, if our existing surety arrangements are not replaced with new surety bonds, letters of credit or other credit arrangements within 60 days following the completion of this offering, CPE LLC will pay to Rio Tinto a monthly fee equal to 4% per annum of (i) the amount of remaining restricted cash in escrow not released to secure our new surety bond arrangements and (ii) $150 million less the aggregate principal amount of any letters of credit then outstanding as of the beginning of each month issued to secure any new surety bond arrangements.

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    Working Capital Adjustment

        Under the Master Separation Agreement, we and Rio Tinto will agree that upon completion of this offering, $181 million of unrestricted proceeds from the senior notes offering will remain with CPE LLC, subject to final adjustments post closing based on our final working capital amounts. This adjustment will occur no later than 15 days following the completion of this offering unless there is a disagreement between us and Rio Tinto with respect to the amount of the adjustment.

    Non-Solicitation

        We will agree with Rio Tinto and its affiliates that for a period of twelve months following the completion of this offering, neither we nor CPE LLC, nor Rio Tinto nor its affiliates will solicit any employee of the other company, subject to certain exceptions.

    Other Provisions

        The Master Separation Agreement also will contain covenants among us, CPE LLC and Rio Tinto and its affiliates with respect to, among other covenants:

    confidentiality of our, CPE LLC's and Rio Tinto's proprietary information;

    restrictions on our ability to take any action that limits Rio Tinto's or any of its affiliates ability to freely sell, transfer, assign, pledge or otherwise dispose of our stock; and

    cooperation with respect to litigation.

    Other Intellectual Property Agreements

        In addition to the Master Separation Agreement, prior to the completion of this offering, we and CPE LLC will enter into certain intellectual property agreements with an affiliate of Rio Tinto, assigning to us certain trademarks used in our business, allowing us to use the Rio Tinto trademarks on a transitional basis and licensing certain software.

CPE LLC Agreement

Second Amended and Restated LLC Agreement

        Prior to the completion of this offering, RTEA's and KMS' interest in CPE LLC will be reclassified into a new class of common membership units pursuant to a second amended and restated limited liability company agreement of CPE LLC. Although Cloud Peak Energy will not be a member under this agreement, Cloud Peak Energy will be a party to and third-party beneficiary of this agreement. This agreement will provide for a redemption right, whereby, upon appropriate notice, RTEA and KMS will have the right to cause CPE LLC to acquire by redemption all or any portion of their common membership units for a cash payment equal to, on a per unit basis, the market price of one share of our common stock (based on the volume-weighted average price per share for the 10 consecutive trading days prior to the date notice of redemption is given to CPE LLC). If RTEA or KMS exercises their redemption right, Cloud Peak Energy will be entitled to assume CPE LLC's rights and obligations to acquire common membership units from them and instead acquire such common membership units from them in exchange for, at our election, shares of our common stock on a one-for-one basis or a cash payment equal to, on a per unit basis, the market price of one share of our common stock (based on the volume-weighted average price per share for the 10 consecutive trading days prior to the date notice of redemption is given to CPE LLC), or a combination of shares of our common stock and cash. We refer to this entitlement as our Assumption Right.

        In addition, the second amended and restated limited liability company agreement will also provide for a redemption right, whereby, upon appropriate notice, if the Rio Tinto members own in the

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aggregate less than 5% of the common membership units of CPE LLC that are outstanding upon completion of this offering, CPE LLC will have the right to acquire by redemption all of the common membership units then held by the Rio Tinto members for a cash payment equal to, on a per unit basis, the market price of one share of our common stock (based on the volume-weighted average price per share for the 10 consecutive trading days prior to the date notice of redemption is given by CPE LLC to the Rio Tinto members). If CPE LLC exercises this redemption right, Cloud Peak Energy will be entitled to assume CPE LLC's rights and obligations to acquire the common membership units from the Rio Tinto members and instead acquire such common membership units from the Rio Tinto members in exchange for, at our election, shares of our common stock on a one-for-one basis or a cash payment equal to, on a per unit basis, the market price of one share of our common stock (based on the volume-weighted average price per share for the 10 consecutive trading days prior to the date notice of redemption is given to CPE LLC), or a combination of shares of our common stock and cash. We refer to this entitlement as our CPE Redemption Assumption Right.

Third Amended and Restated LLC Agreement

        In connection with this offering, Cloud Peak Energy, RTEA and KMS will enter into a third amended and restated limited liability company agreement of CPE LLC. We refer to this third amended and restated agreement as the LLC Agreement.

        Cloud Peak Business.    Our sole asset will be our managing member interest in CPE LLC. Under the LLC Agreement, we will not be permitted to, and our affiliates will not be permitted to, conduct any business or ventures other than in connection with:

    the acquisition, ownership or disposition of our managing member interest;

    the management of the business of CPE LLC as set forth in the LLC Agreement;

    our operation as a public reporting company; or

    businesses or ventures that are held in, or conducted only through, CPE LLC.

        Appointment as Manager.    Under the LLC Agreement, Cloud Peak Energy will become a member and the sole manager of CPE LLC. As the sole manager, we will be able to control all of the day to day business affairs and decision-making of CPE LLC without the approval of any other member. As such, Cloud Peak Energy, through our officers and directors, will be responsible for establishing the strategy and business policies of CPE LLC and for all operational and administrative decisions of CPE LLC and the day to day management of CPE LLC's business. Furthermore, we can only be removed as manager of CPE LLC if we resign or if we remove ourselves as manager. If this occurs, we must appoint a new manager and, if we continue to own common membership units in CPE LLC, we will become a non-managing member in CPE LLC. However, if we resign or remove ourselves as manager, our Management Services Agreement with CPE LLC will terminate. See "—Management Services Agreement."

        Rio Tinto Approval Rights.    In general, so long as Rio Tinto owns, directly or indirectly, at least 30% of the common membership units of CPE LLC that are outstanding upon completion of this offering (treating for purposes of this calculation shares acquired upon exercise of the redemption rights and not disposed of by Rio Tinto as units), Rio Tinto's consent will be required prior to Cloud Peak Energy and/or CPE LLC taking certain actions, including any of the following actions:

    approval of any transaction that would result in a change of control of CPE LLC or Cloud Peak Energy or a change in the manager of CPE LLC;

    the merger, consolidation, dissolution or liquidation of CPE LLC or any merger, consolidation, dissolution or liquidation of any subsidiary of CPE LLC (with customary exceptions);

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    the direct or indirect sale, transfer, lease or other disposition of property or assets (including capital stock of any subsidiary) of CPE LLC and its subsidiaries outside of the ordinary course of business in excess of $500 million (subject to adjustment for inflation); provided, however, that Rio Tinto's consent will not be required for the creation, incurrence or assumption of (or foreclosure or other realization with respect to) any lien created, incurred or assumed in connection with indebtedness assumed, incurred or issued in connection with this offering, the debt financing transactions and the other transactions contemplated by the LLC Agreement or the other structuring-related agreements;

    any fundamental change outside of the ordinary course in the nature (but not size or methods) of CPE LLC's coal business as in effect upon completion of this offering, but only insofar as such fundamental change does not relate to the normal operation or activities of CPE LLC's coal business or any business or operation reasonably related or ancillary to CPE LLC's business;

    the acquisition of any other business or asset that has a purchase price in excess of $500 million or that would result in the issuance of equity interests by us or CPE LLC in excess of $500 million (subject to adjustment for inflation);

    the assumption, incurrence or issuance of indebtedness in excess of 125% of the indebtedness amounts included in CPE LLC's operating plan (subject to adjustment for inflation), other than indebtedness to fund ordinary course business operations or to fund any capital expenditures which do not require Rio Tinto consent;

    making or committing to make in any calendar year period, capital expenditures outside the ordinary course of business; provided that the following capital expenditures (subject to adjustment for inflation) shall be deemed to be in the ordinary course of business (x) committed LBA payments included in CPE LLC's operating plan and (y) the aggregate amount of all other capital expenditures not in excess of 125% of the sum of (1) uncommitted LBA payments included in CPE LLC's operating plan, (2) non-LBA capital payments included in CPE LLC's operating plan and (3) the cumulative amount by which the actual capital expenditures in preceding years for capital expenditures other than committed LBA payments is less than the sum of uncommitted LBA payments and non-LBA payments for the prior years; and

    except as otherwise set forth in any other structuring-related agreement, settling claims as to which Rio Tinto would have liability.

        Tax Matters.    We will be the tax matters member of CPE LLC. If Rio Tinto owns any common membership units, CPE LLC will be prohibited from making tax elections or taking positions on tax issues which would harm Rio Tinto if such election or position had not been made or taken. Rio Tinto will also have a consent right over our actions as tax matters member of CPE LLC, including initiating proceedings and extending statutes of limitations, if such action would have a significant adverse effect on Rio Tinto. In addition, CPE LLC must operate substantially all of its business through entities treated as partnerships or disregarded entities for U.S. federal income tax purposes.

        Redemption Rights.    The redemption right of RTEA and KMS, as well as our Assumption Right, and the redemption right of CPE LLC, as well as the related CPE Redemption Assumption Right, will, in each case, be the same as set forth in the Second Amended and Restated LLC Agreement.

        Compensation.    We will not be entitled to compensation for our services as manager except as provided in the management services agreement described under "—Management Services Agreement" below.

        Distributions.    The LLC Agreement will provide that distributions of cash will be made in our discretion, as manager, pro rata among the members holding common membership units in accordance

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with their respective percentage interests in CPE LLC. It is intended that the distributions made will be sufficient to enable us to satisfy any present or future tax, levy, import, duty, charge, assessment or fee of any nature (including interest, penalties, and additions thereto) that is imposed by any government or other taxing authority and to allow us to meet Cloud Peak Energy's obligations under the Tax Receivable Agreement.

        One-to-One Ratio.    The LLC Agreement contains various provisions requiring that we and CPE LLC take certain actions in order to maintain, at all times, a one-to-one ratio between the number of common membership units held by us and the number of shares of our common stock outstanding. This one-to-one ratio must also be maintained in the event that we issue additional securities or incur debt or issue any debt securities. Accordingly, every time we issue shares of our common stock, other than in connection with the exercise of our assumption rights in connection with any redemption, CPE LLC will be required to issue additional common membership units to us. In addition, if we pay a dividend or other distribution to holders of our common stock, it must be accompanied by an immediately prior distribution by CPE LLC to all members.

        If we redeem, repurchase, acquire, exchange, cancel or terminate any shares of our common stock, this action must be accompanied by an immediately prior identical (including with respect to the appropriate consideration paid for such action) redemption, repurchase, acquisition, exchange, cancellation or termination of common membership units of CPE LLC held by us. In addition, in general, upon any consolidation or merger or combination to which we are a party or any sale or disposition of all or substantially all of our assets to a third party, we are required to take all necessary action so that the common membership units held by any non-managing member will be exchangeable on a per-common membership unit basis at any time or from time to time following such event into the kind and amount of shares of stock and/or other securities or property (including cash) receivable upon such event by holders of our common stock.

        The LLC Agreement also provides that, in connection with any reclassification or recapitalization or any other distribution or dilutive or concentrative event by us, if RTEA and/or KMS exercises its redemption right, following such event, RTEA and/or KMS (as the redeeming member) will generally be treated as if it was entitled to receive the amount of stock, security or other property (including cash) that it would have been entitled to receive had it exercised its redemption right, and we exercised our Assumption Right and gave RTEA and/or KMS solely shares of our common stock, immediately prior to the record date of such event.

        Increase in Our Interest in CPE LLC Upon Exercise of Options or Issuance of Other Equity Compensation.    Upon the exercise of options we have issued or the issuance of other types of equity compensation (such as issuances of restricted or non-restricted stock, payment of bonuses in stock or settlement of stock appreciation rights in stock), the size of our managing member interest in CPE LLC will increase by a number of common units equal to the number of our shares being issued in connection with the exercise of options or the issuance of shares for other types of equity compensation.

