The Future of the Coal Industry An In-depth look at the Challenges & Opportunities the Industry will face.

Presentation Outline  Company Introductions  Explanation of Concepts S.W.O.T. Analysis Porter’s 5 Forces  Industry S.W.O.T. Analysis  Forces Acting on Industry  Individual Firm Outlook  Vision of the Future  Questionnaire Session

Company Introductions  Peabody Energy Co. (BTU)  Arch Coal Inc. (ACI)  Massey Energy Co. (MEE)  Natural Resource Partners L.P.(NRP)  Consol Energy Co. (CNX)  Westmoreland Coal Co. (WLB)  KFx Inc. (KFX) Representative

Explanation of Concepts: S.W.O.T. Analysis  S trengths  W eaknesses  O pportunities  T hreats Internal External Use How Can We Use Each Strength Stop How Can We Stop Each Weakness Exploit How Can We Exploit Each Opportunity Defend How Can We Defend Against Each Threat

Strengths Coal Industry Strengths  Ability to continuously lower emissions through technology Gasification Coal Cleaning Carbon Capture & Storage  Miner Retirement Benefits  Low Cost Energy & Efficient  Abundant Supply: 250 years

 Environmental Concerns Global Warming & Greenhouse Effect Emissions Release  Carbon Dioxide, Sulfur Dioxide  Over Producing Methane Gas  Shortage of Trained and Experienced Workers  The Coal Industry Retiree Health Benefit Act Weaknesses Coal Industry Weaknesses

Opportunities Coal Industry Opportunities  Government Support The Advanced Energy Initiative The Energy Policy Act of 2005  Growing Demand for Coal  Demand for New Technology  Investment in Training Workers

Threats Coal Industry Threats  Alternative Power for Electricity Natural Gas Nuclear Energy Wind Power Hydro-Electric Power  Governmental Regulation Environmental Protection Agency (EPA)  Peak of Coal Industry  Depletion of Coal by 2267 (est. assumption)

Positioning Positioning of Firms  Take Advantage of Opportunities Best Positioned: BTU & KFx Worst Positioned: WLB

Positioning Positioning of Firms  Repelling Threats Best Positioned: BTU Worst Positioned: MEE

Explanation of Concepts: Porter’s 5 Forces Threats ofNewEntrants Threats ofSubstitutes Suppliers Bargaining Power of Suppliers Customers Bargaining Power of Customers Competitive Rivalry within Industry

New Entrants Force: New Entrants  Capital Requirements  Government Regulations: Black Lung Benefits Act EPA’s Clean Air Act The long permit process  Economies of Scale

Substitutes Force: Substitutes  List of Substitutes: Natural gas Hydrogen Wind power Hydro power Solar power  Buyers’ Inclination to Substitute  Switching costs

CustomersSuppliers Forces: Customers & Suppliers  Customers Backward Integration  Suppliers Forward Integration Presence of Substitute Inputs

Rivalry Force: Rivalry  Rivals: BTU, ACI, MEE, WLB, CNX  Brand Identity  Product Differences  Diversity of Rivals

Forces with Most Impact  Short Term Greatest Force Governmental Regulation  Long Term Greatest Force Threat of Substitutes

Environmental Protection Agency Regulations  The Environmental Protection Agency adopts the Bush Administration's Clear Skies multi-emissions approach through a new Clean Air Interstate Rule. Cut emissions by an additional 70% than the existing Clean Air Act standards.

Technology & Solutions to Environmental Concerns  Carbon Dioxide Emissions Problem: Global Warming & Greenhouse gasses Solution (reduction): Carbon Capture Technology  Particulate Emissions (ashes) Problem: Affect peoples respiratory system Solution: Electrostatic Precipitators & Fabric Filters  Methane Emissions Problem: Greenhouse Gas Solution: Methane Capture and Utilization

Technology & Solutions to Environmental Concerns  Land Disturbance Problem: Soil Erosion, Devastates biodiversity Solution: Environmental Impact Computer Simulation  Water Pollution Problem: Acid-mine Drainage Solution: Self-Operating Water Treatment Plants

Zero-Emission Zero-Emission Tech.  FuturegGen Industrial Alliance Coalition of Global Energy Providers  Working with U.S. Department of Energy New Process to Generate Electricity  Near Zero Emissions  Capture Carbon Dioxide  Produce Hydrogen Prototype by 2012

2250 ( Major Replacements of Coal around 2250 (Prediction)  Nuclear Fusion Same process powering the sun and stars  Hydrogen is converted to helium Will be a viable alternative energy supply within the next 30 – 40 years  Microwave Derived from solar energy captured by Satellites NASA is currently testing the technology Both technologies plan to be environmentally friendly, abundant, and safe!

Conclusion  Short Term Future THREAT: Emissions regulations OPPORTUNITY: Invest in technology to reduce emissions  Long Term Future THREAT: Substitutes OPPORTUNITY: Invest in technology to reduce emissions in order to compete with more efficient substitutes

Questionnaire Session