SURFACE TRANSPORTATION BOARD - RETAC COAL PRODUCER UPDATE Jill - - PowerPoint PPT Presentation

SURFACE TRANSPORTATION BOARD - RETAC COAL PRODUCER UPDATE

Jill Harrison, SVP & General Counsel Alpha Coal Sales Co., LLC April 14, 2015

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U.S. Coal Production by Basin (million tons)

SOURCE: Energy Information Administration (EIA); National Mining Association (NMA), U.S.Census, Alpha Research

2012 2013 2014 SAPP 19 19 17 CAPP 148 128 117 NAPP 126 125 132 ILB 128 132 137 PRB 424 416 421 Other 171 164 172 50 100 150 200 250 300 350 400 450 Million Tons

% Change YoY (8.4%) (8.6%) 6.1% 3.7% 1.1% 4.9%

1016 984 996 TOTAL 1.3%

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SOURCE: Jeff Wallace’s Southern Company Presentation to RETAC – March 6, 2008

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SOURCE: Jeff Wallace’s Southern Company Presentation to RETAC – March 6, 2008

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Projected Domestic Pricing for Thermal Coal

SOURCE: Per Coaldesk publication as of 4/07/2015

2015 Projections Calendar Year Projections OTC Index May June Q3 Q4 Q1 16 2016 2017 2018 Powder River Basin (PRB) 8800 0.8 $10.20 $10.30 $10.35 $10.55 $10.90 $11.40 $12.65 $13.70 8400 0.8 $9.10 $9.15 $9.25 $9.45 $9.75 $10.20 $11.30 $12.20 Central Appalachia (CAPP) Nymex 12000 1.7 $49.25 $49.25 $49.00 $48.75 $49.75 $50.50 $52.50 $55.00 CSX 12500 1.6 $45.15 $45.25 $45.40 $45.70 $46.55 $47.80 $50.80 $53.30 NS 12500 1.6 $46.75 $46.75 $47.00 $47.30 $47.60 $48.35 $50.80 $53.30 Northern Appalachia (NAPP) MGA Rail 13000 4.0/4.5 $42.75 $42.75 $43.25 $43.50 $45.00 $45.75 $48.05 $50.45 Mon Rvr 13000 4.8 $45.25 $45.25 $45.60 $46.00 $47.25 $47.85 $50.15 $52.55

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U.S. Coal Car Loadings

SOURCE: Association of American Railroads 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000 200,000 Oct '14 Nov '14 Dec '14 Jan '15 Feb '15 Mar '15

U.S. Class I Coal Car Loadings

NS CSX BNSF UP

13,000 18,000 23,000 28,000 33,000 38,000 43,000 48,000 53,000 Week Ending

Weekly Coal Car Loadings

NS CSX BNSF UP

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Effects of EPA Regulations

SOURCE: American Coalition for Clean Coal Electricity (ACCCE), 2015

• Of the approximately 315,000 MW that

comprised the U.S. coal fleet in 2010, nearly

• ne quarter of that capacity has been

announced for closure or conversion.

• Of the announced retirements and conversions,

61,000 MW (19% of the 2010 U.S. coal fleet total capacity), is attributed to EPA policies.

• In their analysis of expected impact from MATS

and CSAPR, EPA projected only 9,500 MW of coal-fired power to go offline.

approximately 10,000 MW electric-generating capacity

=

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Technology Continues to Advance… Slowly

SOURCE: Mississippi Power

• Conceptual design for Mississippi Power’s Kemper County Energy Facility

began in 2008, with earthwork beginning in 2010.

• A number of delays have postponed the plant’s scheduled operation and

production dates (now expected in the first half of 2016) and added significant cost to the project.

• Initial 2004 forecasts

estimated the project would cost $2.2 billion, but ten years later, Mississippi Power’s October 2014 public filing estimates the total project cost at $6.1 billion, nearly triple

• riginal estimates.

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Projected Global Coal Demand

SOURCE: International Energy Agency (IEA)

2012: 5.526 Billion Tons Coal Equivalent (tce) 2019: 6.462 Billion Tons Coal Equivalent (tce)

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U.S. Coal Exports

SOURCE: Energy Information Administration (EIA); National Mining Association (NMA), U.S.Census, Alpha Research

1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 Monthly Exports (000 Tons) Met Thermal

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Exports from Australia and the U.S.

SOURCE: U.S. Census, ABS

Jun- 12 Total Australia Coal Exports (Million Tonnes) Dec- 12 Jun- 13 Jun- 08 Dec- 08 Jun- 09 Dec- 09 Total U.S. Coal Exports (Million Tonnes) Jun- 10 Dec- 10 Dec- 13 Jun- 11 Jun- 14 Dec- 14 Dec- 11

U.S. Australia

2 4 6 8 10 12 14 5 10 15 20 25 30 35 40

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Strength of the Dollar

SOURCE: Bloomberg

The strength of the U.S. Dollar against other currencies like the Russian Ruble and the Australian Dollar continues to present competitive challenges for U.S. coal producers.

0.2 0.4 0.6 0.8 1 1.2 1.4

USDAUD

20 40 60 80

USDRUB

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In Summary

The IEA and others predict that coal will continue to be a growth fuel over the next 25 years, but a number of factors are culminating to create challenges in the near term for U.S. coal producers.

• Market oversupply,

especially from Australian coal

• Strength of the U.S.

Dollar compared with other currencies

Export Demand and Pricing

• Nearly one-fourth of

coal-fired power fleet retiring or converting

• EPA’s proposed

Clean Power Plan to be finalized this year

Impact of U.S. Regulation

• Central Appalachia

expected to take the most significant hit

• Increase in PRB,

NAPP and Illinois Basin production

Basin Shifting in the U.S.

SOURCE: American Coalition for Clean Coal Electricity (ACCCE), International Energy Agency (IEA), National Mining Association (NMA), U.S.Census, Alpha Research

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