        Dissolution.    The LLC Agreement will provide that the unanimous consent of the members of CPE LLC will be required to voluntarily dissolve CPE LLC. In addition to a voluntary dissolution, CPE LLC will be dissolved upon the entry of a decree of judicial dissolution in accordance with Delaware law. Upon a dissolution event, the proceeds of liquidation will be distributed in the following order:

    first, to pay the expenses of winding up, liquidating and dissolving CPE LLC and all creditors of CPE LLC, including members who are creditors; and

    second, to the members pro rata in accordance with their percentage interests.

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        Information.    The LLC Agreement provides that the members of CPE LLC will be entitled to certain information regarding CPE LLC. This information includes quarterly and annual information regarding CPE LLC, information required for certain tax matters and any other information required under Delaware law or as reasonably requested by a member.

        Confidentiality.    Each member will agree to maintain the confidentiality of any information received by the member or its affiliates and representatives in connection with the transactions contemplated by the LLC Agreement which we, as manager, notify the member is confidential for a period of three years following the earlier of the date of dissolution of CPE LLC or the date such member ceases to be a member, with customary exceptions, including to the extent disclosure is required by law or judicial process.

        Amendment.    Unless otherwise required by law, the LLC Agreement may be amended only by the written consent of each of Cloud Peak Energy, in our capacity as manager, and the non-managing members; provided, however, that no amendment may be made without the consent of the holder if the amendment would adversely affect the rights of the holder other than on a pro rata basis with other holders of common membership units (it being understood that any amendment to the Rio Tinto approval rights prior to the date the approval rights terminate shall require Rio Tinto's consent). In addition, the LLC Agreement also provides that any amendment to the Management Services Agreement that could materially adversely impact the economic interests of the members will require the consent of the non-managing members prior to the execution of the amendment by Cloud Peak Energy, in our capacity as manager, on behalf of CPE LLC. The consent rights of the non-managing member with respect to any amendments shall terminate when the non-managing members cease to own in the aggregate at least 10% of the common membership units outstanding following this offering.

        Indemnification.    The LLC Agreement provides for indemnification of the manager, members and officers of CPE LLC and their respective subsidiaries or affiliates from and against liabilities arising out of or relating to the business of CPE LLC, the LLC Agreement, any person's status as a manager, member, director or officer of CPE LLC or any action taken by any manager, member, director or officer of CPE LLC under the LLC Agreement or otherwise on behalf of CPE LLC, except that no person entitled to indemnification under the LLC Agreement will be entitled to indemnification if the liability results from the gross negligence or willful misconduct of such person.

        Fiduciary Duties.    Circumstances may arise in the future when the interests of the members in CPE LLC conflict with the interests of our stockholders. As manager of CPE LLC, we will owe fiduciary duties to the non-managing members of CPE LLC that may conflict with fiduciary duties our officers and directors owe to our stockholders.

        Corporate Opportunities.    The LLC Agreement will also contain similar provisions regarding corporate opportunities as are included in our amended and restated certificate of incorporation. See "Description of Capital Stock—Corporate Opportunities."

Transition Services Agreement

        Historically, Rio Tinto has provided key services to us, including services related to treasury, accounting, procurement, legal services, information technology, employee benefit and welfare plans, among other services. Prior to the completion of this offering, we and CPE LLC will enter into a transition services agreement, or the Transition Services Agreement, with an affiliate of Rio Tinto, pursuant to which this Rio Tinto affiliate will agree to continue to provide CPE LLC with certain of these key services for a transition period generally of nine months with the exception of certain benefit administration services which will continue through December 31, 2009.

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        Pursuant to the Transition Services Agreement, the Rio Tinto affiliate will provide services to CPE LLC, including certain:

    treasury, accounts payable and other financial related services;

    data management and transactional purchasing procurement services;

    benefit administration related services; and

    information technology, network and related services.

        CPE LLC has agreed to pay the Rio Tinto affiliate for such services as set forth in the Transition Services Agreement. We expect that the total amounts paid to the Rio Tinto affiliate under the Transition Services Agreement on behalf of CPE LLC (assuming no extensions of the services) could be up to approximately $3.1 million. Payments for services will be made on a monthly basis and CPE LLC will also reimburse the Rio Tinto affiliate for all reasonable out-of-pocket expenses. Any amounts owed by CPE LLC to the Rio Tinto affiliate under the Transition Services Agreement that are not paid when due will bear interest at a rate of 10% per annum compounded annually from the time the payment was due until paid. However, if the term of any service provided under the agreement is extended or if there is a material change in the assumptions originally used by us or CPE LLC and the Rio Tinto affiliate in determining the costs to be charged for the service, the amounts payable to the Rio Tinto affiliate will be adjusted accordingly as mutually agreed to by CPE LLC and the Rio Tinto affiliate.

        The services provided under the Transition Services Agreement generally terminate after nine months. The time period with respect to any particular service (other than certain benefit administration services) may be extended one time for up to six months upon CPE LLC's request, or for any time period upon mutual agreement with the Rio Tinto affiliate. Certain finance-related services are also subject to a one-time automatic extension upon CPE LLC's request if the service will expire within a certain number of days of the end of our fiscal period or a reporting deadline of the SEC until the report relating to such a fiscal period has been filed with the SEC or the applicable reporting deadline has expired. In addition, CPE LLC may elect to terminate the provision of any or all of the transition services upon 30 days notice to the Rio Tinto affiliate unless the early termination would result in early termination fees payable by the Rio Tinto affiliate to a third-party, in which case 60 days notice will be required. The Transition Services Agreement will also terminate upon certain change in control events of either us or CPE LLC, unless the Rio Tinto affiliate agrees otherwise. In addition, the Rio Tinto affiliate may immediately terminate the Transition Services Agreement if CPE LLC fails to make any payment due to the Rio Tinto affiliate within 30 days after receipt of written notice of this failure, except with respect to amounts in issue that are subject to a bona fide dispute between us or CPE LLC and the Rio Tinto affiliate. The Rio Tinto affiliate will have limited liability to CPE LLC not to exceed the payments the Rio Tinto affiliate receives under the Transition Services Agreement, except with respect to liabilities caused solely by actions of the Rio Tinto affiliate that constitute gross negligence or willful misconduct.

Tax Receivable Agreement

        This offering and the related transactions, as well as subsequent acquisitions of RTEA's units in CPE LLC by us or CPE LLC, are expected to increase our tax basis in our share of CPE LLC's tangible and intangible assets, as well as our basis in the equity of its subsidiaries and assets held by those subsidiaries. These increases in tax basis are expected to increase our depreciation, amortization and cost depletion deductions and therefore to reduce the amount of tax that we would otherwise be required to pay in the future.

        We will enter into a tax receivable agreement, or the Tax Receivable Agreement, with RTEA that will generally require us to pay to RTEA approximately 85% of the amount of cash tax savings, if any,

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that we will realize as a result of the increases in tax basis that we expect to obtain in connection with this offering and related transactions, subsequent acquisitions of RTEA's units in CPE LLC by us or CPE LLC, as well as payments made by us under the Tax Receivable Agreement. We expect to benefit from the remaining approximately 15% of cash tax savings, if any, that we realize as a result of such tax basis step-up. For purposes of the Tax Receivable Agreement, cash savings in income tax will generally be computed by comparing our income tax liability to the tax liability that we would have had if we had structured our transactions with Rio Tinto in a manner in which we did not receive the increases in tax basis referred to above. For administrative convenience, instead of calculating the exact amount of state and local income tax and franchise tax benefits that we receive we will use an assumed federal income tax rate that is one percentage point higher than the actual federal income tax rate when calculating our tax benefits, which is intended to approximate the amount of state and local tax savings that we will actually realize. The term of the Tax Receivable Agreement will commence upon consummation of this offering and will continue until all such tax benefits have been utilized or expired, unless we exercise our right to terminate the Tax Receivable Agreement, as discussed below. Estimating the benefits of our tax basis step-up and, accordingly, the amount of payments that may be made under the Tax Receivable Agreement is, by its nature, imprecise, because the amount and timing of benefits and payments due under the Tax Receivable Agreement will vary depending on a variety of factors, including the amount and timing of our income. If, even without a tax basis step-up, we would not have had a tax liability in a taxable year, we generally will not be required to make payments under the Tax Receivable Agreement for that taxable year because we will not have realized tax savings for that year from the tax basis step-up. However, any tax benefits related to our transactions with RTEA that do not result in realized tax savings in a given tax year will likely generate tax attributes that may be utilized to generate tax savings in previous or future tax years. The utilization of such tax attributes will result in payments under the Tax Receivable Agreement.

        Because of the potential size of the increases in tax basis referred to above, we expect to make substantial payments to RTEA under the Tax Receivable Agreement. Based on the tax basis of our assets as of September 30, 2009 and CPE LLC's operating plan which takes into account only our existing LBAs, the future payments under the Tax Receivable Agreement with respect to the controlling interest in CPE LLC we will acquire in the initial public offering and related transactions are estimated to be approximately $65.2 million in the aggregate and will be payable over the next 18 years (assuming an initial public offering price of $17.00, the midpoint of the range set forth on the cover page of this prospectus and no exercise of the underwriters' overallotment option). This estimate is based on assumptions related to our business that could change and the actual payments could differ materially from this estimate. Payments would be significantly greater if we generate income significantly in excess of the amounts used in our operating plan, for example, because we acquire additional LBAs beyond our existing LBAs and as a result we realize the full tax benefit of such increased tax basis (or an increased portion thereof). In addition, when we or CPE LLC acquire RTEA's remaining units in CPE LLC (or a significant portion thereof), we would likely receive a further step-up in our tax basis based on the value we or CPE LLC pay for RTEA's units at such time and, accordingly, our obligations under the Tax Receivable Agreement to pay RTEA 85% of any benefits we receive as a result of such further step-up would significantly increase. Our obligation may also increase if there are changes in law, including the increase of current corporate income tax rates. Our payment obligations under the Tax Receivable Agreement will not be conditioned upon RTEA's or its affiliate's continued ownership of an interest in CPE LLC or our available cash resources.

        Distributions from CPE LLC.    As managing member, we intend to cause CPE LLC to distribute cash to us sufficient to enable us to fulfill all of our obligations under the Tax Receivable Agreement. These distributions will be made on a per-unit basis, meaning corresponding distributions will be made to all holders of units in CPE LLC, including RTEA, in proportion to their percentage interests on the date of the distribution. Although distributions from CPE LLC to enable us to fulfill our obligations under the Tax Receivable Agreement will generally be permitted under the terms of the debt financing

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transactions, it is possible that certain payment obligations under the Tax Receivable Agreement may be limited.

        Changes in Control.    If we or CPE LLC undergo a change in control other than a change in control caused by RTEA and within 180 days of such change in control RTEA no longer holds any units in CPE LLC, and we do not otherwise elect to terminate the Tax Receivable Agreement as discussed below, payments to RTEA under the Tax Receivable Agreement will continue on a yearly basis but will be based on an agreed upon set of assumptions. In this case, our assumed cash tax savings, and consequently our payments due under the Tax Receivable Agreement, could exceed our actual cash tax savings each year by material amounts. If we undergo such a change in control and our credit rating is impaired, we will be required to provide credit support to Rio Tinto.

        Asset Sales.    In addition to our obligations to make payments to RTEA with respect to our actual cash tax savings, if CPE LLC sells any asset with a gross value greater than $10 million outside the ordinary course of its business in a wholly or partially taxable transaction, we will be required to make yearly payments to RTEA equal to RTEA's deemed cost of financing its accelerated tax liabilities with respect to such sale and after such assets sales we will be required to make certain adjustments to the calculation of our actual cash tax savings for taxable years following sales or redemptions of RTEA's units in CPE LLC. These adjustments could result in an acceleration of our obligations under the Tax Receivable Agreement. In addition, the debt financing transactions contain limitations on CPE LLC's ability to make distributions, which could affect our ability to meet these payment obligations. These limitations on CPE LLC's ability to make distributions may limit our ability to engage in certain taxable asset sales or dispositions outside the ordinary course of our business. We could also seek to obtain RTEA's consent to any such transaction which they would not be obligated to provide. Further, if CPE LLC transfers an asset outside the ordinary course of business in a wholly or partially tax-free transaction to an entity which does not provide us with sufficient information to calculate tax savings with respect to such asset, CPE LLC will be treated as having sold that asset in a taxable transaction for purposes of determining our cash tax savings and this will result in an acceleration of our obligations under the Tax Receivable Agreement.

