Category Archives for Staff Calendar

EIA Coal News and Markets – 2-15-08

From the EIA website:

The following average spot coal prices appear in the graphic below, for the previous and most recent weeks:
Week Ended Central
Appalachia
12,500 Btu,
1.2 SO2
Northern
Appalachia
13,000 Btu,
<3.0 SO2
Illinois Basin
11,800 Btu,
5.0 SO2
Powder
River Basin
8,800 Btu,
0.8 SO2
Uinta Basin
11,700 Btu,
0.8 SO2
11-Jan-08 $58.30 $61.75 $34.00 $11.65 $24.00
18-Jan-08 $58.30 $61.75 $34.00 $11.85 $33.00
25-Jan-08 $59.90 $63.00 $34.00 $12.30 $33.00
01-Feb-08 $59.90 $63.00 $36.00 $12.55 $33.00
08-Feb-08 $59.90 $70.00 $36.00 $13.10 $33.00
15-Feb-08 $66.95 $70.00 $46.80 $13.10 $33.00

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20. February 2008 by
Categories: Asia, Case Studies, conference, Marketplace Information, Member Pictures, Staff Calendar | Leave a comment

Power Magazine takes a hard look at the 2008 generation scene

In an often biting and blunt review of what to expect in the generation market, Power Magazine has clearly elaborated on some of the key challenges the energy industry will face over the next year. The opening paragraphs are perhaps the most blunt.

Predicting the U.S. power industry’s 2008 performance requires understanding how utilities and other plant developers respond to risk and uncertainty. Three years ago, mercury controls had the undivided attention of every coal plant operator. Today, the imminent arrival of carbon controls has caused a tectonic shift in the industry. In years past, builders of new power plants focused on getting grandfathered out of new regulations. Today, developers are canceling plants before the climate change debate in Congress has ended, already assuming the results will be bad for them.

Even the mere anticipation of carbon controls, and the sea change they will bring to the U.S. economy, has created strange bedfellows and stranger enemies. Environmental groups are now embracing nuclear power because they perceive it to be the lesser of two evils—after coal. Proposed carbon cap-and-trade regulations have executives of nuclear and wind power utilities vilifying their counterparts at coal-based utilities, who are asking for “need” allowances to ease the transition.

Thirty years ago, America’s major utilities faced common challenges arm-in-arm. That time has passed.

The article goes on to detail the prospects of the main forms of energy; sadly, none of their findings are good. Continue reading

06. February 2008 by
Categories: Canada, Case Studies, conference, e-News ~ Members' Update, enviro, Excellence Awards, Good for you!, Industry Reports, Marketplace Information, News Releases, Staff Calendar | Leave a comment

India – Economic Times: You need coal in your portfolio

Nidhi Nath Srinivas, of the Sunday Economic Times (India Times) elaborates on why you should have coal in your investment portfolio.

You are playing crude oil and natural gas futures. You love ethanol. But if you haven’t got a fix on coal, your energy sector portfolio sucks.

I can give five reasons why you should start taking coal seriously.

Read Srinivas’ reasons here

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05. February 2008 by
Categories: Australia, CCT, conference, enviro, Europe, Marketplace Information, Staff Calendar | Leave a comment

AEP seeks coal offers

 

From the AEP website:

Coal Offers

American Electric Power Service corporation (AEPSC), acting as agent for the AEP System Companies, is seeking proposals for the supply of coal to one or more of its generating stations. Specifications may vary. Delivery may be made by rail, barge, or truck.

1/31/2008 American Electric Power seeks low-sulfur coal offers
  American Electric Power (NYSE: AEP) announced today that its American Electric Power Service Corp. (AEPSC) subsidiary is seeking offers for the supply of low-sulfur coal to one or more of its generating stations.

Read the remainder of the coal offer requests on the AEP website Continue reading

01. February 2008 by
Categories: Asia, conference, enviro, Marketplace Information, Staff Calendar | Leave a comment

EIA Coal News and Markets

From the EIA website:

The following average spot coal prices appear in the graphic below, for the previous and most recent weeks:
Week Ended Central
Appalachia
12,500 Btu,
1.2 SO2
Northern
Appalachia
13,000 Btu,
<3.0 SO2
Illinois Basin
11,800 Btu,
5.0 SO2
Powder
River Basin
8,800 Btu,
0.8 SO2
Uinta Basin
11,700 Btu,
0.8 SO2
07-Dec-07 $57.70 $55.25 $33.50 $11.50 $24.00
14-Dec-07 $57.70 $55.25 $33.50 $11.50 $24.00
21-Dec-07 $57.70 $55.25 $33.50 $11.50 $24.00
04-Jan-08 $58.30 $61.75 $34.00 $11.60 $24.00
11-Jan-08 $58.30 $61.75 $34.00 $11.65 $24.00
18-Jan-08 $58.30 $61.75 $34.00 $11.85 $33.00

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25. January 2008 by
Categories: Asia, Case Studies, conference, Marketplace Information, Member Pictures, Staff Calendar | Leave a comment

Campaign advisors argue carbon taxes are the answer

In a January 11, 2008 article in the Financial Post, Terence Corcoran describes how the political world is being turned on its head as presidential candidates struggle to distance themselves from each other and attach themselves to the populist wind that is blowing throw the presidential primaries.

