Coal Age

MAR 2017

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Page 8 of 51

March 2017 7 news continued supply curve contracts and other power prices would be higher." Medine noted there has been considerable interest in third-party acquisitions of existing coal plants. Earlier this year, for example, a joint venture of Blackstone and ArcLight Capital Partners LLC purchased the 2,600-MW Gavin coal plant in Ohio from AEP. Two years ago, Dynegy bought coal plants belonging to Duke Energy Ohio. As a result, Medine said, DP&L should market both Stuart and Killen to potential joint ventures, merchant generators or even coal companies interested in vertically integrating their businesses. "Coal producers and transporters are increasingly flexible with respect to their pricing structure to improve the dis- patch of coal plants," she said. "In some markets, coal producers have been known to provide discounts and premiums to the coal price based upon real-time power pricing. Depending upon the discounts, this could reduce the fuel cost to very low levels during off-peak periods, allowing plants to dispatch ahead of gas." A Murray spokesman declined to comment on whether his company might be interested in buying Stuart or Killen. Cloud Peak Energy Modifies Agreements With Westshore Terminals, BNSF Railway On February 15, Cloud Peak Energy Inc., one of the largest U.S. coal producers and the only pure-play Powder River Basin (PRB) coal company, announced that Cloud Peak Energy Logistics LLC replaced its throughput agreement with Westshore Terminals Ltd. Partnership and its transportation agreement with BNSF Railway Co. Under the new agreements, which were effective in January for the throughput agreement and April for the transportation agreement, Cloud Peak Energy made upfront payments and also committed to minimum payments through 2018. The outstand- ing undiscounted commitments are approximately $51 million through the current two-year term of these agreements. The agreements if elected, may be extended through the end of 2019 if elected. In addition, Westshore has certain priority rights on throughput capacity in respect of any export shipments by Cloud Peak Energy through 2024. The original throughput and transportation agreements and underlying take-or-pay commit- ments would have expired at the end of 2024. "Westshore and BNSF are critical parts of our effort to main- tain a viable long-term Asian export business," said Colin Mar- shall, Cloud Peak Energy president and CEO. "We value our strong relationships with Westshore and BNSF and appreciate their will- ingness to work with us. We believe in the long-term opportunity for Asian exports of Powder River Basin coal." Alpha Completes Sale of Assets in Eastern Kentucky Alpha Natural Resources Holdings Inc. and ANR Inc. announced the divestment of all of their affiliated mining assets in Harlan County, Kentucky, to JRL Coal LLC of Marietta, Georgia. The Coalgood assets include a permitted surface mine oper- ation that has been idle since 2012 and nearly 12 million tons of high-quality thermal coal reserves. JRL has indicated its plan to operate the assets. "The divestiture of the Coalgood mining complex represents our ongoing dedication to our strategic plan regarding idled as- sets, which has been to identify non-strategic properties for di- fi ciency at the Ramin power plant in the Khuzestan Province to 50%-55% from the current 36%, a government offi cial said. India Pushes Coal Production Despite Weak Demand The Indian government will continue to push for higher coal pro- duction in the 2017-2018 fi scal year despite sluggish demand, pil- ing up of pithead stocks and missed targets. Indications available from the federal Ministry of Coal indicate that the latter will set a production target of 660 million metric tons (mt) during 2017- 2018 for Coal India Ltd. (CIL), which accounts for more than 80% of domestic supply. The production target for next year would be about 15% higher than CIL's expected coal production during 2016-2017. During the period April-December 2016, the miner produced 377.7 million mt of coal, compared to the 417 million mt target set by the Ministry of Coal, as per offi cial data released. It is expected to close in the current fi scal year (at the end of March) with a production of 582 million mt against a government target of 598 million mt. Persisting with setting a higher production target was signif- icant when viewed against a slowdown in demand from key con- suming sectors like thermal power production. The off-take of coal by thermal power producers during April-December 2016 was esti- mated by the government at 391 million mt, which was less than the 434 million mt consumption forecast from the thermal power generation companies, made at the start of 2016-2017, a ministry offi cial said. He said the government would continue to push for production growth despite sluggish demand because production growth was set keeping in view long-term demand of the fuel across industrial sectors and could not be a refl ection of "short-term cyclical de- mand fl uctuations." However, the slack demand for coal was expected to persist in the longer term, too, with the Central Electricity Authority (CEA), the statutory government authority for the electricity sector, fore- casting that low demand for the fuel was likely to aggravate fur- ther with the authority claiming that the country does not need any more coal-based thermal power plants until 2027. The forecast was based on the CEA's assumption that electric- ity demand for 2022 would be around 235 gigawatts or about 17% lower than the demand estimate made in 2012 when a large num- ber of thermal power projects were planned for implementation. Coal Truckers Protest Renewables in South Africa Coal truck drivers in South Africa recently protested against the government's decision to invest in renewable energy from inde- pendent power producers. On March 1, traffi c came to a standstill in Pretoria, South Africa, when contracted coal truck transporters were moving at a snail's pace in an effort to get a reaction from the government regarding Eskom's intention to use more renew- able energy, ESI Africa reported. More than 100 coal truck drivers blocked several roads around the capital. In February, while de- livering the State of the Nation address, South African President Jacob Zuma said his administration was now more committed to the Renewable Energy Independent Power Producer Procurement Program (REIPPPP). He emphasized a move toward renewables while explaining that the government continues to work toward ensuring national energy security. Continued from p. 6...

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