        Prohibited Transfers.    In order to protect the value of the payments that RTEA expects to receive under the Tax Receivable Agreement, we are prohibited in certain cases from transferring assets to entities treated as (or entities owned by subsidiaries of CPE LLC treated as) corporations for U.S. federal income tax purposes in transfers which are not wholly-taxable if such transfer would be outside the ordinary course of our business.

        Early Termination and Default.    If we breach any of our material obligations under the Tax Receivable Agreement, whether as a result of our failure to make any payment when due (subject to a specified cure period), failure to honor any other material obligation under the Tax Receivable Agreement or by operation of law as a result of the rejection of the Tax Receivable Agreement in a case commenced under the Bankruptcy Code or otherwise, such default will permit RTEA to enforce its rights under the Tax Receivable Agreement, including by acceleration of our obligations to an amount equal to the net present value of each future payment, based on an agreed upon set of assumptions. We have the right to terminate the Tax Receivable Agreement at any time and, if we so elect, our obligations under the Tax Receivable Agreement will be accelerated and calculated in the same manner as acceleration in default.

        IRS Determinations.    Our ability to achieve benefits from any tax basis increase, and therefore the payments expected to be made under the Tax Receivable Agreement, will depend upon a number of factors, as discussed above, including the timing and amount of our future income. If the U.S. Internal Revenue Service were to subsequently challenge one or more of our tax positions relevant to the Tax Receivable Agreement, and if such challenge were ultimately upheld, the terms of the Tax Receivable Agreement require RTEA to repay to us an amount equal to the prior payments made by us to RTEA

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in respect of any disallowed cash tax savings. Further, such a challenge could result in a decrease to our tax benefits as well as our future obligations under the Tax Receivable Agreement. We must obtain RTEA's consent prior to settlement of any such challenge if it may affect RTEA's rights and obligations under the Tax Receivable Agreement.

Registration Rights Agreement

        In connection with this offering, we will enter into a registration rights agreement, or the Registration Rights Agreement, with CPE LLC, Rio Tinto America, RTEA and KMS. Subject to several exceptions, Rio Tinto America will have the right to require us to register for public resale under the Securities Act all registerable securities that are held by RTEA and KMS and that Rio Tinto America requests be registered at any time after the expiration or waiver of the lock-up period following this offering. Registerable securities subject to the Registration Rights Agreement are shares of our common stock issued or issuable in exchange for common membership units and any other shares of our common stock held by RTEA, KMS and any of their transferees. Rio Tinto America, RTEA and KMS may each assign their rights under the Registration Rights Agreement to any person that acquires registerable securities subject to the agreement and who agrees to be bound by the terms of the agreement.

        Rio Tinto America may require us to use our reasonable best efforts to register under the Securities Act all or any portion of these registerable securities upon a "demand request." The demand registration rights are subject to certain limitations. We are not obligated to:

    cause a registration statement with respect to a demand request to be declared effective within 60 days after the effective date of a previous demand registration, other than a shelf registration pursuant to Rule 415 under the Securities Act of 1933, or within 180 days after the effective date of this registration statement (unless the lock-up agreement entered into by RTEA and KMS has been waived by the underwriters (see "Underwriting"));

    cause a registration statement with respect to a demand request to be declared effective unless the demand request is for a number of shares with a market value that is equal to at least $50 million; or

    cause to be declared effective more than five registration statements with respect to demand registration rights.

In the event that we cause a registration statement to be declared effective registering the sale of our equity securities and conduct a sale of those equity securities, the net proceeds of which will be used solely for the purpose of causing CPE LLC to redeem common membership units from RTEA or KMS in exchange for cash, that registration statement will qualify as one demand registration so long as the net proceeds of the offering are equal to at least $50 million. In addition, in the event that Rio Tinto America submits a demand request and is unable to sell the registerable securities under applicable law or due to an SEC position or interpretation regarding the demand registration, we have agreed, as promptly as practicable following such an occurrence, to use our reasonable best efforts to conduct an SEC registered securities offering, the net proceeds of which will be used to repurchase the registerable securities that were intended to be part of the demand registration. The Registration Rights Agreement will include customary blackout and suspension periods. In addition Rio Tinto America may also require us to file a registration statement on Form S-3 for the resale of their registerable securities if we are eligible to use Form S-3 at that time.

        Holders of registerable securities will also have "piggyback" registration rights, which means that these holders may include their respective shares in any future registrations of our equity securities, whether or not that registration relates to a primary offering by us or a secondary offering by or on behalf of any of our stockholders. During the first three years following the completion of this offering,

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RTEA and/or KMS will have priority over us and any other of our stockholders in any registration that is an underwritten offering. After that time, RTEA and KMS will continue to have piggyback registration rights but will no longer have priority over us in a primary underwritten offering that we initiate and their registerable securities will be included on a pro rata basis with any other securities requested to be included in the registration.

        Cloud Peak Energy and RTEA and/or KMS would share responsibility for the expenses of any demand registration (other than underwriters' discounts or commissions) with Cloud Peak Energy covering 25% of the expenses and RTEA and/or KMS covering 75% of the expenses. Cloud Peak Energy will bear the expenses of any piggyback registration. RTEA and KMS will be responsible for any underwriters' discount or commission in an offering by them pursuant to a demand registration and their pro rata share of any underwriters' discount or commission in any piggyback registration and Cloud Peak Energy will be responsible for any underwriters' discount or commission for shares Cloud Peak Energy sells even if the proceeds are intended to be used to redeem RTEA's or KMS' common membership units in CPE LLC. CPE LLC will also agree to indemnify holders with respect to liabilities resulting from untrue statements or omissions in any registration statement used in any such registration, other than untrue statements or omissions resulting from information furnished to us for use in the registration statement by a holder.

RTEA Coal Supply Agreement

        CPE LLC will enter into a coal supply agreement, or the Coal Supply Agreement, with RTEA pursuant to which CPE LLC will receive the economic benefits and risks of certain coal supply contracts previously entered into by RTEA or its affiliates that could not be assigned to us, CPE LLC or its subsidiaries. The coal to be delivered under the Coal Supply Agreement will be sourced from our mines, which were previously held, operated and controlled by RTEA or its affiliates prior to the completion of this offering. CPE LLC will agree to perform RTEA's obligations under certain coal supply contracts and will receive from RTEA the customer payments made under those agreements. As payment for the sale of coal by, and services of, CPE LLC, RTEA will pay CPE LLC a fee equal to all payments actually received by RTEA from the customers for the coal over the term of the Coal Supply Agreement. The Coal Supply Agreement will expire when the coal supply contracts, which cannot be assigned to us, expire. CPE LLC will indemnify RTEA for certain liabilities and failures of CPE LLC to perform its obligations under the agreement.

RTEA Agency Agreement

        CPE LLC will enter into an Agency Agreement with RTEA pursuant to which CPE LLC will undertake certain customer service, logistics and other activities for and on behalf of RTEA. The services relate to RTEA's coal supply agreement with Arch Coal Sales Company, Inc. regarding certain coal purchases and sales involving the Jacobs Ranch mine that could not be otherwise assigned to Arch Coal Sales Company, Inc. in connection with the Jacobs Ranch Sale. Arch Coal Sales Company, Inc. has agreed to substantially perform RTEA's obligations under certain customer coal supply contracts. CPE LLC in turn will act as agent for RTEA for certain actions required to be taken under the coal supply agreement with Arch Coal Sales Company, Inc., including communicating with RTEA customers and collecting and forwarding payments for the coal sales to Arch Coal Sales Company, Inc. CPE LLC will also agree to arrange for the purchase and/or sale of substitute coal if Arch Coal Sales Company, Inc. fails to perform its obligations under its agreement with RTEA. CPE LLC has also agreed not to intentionally interfere with the customer coal supply contracts or the sales or purchases by Arch Coal Sales Company, Inc. pursuant to those contracts. The Agency Agreement will expire when the coal supply agreement with Arch Coal Sales Company, Inc. expires and is terminable prior to that time in RTEA's sole discretion. CPE LLC will be paid a flat flee of $42,000, payable per annum, which is intended to reflect CPE LLC's costs for acting as agent for RTEA.

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Management Services Agreement

        We intend to enter into a management services agreement, or the Management Services Agreement, with CPE LLC pursuant to which we will agree to provide certain management services to CPE LLC. In exchange for the services, CPE LLC will reimburse us for compensation and other expenses of certain of our officers and for reasonable out-of-pocket costs and expenses incurred by us for providing the management services, including legal, accounting and other third-party advisors and consultants, certain insurance costs and other items of corporate overhead and costs associated with our maintenance of our corporate existence and status as a reporting company under the federal securities laws, including costs related to the Registration Rights Agreement. CPE LLC will also provide reasonable administrative and support services to us, such as office facilities, equipment, supplies, payroll and accounting and financial reporting. The Management Services Agreement also provides that our employees may participate in CPE LLC's benefit plans, and that CPE LLC employees may participate in our equity incentive plan. CPE LLC will indemnify us for any losses arising from our performance under the Management Services Agreement, except that we will indemnify CPE LLC for any losses caused by our willful misconduct or gross negligence. In the event we cease to serve as manager of CPE LLC, the Management Services Agreement will automatically terminate.

Employee Matters Agreement

        Prior to the completion of this offering, we, CPE LLC, RTA, RTEA, CPESC and, for a limited purpose, Rio Tinto plc and Rio Tinto Limited, will enter into an employee matters agreement, or the Employee Matters Agreement, that will govern certain compensation and employee benefit obligations with respect to those employees being transferred to us and CPE LLC from Rio Tinto. The Employee Matters Agreement will allocate liabilities and responsibilities relating to certain employee compensation and benefit plans and programs and related matters in connection with the separation, including, among other things, health and welfare benefit obligations, the treatment of outstanding annual bonus awards and long-term incentive awards, deferred compensation obligations and retirement plans. The executives of our business will be employed by us following the completion of this offering and all other employees will be employed by CPE LLC or one of its subsidiaries.

Employee Benefits

        The Employee Matters Agreement will provide that, upon the completion of this offering, we, in the case of our executive employees, and CPE LLC in respect of all other employees, will assume and be liable for wages, salaries, incentive compensation and defined contribution retirement plan obligations and liabilities for all employees of our business and will indemnify Rio Tinto America and RTEA against certain severance and benefits continuation obligations. Until January 1, 2010, Rio Tinto America and RTEA will continue to provide health and welfare benefits to the employees of our business and CPE LLC will reimburse and indemnify (other than for willful misconduct or material breaches of fiduciary duty) Rio Tinto America and RTEA for agreeing to administer these benefits to our employees until such date. Neither Rio Tinto America nor RTEA shall have liability under any health and welfare plan for claims incurred in respect of our or CPE LLC's employees after the completion of this offering and neither us nor CPE LLC shall have liability under any health and welfare plan for claims incurred in respect of our or CPE LLC's employees prior to the completion of this offering. In addition, CPE LLC will assume and indemnify Rio Tinto America and RTEA for any obligations arising out of certain health reimbursement accounts provided in 2004 and 2005 to our employees.

        Our employees will become eligible to participate in our health and welfare benefit plans on January 1, 2010 and we will reserve the right to amend, modify or terminate any of our benefit plans (including any retirement plans) in accordance with their terms.

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Retirement Plans

        Our employees and the employees of CPE LLC will be permitted to roll over their account balances (including loans) in the applicable Rio Tinto America defined contribution plan to CPE LLC's corresponding plan and will be eligible to participate in such defined contribution plan immediately upon the completion of the offering. We will credit each of our and CPE LLC's employees with his or her service with any member of Rio Tinto prior to the completion of this offering for all purposes under the plans sponsored or maintained by us to the extent the corresponding Rio Tinto America plans give credit for such service. Neither we nor CPE LLC will be assuming any pension obligations under Rio Tinto's or Rio Tinto America's defined benefit plans, but we will provide retiree medical benefits for former Rio Tinto employees now working for us once they reach age 55 and have 10 years of service combined with Rio Tinto and us. Employees vested in Rio Tinto America's plan will be able to choose between our retiree benefits or those provided by Rio Tinto America.

