Wyoming coal cheaper than Appalachian
Sunday, January 10, 1999
By MARTHA BRYSON HODEL
ASSOCIATED PRESS
CHARLESTON, W.Va. - These days, Mr. Peabody's coal train is hauling it for Lehman
Brothers.
Peabody Holding Co., the nation's largest coal producer, wound up in the hands of the venerable
New York investment house last year as part of a complex sale of Britain's Energy Group PLC.
Startling as it was, the $2.3 billion sale of Peabody to Lehman Merchant Banking Partners II was
just one transaction in a wave of mergers and acquisitions.
"We're seeing a lot of foreign investment, a lot of banks getting involved in the coal business," said
John Feddock, industry analyst at Marshall Miller & Associates in Bluefield, Va.
Recent transactions in the coal industry have involved a change in ownership for as much as a
third of the country's coal production. Some other examples:
- Arch Coal Inc. of St. Louis paid $1.7 billion in June to acquire the domestic coal operations of
Atlantic Richfield, becoming the country's No. 2 producer.
Arch Coal was created in 1997 through a merger of Arch Mineral Corp. and Ashland Coal Inc.
- AEI Resources Inc. of Ashland, Ky., a company that did not exist in 1997, bought up Zeigler
Coal Holding Co., and some 11 properties from Cyprus-Amax Coal Co. in four states. Coupled
with other purchases, what was formerly a regional producer known as Addington Enterprises has
become the fifth-largest producer in the country.
- E.I. DuPont de Nemours & Co. sold its 50 percent interest in Consol Coal Group, including
Consolidation Coal Co., to its partner, RheinBraun of Germany. Consol formerly was the
third-largest producer behind Cyprus-Amax.
So many such transactions took place last year that a key trade publication, Financial Times'
Energy World, dubbed it "the great coal sell-off of 1998."
Various analysts have said the transactions have been spurred in part by low prices worldwide for
all forms of energy, including oil. Oil companies that bought up coal reserves in the 1970s and
1980s have begun to see that the two industries do not always mesh well.
Others believe some companies are positioning themselves for the coming deregulation of the
electric utility industry in the United States.
An international global warming treaty signed by the Clinton Administration earlier this year will
put increasing pressure on companies, like electric utilities, that burn fossil fuels like coal.
©1999 Associated Press. All rights reserved. This material may not be published, broadcast,
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