Alpha Natural Resources (
) is America's third largest coal producer competing
with the likes of Peabody Energy (
), Arch Coal (
) and CONSOL (
) Energy. Alpha Natural Resources has production capacity of nearly
100 million tons of steam and metallurgical coal. The size and
quality of its coal reserves enable it to provide top quality
products to a wide range of customers including thermal coal for
power generating utilities, custom blend industrial coal for
industrial customers and high quality metallurgical coal for use in
the production of steel. The company produces, processes
and sells steam and metallurgical coal from more than 60 active
mines and 14 coal preparation plants located throughout Virginia,
West Virginia, Kentucky, Pennsylvania and Wyoming. From 2005 to
2009, the company's revenues increased from $1.6 billion to nearly
$2.5 billion, an annual growth rate of over 11%.
Our price estimate for
Alpha Natural Resources is $51.98
, which is slightly ahead of the current market price.
Launch of Coverage on Alpha Natural Resources ; $51.98
We've broken down our analysis of Alpha Natural Resources into
three main business segments:
Utility & Industrial Coal
Freight & Handling & Other Revenues
Demand for coal expected to pick up gradually
According to the U.S. Energy Information Administration (
), coal production in 2009 fell by nearly 8.5% as a result of lower
U.S. coal consumption, fewer exports and higher coal inventories.
Going forward, the EIA estimates a 0.3% decline in U.S. coal
production in 2010, as drawdowns in both producer and end user
inventories are expected to meet the increased coal consumption in
2010. Coal production however is expected to improve in 2011
and increase by 1.8%. At the current rate of recovery, the EIA
estimates that the world coal consumption will rebound, returning
to its pre-recession level (2008 level) by 2013.
Increasing focus on clean coal technologies
As a result of growing focus on climate change a substantial
amount of global investments are being made in clean coal
technologies that mitigate the harmful environmental effects of
conventional coal. Clean coal technologies are generally segmented
into three areas of focus: the reduction or elimination of
pollutant emissions such as particulates, sulfur and nitrogen
oxides; the improvement of conversion technologies to increase
efficiency; and the reduction of atmospheric carbon dioxide
emissions with the development of carbon capture and storage.
The deployment of clean coal technologies will continue to
expand internationally as coal-fired power generation increases to
meet escalating electricity demands worldwide.
China's impact on global coal prices
China currently consumes half of the global production of coal,
and its demand for coal is only expected to increase in the near
future. To further aggravate this situation, the Chinese government
intends to limit the amount of coal that is produced in the country
to ensure that the reserves are not depleted very quickly. These
factors would significantly raise global coal prices in the years
See our full analysis for Alpha Natural Resources.