Bonus Plans

        The Employee Matters Agreement will provide that any of our employees that participated in the Rio Tinto Short Term Incentive Plan, the Rio Tinto Energy America Retention Bonus Plan or the Rio Tinto Energy America Quarterly Incentive Plan will receive their full bonus for the 2009 calendar year. Rio Tinto America and RTEA will be liable for a pro rata portion of the bonus equal to the number of days in the performance period prior to the completion of the offering divided by the total number of days in the applicable performance period and we will be liable for the remainder of such bonus. With respect to any discretion under any bonus plan that may be exercised by Rio Tinto America or RTEA, such discretion will be exercised prior to the completion of the offering and the fact that such discretion has been exercised will be communicated to our employees.

        With respect to our employees that participate in Rio Tinto plc and Rio Tinto Limited equity compensation plans, the Employee Matters Agreement provides that, upon the closing of this offering, such employees will be treated as having terminated their employment with Rio Tinto due to their employer ceasing to be under the control of Rio Tinto and shall be paid out in accordance with the applicable plan terms. Rio Tinto plc and Rio Tinto Limited will only be party to the Employee Matters Agreement for purposes of Rio Tinto's equity compensation plans.

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CAPITALIZATION

        The following table sets forth our capitalization as of September 30, 2009:

    for Cloud Peak Energy Inc. and Rio Tinto Energy America Inc. on a historical basis;

    as adjusted for the structuring transactions and separation from Rio Tinto; and

    for Cloud Peak Energy Inc. as adjusted for the structuring transactions and separation from Rio Tinto, and on a pro forma basis to give effect to the debt financing transactions, the issuance of approximately 831,000 shares of restricted stock to our directors and employees in connection with this offering (assuming an estimated public offering price of $17.00 per share, the midpoint of the range set forth on the cover page of this prospectus), the issuance of 30,600,000 shares of common stock in this offering and the use of proceeds from this offering, as if each had occurred on September 30, 2009.

        RTEA is considered to be our predecessor for accounting purposes and its consolidated financial statements are our historical consolidated financial statements.

        This table should be read in conjunction with "Structuring Transactions and Related Agreements," "Use of Proceeds," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Unaudited Pro Forma Condensed Consolidated Financial Information," and the consolidated financial statements and related notes thereto included in this prospectus.

 
  As of September 30, 2009  
 
  Cloud Peak
Energy Inc.
Historical
  Rio Tinto
Energy
America Inc.
Historical
  As Adjusted for
the Structuring
Transactions
and Separation
from Rio Tinto
  Cloud Peak
Energy Inc.
Pro Forma
 
 
  (dollars in thousands except per share amounts)
 

Long-term debt:

                         

Long-term debt—other (including current portion)(1)

  $   $ 175,604   $ 175,604   $ 175,604  

Revolving credit facility(2)

                 

Senior notes due 2016 and 2019 offered concurrently(3)

                584,622  
                   

Total long-term debt (including current portion)

        175,604     175,604     760,226  

Equity:

                         
 

Common stock ($0.01 par value; 200,000,000 shares authorized; 1 share issued and outstanding on a historical basis; 31,431,000 shares issued and outstanding on a pro forma basis)

                306  
 

Additional paid-in capital

        805,074     (208,568 )   279,870  
 

Retained earnings (accumulated deficit)

    (532 )   379,878     (532 )   (532 )
 

Accumulated other comprehensive income (loss)

        (4,564 )   (4,564 )   (4,564 )
                   
 

Shareholders' equity attributable to controlling interest

    (532 )   1,180,388     (213,664 )   275,080  
 

Noncontrolling interest

            183,735     182,505  
                   

Total equity

    (532 )   1,180,388     (29,929 )   457,585  
                   

Total capitalization

  $ (532 ) $ 1,355,992   $ 145,675   $ 1,217,811  
                   

(1)
Includes current portion of long-term debt. This amount is composed of $172.3 million of discounted obligations payable to the Bureau of Land Management of the U.S. Department of the Interior under four coal leases and $3.3 million of other long-term debt incurred in connection with land acquisitions. See Note 9 of Notes to Consolidated Financial Statements included elsewhere in this prospectus for additional information on our long-term debt.

(2)
CPE LLC will enter into a $400 million revolving credit facility concurrently with this offering. We expect that in the near-term CPE LLC will use up to $150 million of the capacity under its revolving credit facility to support the letter of credit arrangements securing our reclamation obligations. CPE LLC may use additional capacity for these purposes going forward.

(3)
CPE LLC will issue $600 million aggregate principal amount ($584.6 million net of assumed original discount) of senior notes concurrently with this offering in two tranches maturing in 2016 and 2019.

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DILUTION

        If you invest in our common stock in this offering, your interest will be diluted to the extent of the difference between the initial public offering price per share of our common stock and the pro forma net tangible book value per share of our common stock after this offering. Dilution results from the fact that the per share offering price of the common stock is substantially in excess of the book value per share attributable to RTEA, the existing equity holder of our business.

        As of September 30, 2009 our historical net tangible book value (deficit) was approximately $1,137.1 million, or $1,137.1 million per share of common stock. As of September 30, 2009, as adjusted for the structuring transactions and separation from Rio Tinto, our net tangible book value (deficit) was approximately $(72.7) million, or $(2.47) per share of common stock. As adjusted for the structuring transactions and separation from Rio Tinto our net tangible book value (deficit) per share represents total tangible assets less total liabilities and divided by the number of shares of our common stock outstanding, in each case after giving effect to the structuring transactions described under "Structuring Transactions and Related Agreements" and other transactions described under "Unaudited Pro Forma Condensed Consolidated Financial Information" and assuming that all of RTEA's and KMS' common membership units in CPE LLC were acquired by means of redemption and we used our Assumption Right to acquire RTEA's and KMS' common membership units in exchange only for shares of our common stock.

        After giving effect to our sale in this offering of 30,600,000 shares of our common stock, the issuance of approximately 831,000 shares of restricted stock to be issued to our directors and employees in connection with this offering, the structuring transactions described under "Structuring Transactions and Related Agreements" and other transactions described under "Unaudited Pro Forma Condensed Consolidated Financial Information," and assuming an estimated initial public offering of $17.00 per share (the midpoint of the range set forth on the cover of this prospectus) and after deducting estimated underwriting discounts and commissions and assuming that all of RTEA's and KMS' common membership units in CPE LLC were acquired by redemption and we, pursuant to our Assumption Right, acquired RTEA's and KMS' common membership units in exchange only for shares of our common stock, our pro forma net tangible book value as of September 30, 2009 would have been approximately $414.8 million, or $6.82 per share of our common stock. This represents an immediate increase in net tangible book value of $9.29 per share to RTEA and KMS and an immediate dilution in net tangible book value of $10.18 per share to new investors purchasing shares in this offering. This information assumes no exercise by the underwriters of their right to purchase up to 4,590,000 shares of common stock from us to cover over-allotments.

        The following table illustrates this per share dilution:

Assumed initial public offering price per share (the midpoint of the price range set forth on the cover of this prospectus)

        $ 17.00  
 

Net tangible book value per share, as adjusted for the structuring transactions and separation from Rio Tinto, as of September 30, 2009, before giving effect to this offering and the issuance of restricted stock to our directors and employees

  $ (2.47 )      
 

Increase in net tangible book value per share attributable to new investors, as adjusted for the structuring transactions and separation from Rio Tinto and as adjusted for this offering and the issuance of restricted stock to our directors and employees

    9.29        
             
 

Pro forma net tangible book value per share, after giving effect to this offering

          6.82  
             
 

Dilution in pro forma net tangible book value per share to new investors in this offering

        $ 10.18  
             

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        If the underwriters' over-allotment option is exercised in full, the pro forma net tangible book value per share of common stock after giving effect to this offering and the structuring transactions described under "Structuring Transactions and Related Agreements" would be approximately $7.47 per share, and the dilution in pro forma net tangible book value per share of common stock to new investors would be $9.53 per share.

        The following table summarizes, on a pro forma basis as of September 30, 2009, the total number of shares of our common stock purchased from us, the total cash consideration paid to us and the average price per share paid by RTEA and by new investors purchasing shares in this offering, assuming that all of RTEA's and KMS' common membership units in CPE LLC were acquired by redemption and we, pursuant to our Assumption Right, acquired RTEA's and KMS' common membership units in exchange only for shares of our common stock, at an assumed initial public offering price of $17.00 per share (the midpoint of the range set forth on the cover of the prospectus), before deducting the estimated underwriting discounts and commissions:

 
  Shares Purchased   Total Consideration    
 
 
  Average Price
Per Share
 
 
  Number   Percent   Amount   Percent  

RTEA and KMS

    29,400,000     49.0 % $ 314,959,000     37.7 % $ 10.71  

New investors

    30,600,000     51.0 % $ 520,200,000     62.3 % $ 17.00  
                         

Total

    60,000,000     100.0 % $ 835,159,000     100.0 %      
                         

        The table above excludes:

    approximately 831,000 shares of restricted stock to be issued to our directors and employees in connection with this offering; and

    958,000 share options to be granted to our named executive officers and other employees in connection with this offering.

        A $1.00 increase (decrease) in the assumed initial public offering price of $17.00 per share (the midpoint of the range set forth on the cover of the prospectus) would not impact our pro forma net tangible book value as all of the net proceeds of this offering will be used to acquire our managing member interest in CPE LLC. The pro forma information discussed above is for illustrative purposes only. Our net tangible book value following the completion of the offering is subject to adjustment based on the actual offering price of our common stock and other terms of this offering determined at pricing.

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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

        The following unaudited pro forma condensed consolidated information sets forth our unaudited pro forma and historical consolidated statements of operations for the year ended December 31, 2008 and for the nine months ended September 30, 2009 and the unaudited pro forma and historical consolidated balance sheets at September 30, 2009. Such information is based on the audited and unaudited consolidated financial statements of RTEA appearing elsewhere in this prospectus, as adjusted to illustrate the estimated pro forma effects of our structuring transactions that will occur immediately prior to the offering and separation from Rio Tinto and transition to a stand-alone public company. RTEA consolidated financial statements were prepared on a carve-out basis from our ultimate parent company, Rio Tinto plc. Such carve-out information is not intended to be a complete presentation of the financial position or results of operations of our company had we operated as a stand-alone public company. RTEA is considered to be our predecessor for accounting purposes and its consolidated financial statements are our historical consolidated financial statements. Cloud Peak Energy Inc. was incorporated in Delaware in July 2008 in anticipation of an initial public offering and has had no operations.

        The unaudited pro forma condensed consolidated balance sheet at September 30, 2009, and the unaudited pro forma condensed consolidated statements of operations for the nine months ended September 30, 2009 and for the year ended December 31, 2008, give effect to (i) the structuring transactions and related agreements, including the separation from Rio Tinto, (ii) the debt financing transactions, (iii) the issuance of approximately 831,000 shares of restricted common stock in connection with this offering, which vest three years after our initial public offering (assuming an estimated public offering price of $17.00 per share, the midpoint of the range set forth on the cover page of this prospectus) and (iv) the issuance of 30,600,000 shares of common stock in this offering (assuming an estimated public offering price of $17.00 per share, the midpoint of the range set forth on the cover page of this prospectus) and the use of proceeds from this offering as if each had occurred on September 30, 2009 for the unaudited pro forma condensed consolidated balance sheet and on January 1, 2008 for the unaudited pro forma condensed consolidated statements of operations.

        The unaudited pro forma adjustments are based on available information and certain assumptions that we believe are reasonable. Presentation of the unaudited pro forma financial information is prepared in conformity with Article 11 of Regulation S-X.

        The unaudited pro forma condensed consolidated financial information was prepared on a basis consistent with that used in preparing our audited consolidated financial statements and includes all adjustments, consisting of normal and recurring items, that we consider necessary for a fair presentation of the financial position and results of operations for the unaudited periods.

