While some attending this week’s Eastern Coal Council conference were writing the industry’s obituary, Alpha Natural Resources was finalizing a plan to become the third-largest coal producer in the nation.
On Tuesday, Alpha announced it would buy Foundation Coal Holdings Inc. for about $1.5 billion in stock, a self-financed move that will take the Abingdon, Va. -based company into the lucrative Powder River Basin in Wyoming. This growth in a time of recession and decline is a testament to Alpha’s leadership and strong fiscal management.
At the MeadowView Conference Center in Kingsport, Tenn., coal industry leaders are gathered for the 30th annual Eastern Coal Council conference. On Monday, Kenneth Nameth, executive director of the Southern States Energy Board, said coal is in serious trouble in the existing political climate, especially as Congress considers limits on carbon emissions. “We’re in the end game here,” Nameth said. “Now the time has hit.”
Obviously, Alpha doesn’t believe the end is neigh. The company had almost $700 million in cash and cash equivalents on hand at the end of the first quarter, will self-finance the merger with Foundation, and will use about a quarter of that cash to pay some of Alpha’s existing debt. It’s a nice position to be in and speaks of Alpha’s financial strength. While some companies are running from the coal business, the merger will give Alpha 2.3 billion tons of coal reserves and Foundation’s operations in Wyoming.
Like many Americans, we support conservation and increasing use of green energy – wind, solar and biofuels – because we recognize that carbon emissions are harmful to the environment. But this fact remains: Coal is a plentiful and cheap domestic fuel that now generates half the electricity in the United States. Any effective energy strategy for the nation must include coal, burned as cleanly as possible. This region was built on coal and continues to run on the jobs the industry provides. Even before Tuesday’s announcement, Alpha was the largest supplier of metallurgical coal to the steel industry. We support effective carbon sequestration technology because it would eliminate the biggest obstacle to using more American coal, the cheapest, most plentiful energy resource we have.
The Alpha-Foundation merger will be complete later this year, but some important facts were announced immediately. Key leaders will run the combined company. Mike Quillen, a Gate City, Va., native, longtime leader in the region’s coal industry and the person who helped found Alpha Natural Resources, will become chairman of the combined company. Kevin Crutchfield, Alpha’s president and a Bristol, Va., native, will become chief executive. The company will continue to be headquartered in Abingdon.
Alpha is a longtime good corporate citizen in the region, one that provides stable jobs to thousands of residents. Its growth is fantastic news for the region and proof that obituary-writing for the coal industry is premature.
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