        The unaudited pro forma condensed consolidated financial information should be read in conjunction with the sections of this prospectus entitled "Use of Proceeds," "Structuring Transactions and Related Agreements," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and our historical consolidated financial statements and related notes thereto included elsewhere in this prospectus. The unaudited pro forma condensed consolidated financial information is for informational purposes only and is not intended to represent or be indicative of the consolidated results of operations or financial position that we would have reported had the structuring transactions and this offering been completed on the dates indicated and should not be taken as representative of our future consolidated results of operations or financial position.

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Unaudited Pro Forma Consolidated Balance Sheet
As of September 30, 2009
(dollars in thousands, except per share amounts)

 
  Cloud Peak
Energy Inc.—
Historical
  Rio Tinto Energy
America Inc.—
Historical
  Adjustments for the
Structuring
Transactions,
Separation
from Rio Tinto and
Eliminations(1)
  As Adjusted for
Structuring
Transactions and
Separation
from Rio Tinto
  Adjustments for
this Offering and
Debt Financing(2)
  Cloud Peak
Energy Inc.
Pro Forma
 

ASSETS

                                     

Current assets

                                     
 

Cash and cash equivalents

  $   $ 18,319   $   $ 18,319   $ 491,589   (a) $ 199,319  

                            (491,589 )(b)      

                            181,000   (c)      
 

Accounts receivable, net

        81,390         81,390         81,390  
 

Due from related parties

        153,769     (149,615 )(a)   37,921         37,921  

                7,767   (b)                  
 

                26,000   (h)                  
 

Deferred income taxes

        36,150     (34,561 )(c)   1,589         1,589  
 

Inventories, net

        62,996         62,996         62,996  
 

Other current assets

        12,636         12,636     5,268   (c)   13,829  

                            (4,075 )(a)      
 

Current assets of discontinued operations

        62,873     (62,873 )(d)            
                           

Total current assets

        428,133     (213,282 )   214,851     182,193     397,044  

Property, plant and equipment, net

        981,248         981,248         981,248  

Deferred income taxes

            147,271   (c)   147,271         147,271  

Intangible assets, net and goodwill

        42,780         42,780         42,780  

Restricted cash

                    92,500   (c)   92,500  

Other assets

        5,720     1,000   (h)   6,720     21,282   (c)   28,002  

Noncurrent assets of discontinued operations

        519,431     (519,431 )(d)            
                           

Total assets

  $   $ 1,977,312   $ (584,442 ) $ 1,392,870   $ 295,975   $ 1,688,845  
                           

LIABILITIES AND EQUITY

                                     

Current liabilities

                                     
 

Accounts payable and other liabilities

  $   $ 103,579   $ (758 )(e) $ 99,031   $   $ 99,031  

                1,781   (f)                  

                (5,571 )(b)                  
 

Royalties and production taxes

        115,124         115,124         115,124  
 

Due to related party

    532         (532 )(a)   776,161     (491,589 )(b)    

                491,589   (g)         (284,572 )(c)      

                284,572   (h)                  
 

Tax agreement liability—related party, current portion

            4,415   (i)   4,415         4,415  
 

Current portion of long-term debt

        53,823         53,823       (c)   53,823  
 

Current liabilities of discontinued operations

        64,740     (64,740 )(d)            
                           

Total current liabilities

    532     337,266     710,756     1,048,554     (776,161 )   272,393  

Long-term debt

        121,781         121,781     584,622   (c)   706,403  

Tax agreement liability—related party, net of current portion

            60,800   (i)   60,800         60,800  

Asset retirement obligations

        169,642           169,642         169,642  

Other liabilities

        7,296     17,304   (j)   22,022         22,022  

                (2,578 )(c)                  

Deferred income taxes

        86,320     (86,320 )(c)            

Noncurrent liabilities of discontinued operations

        74,619     (74,619 )(d)            
                           

Total liabilities

    532     796,924     625,343     1,422,799     (191,539 )   1,231,260  
                           

Equity

                                     
 

Common stock ($0.01 par value; 1,000 shares authorized; 1 share issued and outstanding on a historical basis, for Cloud Peak Energy and RTEA, each; 200,000,000 shares authorized, 31,431,000 shares issued and outstanding on a pro forma basis)

                    306   (a)   306  
 

Additional paid-in capital

        805,074     (1,013,642 )(n)   (208,568 )   487,208   (a)   279,870  

                            1,230   (d)      
 

Retained earnings (accumulated deficit)

    (532 )   379,878     (379,878 )(n)   (532 )       (532 )
 

Accumulated other comprehensive income (loss)

        (4,564 )       (4,564 )       (4,564 )
                           
 

Shareholders' equity attributable to controlling interest

    (532 )   1,180,388     (1,393,520 )   (213,664 )   488,744     275,080  
 

Noncontrolling interest in CPE LLC

            183,735   (g)   183,735     (1,230 )(d)   182,505  
                           

Total equity

    (532 )   1,180,388     (1,209,785 )   (29,929 )   487,514     457,585  
                           

Total liabilities and equity

  $   $ 1,977,312   $ (584,442 ) $ 1,392,870   $ 295,975   $ 1,688,845  
                           

See notes to unaudited pro forma condensed consolidated financial information.

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Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Nine Months Ended September 30, 2009
(dollars in thousands, except pro forma per share amounts)

 
  Cloud Peak
Energy Inc.—
Historical
  Rio Tinto Energy
America Inc.—
Historical
  Adjustments for the
Structuring
Transactions,
Separation
from Rio Tinto and
Eliminations(1)
  As Adjusted for
Structuring
Transactions and
Separation
from Rio Tinto
  Adjustments for
this Offering and
Debt Financing(2)
  Cloud Peak
Energy Inc.
Pro Forma
 

Revenues

  $   $ 1,061,286   $   $ 1,061,286   $   $ 1,061,286  

Costs and expenses

                                     
 

Cost of product sold (exclusive of depreciation, depletion, amortization and accretion, shown separately)

        702,569       (k)   702,569         702,569  
 

Depreciation, depletion, amortization, accretion and exploration costs

        102,711         102,711         102,711  
 

Selling, general and administrative expenses

    415     49,075       (k)   49,490         49,490  
                           
   

Total costs and expenses

    415     854,355         854,770         854,770  
                           

Operating Income

    (415 )   206,931         206,516         206,516  
 

Interest and other income (expense), net

        (764 )       (764 )   (50,569 )(c)   (51,333 )
                           

Income from continuing operations before income tax provision and earnings from unconsolidated affiliates

    (415 )   206,167         205,752     (50,569 )   155,183  
 

Income tax provision

        (59,888 )   27,731   (l)   (32,157 )   9,406   (e)   (22,751 )
 

Earnings (losses) from unconsolidated affiliates, net of tax

        989     273   (l)   1,262         1,262  
                           

Income from continuing operations

    (415 )   147,268     28,004     174,857     (41,163 )   133,694  

Income from continuing operations attributable to noncontrolling interest

            (100,132 )(m)   (100,132 )   24,440   (f)   (75,692 )
                           

Income from continuing operations attributable to controlling interest

  $ (415 ) $ 147,268   $ (72,128 ) $ 74,725   $ (16,723 ) $ 58,002  
                           

Income from continuing operations per share:

                                     
 

Basic

  $ (415 ) $ 147,268                     $ 1.90   (g)
                                 
 

Diluted

  $ (415 ) $ 147,268                     $ 1.83   (g)
                                 

Weighted average shares outstanding:

                                     
 

Basic

    1     1                       30,600,000   (g)
                                 
 

Diluted

    1     1                       60,380,875   (g)
                                 

See notes to unaudited pro forma condensed consolidated financial information.

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Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 2008
(dollars in thousands, except pro forma per share amounts)

 
  Cloud Peak
Energy Inc.—
Historical
  Rio Tinto Energy
America Inc.—
Historical
  Adjustments for the
Structuring
Transactions,
Separation
from Rio Tinto and
Eliminations(1)
  As Adjusted for
Structuring
Transactions and
Separation
from Rio Tinto
  Adjustments for
this Offering and
Debt Financing(2)
  Cloud Peak
Energy Inc.
Pro Forma
 

Revenues

  $   $ 1,239,711   $   $ 1,239,711   $   $ 1,239,711  

Costs and expenses

                                     
 

Cost of product sold (exclusive of depreciation, depletion, amortization and accretion, shown separately)

        892,649       (k)   892,649         892,649  
 

Depreciation, depletion, amortization, accretion and exploration costs

        149,090         149,090         149,090  
 

Selling, general and administrative expenses

    116     70,485       (k)   70,601         70,601  
 

Asset impairment charges

        2,551         2,551         2,551  
                           
   

Total costs and expenses

    116     1,114,775           1,114,891         1,114,891  
                           

Operating income

    (116 )   124,936         124,820         124,820  
 

Interest and other income (expense), net

        (15,796 )   14,944   (a)   (852 )   (66,046 )(c)   (66,898 )
                           

Income from continuing operations before income tax provision and earnings from unconsolidated affiliates

    (116 )   109,140     14,944     123,968     (66,046 )   57,922  
 

Income tax provision

        (25,318 )   10,307   (l)   (15,011 )   12,285   (e)   (2,726 )
 

Earnings (losses) from unconsolidated affiliates, net of tax

        4,518     1,245   (l)   5,763         5,763  
                           

Income from continuing operations

    (116 )   88,340     26,496     114,720     (53,761 )   60,959  

Income from continuing operations attributable to noncontrolling interest

            (63,302 )(m)   (63,302 )   31,920   (f)   (31,382 )
                           

Income from continuing operations attributable to controlling interest

  $ (116 ) $ 88,340   $ (36,806 ) $ 51,418   $ (21,841 ) $ 29,577  
                           

Income from continuing operations per share:

                                     
 

Basic

  $ (116 ) $ 88,340                     $ 0.97   (g)
                                 
 

Diluted

  $ (116 ) $ 88,340                     $ 0.89   (g)
                                 

Weighted average shares outstanding:

                                     
 

Basic

    1     1                       30,600,000   (g)
                                 
 

Diluted

    1     1                       60,138,500   (g)
                                 

See notes to unaudited pro forma condensed consolidated financial information.

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Notes to Unaudited Pro Forma Condensed Consolidated Financial Information

Basis of Presentation

        The accompanying unaudited pro forma condensed consolidated balance sheet and statements of operations present:

    Cloud Peak Energy Inc. and Rio Tinto Energy America Inc. on a historical basis;

    as adjusted for the structuring transactions and separation from Rio Tinto; and

    for Cloud Peak Energy Inc. as adjusted for the structuring transactions and separation from Rio Tinto, and on a pro forma basis to give effect to CPE LLC's revolving credit facility and senior notes offering, the issuance of approximately 831,000 shares of restricted common stock to be issued to our directors and employees in connection with this offering, (assuming an estimated public offering price of $17.00 per share, the midpoint of the range set forth on the cover page of this prospectus) and the issuance of 30,600,000 shares of common stock in this offering (assuming an estimated public offering price of $17.00 per share, the midpoint of the range set forth on the cover page of this prospectus) and the use of proceeds from this offering.

        The unaudited pro forma condensed consolidated financial information is based on the audited and unaudited financial statements of RTEA. The consolidated financial statements of RTEA were prepared on a carve-out basis from our ultimate parent company, Rio Tinto plc. and include the accounts of Cloud Peak Energy Inc. Such carve-out information is not intended to be a complete presentation of the financial position or results of operations of our company had we operated as a stand-alone public company.

        The historical consolidated balance sheet of RTEA as of September 30, 2009 reflects $62.9 million and $519.4 million of current and noncurrent assets of discontinued operations, respectively, and $64.7 million and $74.6 million of current and noncurrent liabilities of discontinued operations, respectively. Effective March 8, 2009, CPE LLC entered into an agreement to sell the Jacobs Ranch mine. As of March 1, 2009, the Jacobs Ranch mine was presented in our consolidated financial statements as held for sale and the assets and liabilities and results of operations of the Jacobs Ranch mine have been reflected as discontinued operations. The Jacobs Ranch mine was sold on October 1, 2009, and has been eliminated from our pro forma condensed consolidated balance sheet as of September 30, 2009. See note (1)(d) below.

        The pro forma condensed consolidated statements of operations for the nine months ended September 30, 2009 and the year ended December 31, 2008 present financial information only for the Company's continuing operations. Accordingly, the income (loss) from discontinued operations related to Jacobs Ranch mine and other discontinued operations are not reflected in the unaudited pro forma condensed consolidated financial information and no pro forma adjustment is necessary to reflect the disposal of the discontinued operations in the respective pro forma condensed consolidated statements of operations.

Pro Forma Adjustments

    (1)
    In connection with our separation from RTEA, we are entering into a series of integrated structuring transactions and related agreements while Cloud Peak Energy Inc. and RTEA are under common control by Rio Tinto America. Accordingly, the assets and liabilities of CPE LLC will be reported in the unaudited pro forma condensed consolidated balance sheet at their historical cost, consistent with the requirements of U.S. GAAP. The amounts in this column represent the pro forma adjustments made to reflect the structuring transactions to be

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      completed prior to this offering as further described in "Structuring Transactions and Related Agreements":

      (a)
      Reflects the effects of the structuring transactions on amounts due from related parties. Due from related parties in RTEA's unaudited consolidated balance sheet as of September 30, 2009, consisted of (i) intercompany accounts comprising a $149.6 million net receivable from Rio Tinto America and its subsidiaries other than RTEA and (ii) a $4.2 million receivable from an unconsolidated investee of CPE LLC. The accounts comprising the net receivable from Rio Tinto America and its subsidiaries other than RTEA will be cancelled, repaid or otherwise eliminated prior to the offering. Accordingly, the structuring transactions result in the elimination of all intercompany accounts other than CPE LLC's $4.2 million net receivable from its unconsolidated investee. These eliminations are reflected as a $149.6 million charge to shareholders' equity (see note (1)(n) below) in the unaudited pro forma condensed consolidated balance sheet as of September 30, 2009. In addition, an adjustment to eliminate a $532,000 intercompany payable from Cloud Peak Energy Inc. to RTEA is reflected as credit to shareholders' equity (see note (1)(n) below) because the related expenses are included in RTEA's consolidated retained earnings as of September 30, 2009.

        The unaudited pro forma condensed consolidated statements of operations for the nine months ended September 30, 2009, and for the year ended December 31, 2008, give effect to the elimination of the intercompany account balances as of January 1, 2008. During the period from January 1 to September 24, 2008, RTEA had outstanding balances under an interest bearing facility loan from Rio Tinto America and recognized interest expense of $14.9 million on those balances. This interest expense would not have been incurred had the structuring transactions been completed as of January 1, 2008. Accordingly, the unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2008, reflects an adjustment to reverse such interest expense. Additional interest expense resulting from CPE LLC entering into new debt agreements is discussed in note (2)(c) below.

      (b)
      Reflects adjustments to accrued liabilities at the offering date as a result of certain provisions of the Employee Matters Agreement. The agreement provides that Rio Tinto America and RTEA will be liable for claims incurred prior to the offering date under Rio Tinto America's and RTEA's employee health insurance plans. Accordingly, the unaudited pro forma condensed consolidated balance sheet includes an adjustment to eliminate a $5.6 million recorded accrued liability for incurred but unpaid health insurance claims as of September 30, 2009. The Employee Matters Agreement further provides that Rio Tinto America and RTEA will reimburse CPE LLC for a portion of the bonuses to be paid under Rio Tinto America's and RTEA's short-term incentive plans based on the number of days in the performance period prior to the offering date. Accordingly, the unaudited pro forma condensed consolidated balance sheet reflects a pro forma adjustment to recognize a $7.8 million receivable, representing the recorded accrued liability as of September 30, 2009 for such bonuses that are required to be reimbursed by Rio Tinto America and RTEA. A corresponding $13.3 million increase in shareholders' equity (see note (1)(n) below) is reflected in the unaudited pro forma condensed consolidated balance sheet as of September 30, 2009, reflecting Rio Tinto's assumption of these funding obligations.

      (c)
      Reflects the effects on our deferred income tax accounts that result from Cloud Peak Energy Inc.'s use of offering proceeds to repay the CPE Note pursuant to which it acquired a controlling interest in the common membership units of CPE LLC pursuant to the Acquisition Agreement. At the time of the acquisition, CPE LLC will have in effect an election under Section 754 of the Internal Revenue Code, which will result in an

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        increase in the tax basis of Cloud Peak Energy Inc.'s initial share of the net assets of CPE LLC. This increase in tax basis will result in additional income tax deductions over the remaining lives of the affected assets, which consist primarily of property, plant and equipment used in our mining operations. Based on currently enacted tax rates, these deductions and tax attributes, to the extent that they reduce future taxable income, would result in a decrease in our future income tax payments. The increased tax basis results in a gross deferred tax asset of $157.4 million, calculated as the statutory rate of 36% multiplied by the amount by which our tax bases in these assets exceed the related financial reporting carrying amounts. In addition, Cloud Peak Energy Inc.'s ownership of the controlling interest in CPE LLC will result in the elimination of RTEA's existing deferred income tax accounts, because RTEA will hold a noncontrolling interest in CPE LLC and no longer will be included in our consolidated financial statements. Substantially all of the $50.2 million net deferred income tax liability reflected in RTEA's historical consolidated balance sheet as of September 30, 2009 is recorded at the parent company level and will be eliminated in connection with the structuring transactions, as CPE LLC generally is not an income tax paying entity and does not have any significant deferred income taxes. Similarly, RTEA's $2.6 million liability for uncertain tax positions as of September 30, 2009 (included in other long-term liabilities) also will be eliminated in connection with the structuring transactions. The unaudited pro forma condensed consolidated balance sheet as of September 30, 2009, thus reflects adjustments to eliminate RTEA's existing income tax accounts and to record $157.4 million in deferred tax assets related to the excess of the tax basis of Cloud Peak Energy Inc.'s interest in CPE LLC over its interest in the related carrying amounts of CPE LLC's net assets as reported in the historical consolidated balance sheet as of September 30, 2009.

        The future realization of the deferred income tax assets that result from the increased tax basis of our interest in CPE LLC's net assets depends on the existence of sufficient future taxable income. Based on our consideration of CPE LLC's historical operations, the effects of the structuring and financing transactions contemplated by this offering, current forecasts of taxable income over the remaining lives of our mines, the availability of tax planning strategies, and other factors, we determined that $148.9 million of the potential tax benefits resulting from the increased tax basis of Cloud Peak Energy Inc.'s interest in CPE LLC are more likely than not to be realized at the statutory federal and state income tax rates. Accordingly, the unaudited pro forma condensed consolidated balance sheet as of September 30, 2009, reflects a $8.5 million adjustment to record a valuation allowance to reduce the deferred income tax assets to the net amount that we determined is more likely than not to be realized.

        For U.S. GAAP purposes, the deferred income tax assets and related valuation allowance that will be recognized as a result of our increased tax basis in CPE LLC's net assets are attributable to transactions between the owners of CPE LLC. The tax effects of such equity transactions are required by U.S. GAAP to be recorded in equity. Accordingly, the unaudited pro forma condensed consolidated balance sheet as of September 30, 2009, reflects a $201.6 million increase in shareholders' equity (see note (1)(n) below) to reflect the net effects of the pro forma adjustments to deferred income taxes described above.

      (d)
      Reflects the elimination of the assets and liabilities associated with the Jacobs Ranch coal mine, which CPE LLC sold on October 1, 2009. The sale resulted in gross nonrecurring cash proceeds, of approximately $764 million and a nonrecurring gain on sale, net of income taxes, of approximately $170 million. The net proceeds and gain are subject to adjustment based on a final determination of certain balance sheet amounts as of the closing date. The unaudited pro forma condensed consolidated balance sheet reflects a pro forma adjustment to charge shareholders' equity (see note (1)(n) below) by

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        $442.9 million for the net assets of the Jacobs Ranch coal mine as of September 30, 2009. The adjustment reflects the net effect of charging retained earnings for the distribution of net sales proceeds to Rio Tinto America and crediting retained earnings for the gain on sale. No pro forma adjustments to cash or current income tax liabilities are reflected in the unaudited pro forma condensed consolidated balance sheet, because the net proceeds from the sale were distributed to Rio Tinto America, which has the obligation to pay the related income taxes.

      (e)
      As a result of our separation from RTEA, the vesting of certain awards under Rio Tinto's existing share-based compensation arrangements will accelerate as provided in the original terms of those awards. As of September 30, 2009, we would recognize additional compensation expense of $716,000 to reflect the accelerated vesting; however, no pro forma adjustment for this amount is included in the unaudited pro forma consolidated statements of operations because it does not have a continuing impact on our operations. Rio Tinto will retain the obligation to settle existing awards that are expected to be settled in cash and which are recorded as liabilities. We have recorded adjustments in our unaudited pro forma consolidated balance sheet as of September 30, 2009, to reflect a $716,000 charge to retained earnings resulting from acceleration of the vesting of share-based compensation, a $758,000 decrease in other current liabilities resulting from Rio Tinto's retention of cash-settled awards, with a corresponding credit to shareholders' equity (see note (1)(n) below).

        We will establish new share-based compensation plans in connection with this offering and have considered the continuing impacts of those plans on our operating expenses as discussed in note (1)(k) below.

      (f)
      Reflects the recognition of a $1.8 million liability for nonrecurring employee bonus compensation that is contingently payable upon completion of the offering. The recognition of this liability will result in a charge to expense and reduce shareholders' equity (see note (1)(n) below).

      (g)
      Reflects the execution of the Acquisition Agreement, pursuant to which Cloud Peak Energy Inc. will issue the $491.6 million CPE Note (based on the midpoint of the range set forth on the cover page of this prospectus and assuming no exercise of the underwriter's overallotment option, net of underwriter discounts) to RTEA and KMS in exchange for 30.6 million common membership units in CPE LLC. As a result of this agreement and exchange, (i) Cloud Peak Energy Inc. will become the managing member of CPE LLC and obtain control of CPE LLC, resulting in consolidation of CPE LLC by Cloud Peak Energy Inc. and (ii) RTEA and KMS will hold a noncontrolling interest comprised of 29.4 million common membership units in CPE LLC and will no longer consolidate CPE LLC. RTEA and KMS previously contributed Rio Tinto America's western U.S. coal business to CPE LLC and prior to the execution of the Acquisition Agreement, RTEA and KMS will have contributed to CPE LLC substantially all of the remaining assets and liabilities that RTEA holds directly. For U.S. GAAP purposes, RTEA's and KMS' transfer of common membership units in CPE LLC to Cloud Peak Energy Inc. in exchange for the CPE Note will be a transfer of assets between entities under common control and will not result in any adjustments to the historical financial reporting carrying amounts of assets and liabilities held by CPE LLC. Based on such carrying amounts, together with the effects of other pro forma adjustments to such carrying amounts described herein, the carrying amount of CPE LLC's net assets in an exchange as of September 30, 2009, would have been $375.0 million, and RTEA's and KMS' share of such net assets would have been $183.7 million. The unaudited pro forma condensed consolidated balance sheet as of September 30, 2009, includes adjustments to (i) reflect the $491.6 million CPE Note as a payable to a related party with a

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        corresponding charge to shareholders' equity (see note (1)(n) below), representing the consideration received by RTEA and KMS from Cloud Peak Energy Inc. for the controlling interest in CPE LLC, and (ii) reflect RTEA's and KMS' $183.5 million noncontrolling interest in CPE LLC with a corresponding charge to shareholders' equity (see note (1)(n) below), representing RTEA's and KMS' share of the carrying amount of CPE LLC's net assets.

      (h)
      Prior to Cloud Peak Energy Inc.'s acquisition of a controlling interest in CPE LLC and the receipt of net proceeds from the senior notes (see note (2)(c) below), CPE LLC will declare a distribution payable to RTEA of approximately $284.6 million, and CPE LLC will retain proceeds of $273.5 million as provided in the Master Separation Agreement. The unaudited pro forma condensed consolidated balance sheet as of September 30, 2009, reflects adjustments to record a liability for the declared distribution amount, to record a $26.0 million receivable from Rio Tinto, representing the amount that Rio Tinto would be required to pay CPE LLC if the working capital adjustment provisions of the Master Separation Agreement were applied based on working capital account balances as of September 30, 2009 and to record a deferred financing cost asset for debt costs of approximately $1.0 million paid by RTEA on our behalf, with a corresponding charge of $257.6 million to shareholders' equity (see note (1)(n) below).

      (i)
      Cloud Peak Energy Inc. will enter into the Tax Receivable Agreement with RTEA, pursuant to which Cloud Peak Energy Inc. will pay to RTEA approximately 85% of its cash savings in income taxes that it realizes as a result of the increase in the tax basis of its interest in CPE LLC, including tax benefits attributable to payments made under the Tax Receivable Agreement. The unaudited pro forma condensed consolidated balance sheet as of September 30, 2009, reflects adjustments to recognize current and noncurrent liabilities totaling $65.2 million, with a corresponding charge to shareholders' equity (see note (1)(n) below), based on our estimate, using assumptions consistent with those used in determining the amount of the deferred tax asset valuation allowance, of the undiscounted amounts that we expect to pay to RTEA under this agreement. We estimate that annual payments to RTEA under the agreement will range from approximately $1 million to $8 million per year based on our operating plan which takes into account only our existing LBAs. Payments would be significantly greater if we generate income significantly in excess of the amounts used in our operating plan, for example, because we acquire additional LBAs beyond our existing LBAs, and as a result we realize the full tax benefit of such increased tax basis (or an increased portion thereof). When we or CPE LLC acquire RTEA's remaining units in CPE LLC (or a significant portion thereof), we would likely receive a further step-up in our tax basis based on the value we or CPE LLC pay for RTEA's units at such time and, accordingly, our obligations under the Tax Receivable Agreement to pay RTEA 85% of any benefits we receive as a result of such further step-up would significantly increase. Our obligation may also increase if there are changes in law, including the increase of current corporate income tax rates. These estimates are based on assumptions related to our business that could change and the actual estimated payments could differ materially from these estimates. See "Risk Factors—We will be required to pay RTEA for most of the benefits we may claim as a result of the tax basis step-up we receive in connection with this offering and related transactions. In certain cases payments to RTEA may be accelerated or exceed our actual cash tax savings." The information presented in this note with respect to payments and liabilities under the Tax Receivable Agreement is forward-looking information. See "Special Note Regarding Forward-Looking Statements" herein.

      (j)
      Following the completion of this offering, CPE LLC will offer certain retiree medical benefits to employees and will grant credit to employees for their prior service to RTEA

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        for benefit vesting purposes. The unaudited pro forma condensed consolidated balance sheet as of September 30, 2009, reflects an adjustment to record a $17.3 million liability, with a corresponding charge to shareholders' equity (see note (1)(n) below), for the initial accumulated postretirement benefit obligation related to the retiree medical benefit plan, which will not be funded as of the offering date. We also will establish a defined contribution retirement plan for our employees in connection with the offering, but will not have any liability for benefits under this plan as of the offering date.

        Certain of our employees currently participate in defined benefit pension and retiree medical plans sponsored by Rio Tinto America, which will retain the liabilities for any accrued benefits under those plans. After the offering, our employees will not accrue additional benefits under the Rio Tinto America plans. Due from related parties in our historical consolidated balance sheet as of September 30, 2009, reflects accrued liabilities for benefits under the Rio Tinto America plans. Such accrued liabilities are eliminated in the unaudited pro forma condensed consolidated balance sheet as of September 30, 2009, as discussed in note (1)(a) above.

        We have considered the continuing impacts on our operating expenses of our separation from the Rio Tinto America benefit plans and the establishment of new employee benefit plans by Cloud Peak Energy Inc., as discussed in note (1)(k) below.

      (k)
      The operating expenses reported in our carve-out historical consolidated statements of operations include allocations of certain general and administrative costs and Rio Tinto's headquarters costs totaling $19.8 million and $25.4 million for the nine months ended September 30, 2009 and for the year ended December 31, 2008, respectively. Many of the cost allocations relate to services provided to us under a shared services agreement with an affiliate of Rio Tinto America. Also included in our operating expenses for the nine months ended September 30, 2009 and for the year ended December 31, 2008, are costs incurred as a result of actions to divest RTEA, either through a trade sale or an initial public offering, of $11.3 million and $25.8 million, respectively. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Post-offering Cost Structure."

        The costs incurred under the shared services agreement and the allocations of Rio Tinto's headquarters costs will not continue when we are a stand-alone public company. We also do not expect to incur additional costs in connection with the divestiture of RTEA after completion of this offering. However, we will incur additional recurring costs related to being a stand-alone public company, including costs for financial reporting, tax, regulatory compliance, corporate governance, treasury, legal, internal audit and investor relations activities.

        We are currently in the process of implementing plans, which are subject to further refinement, to replace shared services from Rio Tinto America and develop the internal functions that we need to operate effectively and fulfill our responsibilities as a stand-alone public company. Our plans reflect anticipated recurring activities that are incremental to our current activities, as well as certain nonrecurring activities that we expect will be required during our transition to a stand-alone public company. We have estimated the costs of these recurring and nonrecurring activities and will continue to revise our estimates as we implement our plans.

        We currently estimate the incremental recurring annual costs related to being a stand-alone public company to be approximately $38 million. The significant assumptions involved in determining the estimates of incremental recurring costs include:

        additional personnel required to operate as a stand-alone public company;

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        changes in compensation with respect to new and existing positions;

        the level of additional assistance we will require from professional service providers;

        the increase in insurance premiums and bonding costs as a stand-alone public company;

        the increase in health and welfare costs associated with a larger employee base in conjunction with changes in our employee benefit plans;

        the amount of additional capital expenditures for information technology infrastructure investments associated with being a stand-alone public company; and

        the type and level of other costs expected to be incurred in connection with being a stand-alone public company.

        We currently estimate the nonrecurring costs that we will incur during our transition to being a stand-alone public company to be approximately $18 million. We anticipate that substantially all of these costs will be incurred during the period from July 1, 2009 to a date approximately nine months after the effective date of this offering. Our historical consolidated statement of operations for the nine months ended September 30, 2009 includes approximately $4.0 million of such costs. These costs relate to the following:

        one-time legal, accounting, tax and consulting costs pertaining to the structuring transactions and separation and establishing us as a stand-alone public company;

        nonrecurring compensation, such as accelerated vesting of certain share-based awards, upon completion of the separation and initial public offering;

        office relocation costs;

        recruiting and relocation costs associated with hiring key senior management personnel new to our company;

        costs incurred under our Transition Services Agreement with an affiliate of Rio Tinto America;

        costs to separate information systems; and

        other one-time costs.

        As of the date of this offering, we are continuing to refine our transition plan including specific arrangements for certain significant elements of our cost structure as a stand-alone public company. Although we believe our estimates of incremental recurring costs and nonrecurring transition costs are reasonable based on the information we have to date, certain significant components of our estimates are preliminary and subject to change. A substantial portion of our estimated costs are thus not considered to be factually supportable. As a result, the accompanying unaudited pro forma condensed consolidated financial statements have not been adjusted to reflect the estimated costs of becoming a stand-alone public company. In addition, we have not adjusted the accompanying unaudited pro forma condensed consolidated statements of operations for the estimated nonrecurring transition costs as these costs are not expected to have an ongoing impact on our operating results.

        We have, however, included adjustments in the accompanying unaudited pro forma condensed consolidated balance sheet for certain nonrecurring employee compensation costs and certain effects of changes in our employee benefit arrangements, as we believe these effects are factually supportable and reliably determinable at the date of this offering. See notes (1)(e), (1)(f) and (1)(j) above.

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        The information presented in this note, with respect to the costs that we expect to incur as a stand-alone public company, is forward-looking information. See "Special Note Regarding Forward-Looking Statements" herein.

      (l)
      Reflects the effects of the structuring transactions, which on a pro forma basis result in a reduction in our consolidated effective income tax rates from 29.1% for the nine months ended September 30, 2009 and 23.2% for the year ended December 31, 2008. In RTEA's historical consolidated statements of operations, which are prepared on a carve-out basis, income tax expense is calculated as if RTEA files federal and state corporate income tax returns on a stand-alone basis under the separate return method. As a result, substantially all of the pre-tax income reported in the historical consolidated statements of operations is subject to income taxes, with certain limited exceptions for income and expense items that are treated as permanent differences between pre-tax financial reporting income and taxable income. Following Cloud Peak Energy Inc.'s acquisition of a controlling interest in CPE LLC, which generally is not an income tax paying entity, our consolidated financial statements generally will reflect income tax expense on CPE LLC's pre-tax income only to the extent of Cloud Peak Energy Inc.'s interest in CPE LLC. As a result, our consolidated effective income tax rate will be lower because of the changes in our structure. The structuring transactions also may affect the tax benefits we will receive from certain tax deductions, such as statutory percentage depletion deductions in excess of cost basis for tax purposes, that are accounted for as permanent differences and affect our consolidated effective income tax rate. The unaudited pro forma condensed consolidated statements of operations include adjustments to reduce RTEA's historical income tax provisions to amounts that reflect Cloud Peak Energy Inc.'s ownership interest in CPE LLC and such other effects of the structuring transactions.

      (m)
      Reflects the effects of RTEA's and KMS' noncontrolling interest in CPE LLC's income from continuing operations. Following Cloud Peak Energy Inc.'s acquisition of a controlling interest in CPE LLC, RTEA's remaining ownership interest will be reflected as a noncontrolling interest in our consolidated financial statements. Accordingly, the unaudited pro forma condensed consolidated statements of operations include adjustments to reflect RTEA's and KMS' share of CPE LLC's income from continuing operations as income from continuing operations attributable to noncontrolling interest. The noncontrolling interest percentage of consolidated income from continuing operations exceeds RTEA's percentage interest in CPE LLC because of the effects of income taxes. Because CPE LLC and its non-corporate subsidiaries are not income tax paying entities, income tax expense related to CPE LLC's pre-tax income reflected in the unaudited pro forma condensed consolidated statements of operations consists only of the taxes attributable to Cloud Peak Energy Inc.'s ownership interest in CPE LLC. Income tax expense is not reflected in the unaudited pro forma condensed consolidated statements of operations for the portion of CPE LLC's pre-tax income that is attributable to the noncontrolling interest.

      (n)
      The pro forma adjustments for the structuring transactions, separation from Rio Tinto and eliminations described above reflect a series of integrated transactions involving Cloud Peak Energy Inc., RTEA and CPE LLC while under the common control of Rio Tinto in anticipation of Cloud Peak Energy Inc.'s initial public offering. The aggregate

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        effect of these adjustments is a $1,393.5 million net decrease in shareholders' equity, as follows:

 
  Note    
 

Elimination of intercompany accounts

    (a)   $ (149,083 )

Adjustments related to RTEA's obligations for certain liabilities

    (b)     13,338  

Adjustments to the deferred income taxes

    (c)     201,608  

Elimination of assets and liabilities of Jacobs Ranch mine

    (d)     (442,945 )

Rio Tinto retention of cash-settled share-based compensation awards

    (e)     758  

Recognition of employee bonus expense

    (f)     (1,781 )

Execution of the Acquisition Agreement and CPE Note

    (g)     (491,589 )

Recognition of noncontrolling interest in shareholders' equity

    (g)     (183,735 )

Declaration of debt proceeds distribution to RTEA

    (h)     (257,572 )

Recognition of Tax Receivable Agreement liability

    (i)     (65,215 )

Recognition of retiree medical benefit obligation

    (j)     (17,304 )
             

Net decrease in pro forma consolidated shareholders' equity

        $ (1,393,520 )
             

        The transactions described above will result in the transfer of the controlling interest in CPE LLC from RTEA to Cloud Peak Energy Inc. To present the accounts of Cloud Peak Energy Inc. as those of the parent company of CPE LLC in the unaudited pro forma condensed consolidated balance sheet as of September 30, 2009, the net decrease in pro forma consolidated shareholders' equity is recorded as (i) a $379.9 million charge to retained earnings (accumulated deficit) to eliminate RTEA's historical retained earnings and (ii) a $1,013.6 million charge to additional paid-in capital for the remaining decrease.

    (2)
    The amounts in this column represent the pro forma adjustments made to reflect the debt financing transactions which CPE LLC intends to enter into in connection with this offering, the issuance of shares of common stock in this offering and the subsequent use of proceeds of the debt financing transactions and common stock offering.

    (a)
    Reflects Cloud Peak Energy Inc.'s receipt of the net proceeds from this offering of $491.6 million, assuming the issuance of shares of common stock at a price of $17.00 per share (the mid-point of the estimated public offering range). RTEA has agreed to pay all of Cloud Peak Energy Inc.'s out-of-pocket costs and expenses incurred in connection with the structuring transactions and this offering. The unaudited pro forma condensed consolidated balance sheet as of September 30, 2009, reflects the receipt of proceeds as increases in cash and cash equivalents and shareholders' equity, primarily additional paid-in capital.

    (b)
    Reflects Cloud Peak Energy Inc.'s use of net proceeds from this offering to repay the $491.6 million CPE Note discussed in note (1)(g) above. The unaudited pro forma condensed consolidated balance sheet as of September 30, 2009, reflects the CPE Note repayment as decreases in cash and cash equivalents and due to related party.

    (c)
    Concurrent and contingent with this offering, CPE LLC will enter into debt agreements that provide for borrowings under senior notes and a revolving credit facility. The senior notes reflect a principal amount of $600 million and will be funded concurrent with this offering. We will receive estimated net proceeds from the senior notes offering of

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        $572.6 million, net of estimated original issue discount and initial purchasers' discounts and commissions. The senior notes consist of two tranches maturing in 2016 and 2019 and bear interest at an assumed blended interest rate of 8.75%. We expect that $92.5 million of the net proceeds will be restricted cash used to secure arrangements relating to our surety bonds and we will pay $284.6 million to Rio Tinto in satisfaction of the previously declared distribution (see note (1)(h) above). The amount of restricted cash is based on current estimates of restricted cash required as collateral for our new surety bonds that will replace the existing surety arrangements securing our reclamation obligations. As the terms of these surety bonds are negotiated, the amount of restricted cash required may be adjusted downward prior to the closing of this offering. We estimate that the amount of required restricted cash could decline by up to $25 million from the current estimates. The amount of any such decline would be added to the distribution paid to RTEA from the proceeds of the senior notes offering and would not be retained by us as unrestricted cash.

        We will use $15.0 million of the net proceeds to pay fees associated with our revolving credit facility (described below) and other financing costs, and will retain the remaining $181.0 million of the net proceeds from the senior notes offering for general corporate purposes. Substantially all of the $18.3 million balances of cash and cash equivalents reported on our historical consolidated balance sheet as of September 30, 2009 represents our 50% proportionate share of cash held by Decker and is not available for general corporate purposes. The unaudited pro forma condensed consolidated balance sheet as of September 30, 2009 includes adjustments to reflect the effects of these transactions.

        The revolving credit facility provides for maximum borrowings of $400 million, which bear variable interest based on LIBOR, and has a term to maturity of four years. We do not expect to draw on the revolving credit facility concurrent with the offering although we expect to have up to $150 million of outstanding letters of credit in the near term following the completion of this offering. The unaudited pro forma condensed consolidated balance sheet as of September 30, 2009, includes adjustments to reflect the effects of these transactions.

        The unaudited pro forma condensed consolidated statements of operations include adjustments to reflect interest expense related to the debt financing transactions of $66.0 million and $50.6 million for the year ended December 31, 2008, and nine months ended September 30, 2009, respectively. Pro forma interest expense reflects periodic commitment fees, the amortization of up-front lender fees and other financing costs over the terms of the related debt, and is net of amounts required to be capitalized. A 1/8th% variance in the interest rates that apply to our debt financing would result in a change in pro forma income from continuing operations of $248,000 and $186,000 for the year ended December 31, 2008, and the nine months ended September 30, 2009, respectively.

      (d)
      Upon completion of this offering we will grant approximately 831,000 restricted shares of Cloud Peak Energy Inc. common stock to our directors and employees, and CPE LLC will issue a corresponding number of common membership units to Cloud Peak Energy Inc. in accordance with provisions of the Third Amended and Restated LLC Agreement that require a one-to-one ratio of common shares to common membership units held by Cloud Peak Energy Inc. The issuance of common membership units will increase Cloud Peak Energy Inc.'s managing member interest in CPE LLC to approximately 51.67% and will reduce RTEA's and KMS' noncontrolling interest in CPE LLC to approximately 48.33%. The unaudited pro forma condensed consolidated balance sheet as of September 30, 2009 includes an adjustment to increase additional paid-in capital and decrease the noncontrolling interest in shareholders' equity by $1.2 million to reflect these changes in ownership.

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      (e)
      Reflects the effects on our income tax provision of the pro forma adjustments to interest expense discussed in note (2)(c) above. The calculated amount reflects a combined federal and state statutory income tax rate of 36% and applies only to Cloud Peak Energy Inc.'s ownership interest in CPE LLC.

      (f)
      Reflects the effects of RTEA's noncontrolling interest in CPE LLC's income from continuing operations. Following Cloud Peak Energy Inc.'s acquisition of a controlling interest in CPE LLC, RTEA's remaining ownership interest will be reflected as a noncontrolling interest in our consolidated financial statements. Accordingly, the unaudited pro forma condensed consolidated statements of operations include adjustments to reflect RTEA's share CPE LLC's income from continuing operations as income from continuing operations attributable to noncontrolling interest. The noncontrolling interest percentage of consolidated income from continuing operations exceeds RTEA's percentage interest in CPE LLC because of the effects of income taxes. Because CPE LLC is not an income tax paying entity, income tax expense related to CPE LLC's pre-tax income reflected in the unaudited pro forma condensed consolidated statements of operations consists only of the taxes attributable to Cloud Peak Energy Inc.'s ownership interest in CPE LLC. Income tax expense is not reflected in the unaudited pro forma condensed consolidated statements of operations for the portion of CPE LLC's pre-tax income that is attributable to the noncontrolling interest.

      (g)
      Pro forma income from continuing operations per share for the year ended December 31, 2008, and the nine months ended September 30, 2009, reflects 30,600,000 weighted average shares that will be issued in the offering. Restricted shares and options that are expected to be granted in connection with the offering have been reflected in the calculation of pro forma diluted income from continuing operations per share using the treasury stock method. In applying the treasury stock method, we have assumed that the weighted average share price during the period is equal to the offering price. Additional shares of common stock that may be issued in exchange for all of the CPE LLC common membership units held by RTEA is reflected in the calculation of diluted income from continuing operations per share using the if-converted method. In applying the if-converted method, we have increased the numerator to include CPE LLC income attributable to the noncontrolling interest and decreased the numerator to reflect the additional income tax expense that results from the attribution of additional CPE LLC income to Cloud Peak Energy Inc.'s controlling interest in CPE LLC. The calculation of such additional income tax expense includes the effects of permanent differences between financial reporting income and taxable income that are reflected in our historical consolidated statements of operations and adjustments to those permanent differences that are directly attributable to the assumed exchange at $17.00 per common membership unit (the midpoint of the estimated public offering range).

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        The following table presents the calculation of pro forma basic and diluted income from continuing operations per share.

 
  Year Ended
December 31, 2008
  Nine Months Ended
September 30, 2009
 
 
  (dollars in thousands,
except share and per share amounts)

 
           

Numerator for basic income from continuing operations per share—pro forma income from continuing operations

  $ 29,577   $ 58,002  
           

Add back pro forma income from continuing operations attributable to noncontrolling interest, net of estimated income taxes

    24,013     52,765  
           
           

Numerator for diluted income from continuing operations per share

  $ 53,590   $ 110,767  
           
           

Denominator for basic income from continuing operations per share—common shares issued in the offering

    30,600,000     30,600,000  
           

Dilutive potential common shares:

             
             

Weighted average dilutive potential shares—non-vested share awards

    138,500     380,875  
             

Common shares from assumed exchange of CPE LLC common membership units held by noncontrolling interest

    29,400,000     29,400,000  
           
           

Denominator for diluted income from continuing operations per share

    60,138,500     60,380,875  
           
           

Pro forma basic income from continuing operations per share

  $ 0.97   $ 1.90  
           

Pro forma diluted income from continuing operations per share

  $ 0.89   $ 1.83  

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SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA

        The following table sets forth selected consolidated financial and other data on a historical basis. The information below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and related notes thereto included in this prospectus.

        RTEA is considered to be our predecessor for accounting purposes and its consolidated financial statements are our historical consolidated financial statements. Our historical consolidated financial statements include, as discontinued operations, financial information for certain operations that will not be owned by Cloud Peak Energy after this offering, including with respect to the Colowyo mine, the Jacobs Ranch mine and the uranium mining venture. As a result, our historical consolidated financial statements are not comparable to the unaudited pro forma condensed consolidated financial information included elsewhere in this prospectus or to the results investors should expect after the offering. To date, Cloud Peak Energy has had no operations. As described in "Structuring Transactions and Related Agreements—Holding Company Structure," following the completion of this offering we will be a holding company and our sole asset will be our managing member interest in CPE LLC. The consolidated financial statements of RTEA are provided elsewhere in this prospectus.

        We have derived the historical consolidated financial data as of December 31, 2006, 2007 and 2008 and for each of the three years in the period ended December 31, 2008 from the audited consolidated financial statements of RTEA included elsewhere in this prospectus. We have derived the historical consolidated balance sheet data as of December 31, 2004 and 2005 and the historical consolidated statement of operations data for each of the two years in the period ended December 31, 2005 from the unaudited consolidated financial data of RTEA not included in this prospectus. We have derived the historical consolidated financial data as of September 30, 2009 and for the nine months ended September 30, 2008 and 2009 from the unaudited consolidated financial statements of RTEA included elsewhere in this prospectus. The unaudited interim consolidated financial statements include all adjustments (consisting of normal, recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of our financial position and results of operations for the periods presented. The interim results of operations are not necessarily indicative of operations for a full fiscal year.

        Prior to the consummation of the offering, our consolidated financial statements were prepared on a carve-out basis from our ultimate parent company, Rio Tinto and its subsidiaries. The carve-out consolidated financial statements include allocations of certain general and administrative costs and Rio Tinto's headquarters costs. We do not expect to continue to incur some of these charges as a stand-alone public company. These allocations were based upon various assumptions and estimates and historical results may differ from these allocations, assumptions and estimates. Accordingly, the carve-out consolidated financial statements should not be relied upon as being representative of our financial position or operating results had we operated on a stand-alone basis, nor are they representative of our financial position or operating results following the offering.

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Selected Consolidated Financial and Other Data

 
  For the Years Ended December 31,   For the Nine
Months Ended
September 30,
 
 
  2004   2005   2006   2007   2008   2008   2009  
 
  (dollars in thousands, except share amounts)
 

Statement of Operations Data

                                           

Revenues(1)

  $ 734,986   $ 783,929   $ 942,841   $ 1,053,168   $ 1,239,711   $ 904,627   $ 1,061,286  
                               

Costs and expenses

                                           
 

Cost of product sold (exclusive of depreciation, depletion, amortization and accretion, shown separately)(3)

    502,921     569,490     699,121     754,464     892,649     653,544     702,569  
 

Depreciation and depletion

    51,711     50,130     59,352     80,133     88,972     69,258     68,383  
 

Amortization(2)

    39,053     35,645     34,957     34,512     45,989     37,027     24,770  
 

Accretion

    6,853     8,391     10,088     12,212     12,742     8,926     8,402  
 

Exploration costs

        1,185     2,325     816     1,387     787     1,156  
 

Selling, general and administrative expenses(3)

    43,648     41,794     48,130     50,003     70,485     50,833     49,075  
 

Asset impairment charges(4)

    15,185             18,297     2,551     1,014      
                               

Total costs and expenses

    659,371     706,635     853,973     950,437     1,114,775     821,389     854,355  
                               

Operating income

    75,615     77,294     88,868     102,731     124,936     82,238     206,931  

Other income (expense)

                                           
 

Interest income

    4,169     1,493     3,604     7,302     2,865     2,682     228  
 

Interest expense

    (35,468 )   (26,771 )   (38,785 )   (40,930 )   (20,376 )   (19,974 )   (1,007 )
 

Other, net