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14. January 2008 by
Categories: Asia, Energy Trading, Excellence Awards, Marketplace Information, Staff Calendar, travel | Leave a comment

Innovative Finance Techniques for Mine Owners

(Note: This
article was produced by Bryan Clark of Lion CFC Inc. This article is
provided for information purposes only
and does not constitute an endorsement or recommendation of CFC Inc. or
its products and services by the American Coal Council or its member
companies.)

Investment banks, private equity funds, commercial banks and various
other financial institutions have long been utilized to fund coal
mining ventures and operations. Although these funding sources can
offer a quick source of funds to begin a project or expand an existing
project, these funding sources also typically require a “piece of the
action,” otherwise known as an equity or ownership position in the mine
project. Depending on the mine owner’s banking relationships and past
projects, or even the availability of capital in the various capital
markets, a mine owner can be forced to share anywhere from 10 percent
to 65 percent of the profits of the mine with the equity partner,
investment bank, lender, etc. Depending on how the deal or loan is
structured, the mine owner’s credit and assets can also be required as
additional collateral and/or recourse for the loan. Of course, this is
a less than ideal scenario. Additionally, commercial banks and lenders
are tightening lending guidelines, raising rates, changing terms on
their clients at the last minute, and worst of all, backing out of
financing commitments days (and sometimes hours) before the scheduled
closing. So how else can coal miners secure the financing they need
without giving up a large “chunk” of equity and/or profits from their
project?

In response to the tightening of commercial lending guidelines in the
coal mining and alternative energy industries, several investment banks
and Commercial Funding Specialists have begun providing financing for
coal mines using unconditional purchase contracts and financial
instruments as collateral for financing instead of the mine and/or
project itself. Using unconditional “take or pay” purchase contracts or
collateralized financial instruments including (but not limited to)
bank guarantees, medium term notes, and standby letters of credit, mine
owners can secure the financing they need within weeks, not months, and
with NO SURPRISES! These methods allow any company from start-up to
industry leader to secure 100 percent financing with nothing other than
a financial instrument and/or an unconditional (“take or pay”) purchase
contract needed as collateral. No underwriting, no financials, no
credit ratings, and no third party reports are typically needed.
Additionally, there is no recourse to the borrower in the event of
default.

“Advanced Contract Funding” and “Collateralized Financial Instrument
Based Funding” were once difficult to secure due to the extensive track
record, credit, and banking relationships required to obtain this type
of financing. However, much of this has changed within the last twelve
to eighteen months.

Let’s start by examining “Advanced Contract Funding”. In order to
secure financing using the “Advanced Contract Funding” method, the mine
owner will need to find a buyer that is willing purchase X amount of
coal, over X amount of years, at X price. The buyer will also need to
be investment grade, meaning the buyer (corporate or government entity)
of the coal must be rated BBB or better by Standard and Poor’s, or Baa
or better by Moody’s. It is worth noting that city and state
governments are often rated BBB or better, meaning this type of
financing is ideal for mine owners that sell coal to public and/or
private entities.

Here’s an example:
Consider a situation where your company has recently landed a
$100 million contract with a BBB or better rated company or government
entity (rated by S&P or Moody’s). The BBB or better rated
company or government, who we’ll call XYZ Company, is guaranteeing to
purchase $100 million worth of your coal over the course of the next
five years. During the negotiations of the contract, several things
must be discussed with XYZ and included in the contract including:

  1. Contract must be date certain (in this
    example five years)
  2. Contract must be sum certain 
    (in this example $100 million)
  3. Currency needs to be specified (US
    dollars typically)
  4. Jurisdiction of contract (Often the
    United States)
  5. Contract must be “assignable”
  6. Contract must be unconditional
    (contract cannot contain conditions or “off sets”)

Once your company has obtained these requirements in the contract with
XYZ, your financing is virtually guaranteed. This contract now
qualifies as “investment grade” and is the only collateral needed to
secure funding of up to 100 percent of the contract’s face value ($100
million in this example) within two weeks at rates fixed between 6.5 to
10.5 percent without giving up any ownership or equity in your mining
project. Simply provide a copy of the contract to a commercial finance
institution that provides “Advanced Contract Funding” and they will
begin due diligence on the contract and entities involved in the
transaction. Due diligence typically takes two to three weeks. Once due
diligence is completed, the lender/funding institution will provide you
with a “letter of intent” or “term sheet” spelling out the terms of the
proposed financing. Since the investment banker or commercial funding
specialist providing the financing can verify the legitimacy of the
contract quickly and without much expense, your upfront costs should be
between $1500 and $4500. Depending on the financial institution you
choose to work with, your closing costs could be as much as 3 percent
and as low as $0.

Many of the more sophisticated and experienced firms will charge
“consultant” or “success fees” of 1-3 percent outside of closing,
meaning zero closing costs show up on the closing statement, but you
will get a bill for 1-3 percent of the total loan amount you financed
once, and only if, the loan funds. Lastly, it is important to note that
this is a “non-recourse” funding, meaning your company and/or mining
project is not liable for the loan, or its payments, if the “off-taker”
(buyer of the coal paying on the contract) defaults on their payments
as agreed in the contract. The investment bank or commercial lender
would take legal action against the “buyer/off taker,” not you, to
recoup their money and enforce the terms of the contract.

“Collateralized Instrument Based Funding,” is the second finance
structure worth considering. Collateralized Instrument Based Funding,
as mentioned earlier, requires a standby letter of credit, bank
guarantee, medium term note, or other financial instrument. In order to
utilize this finance structure, a bank willing to issue this type of
financial instrument using your real estate and/or mineral rights as
collateral will to need to be identified. Please note that various
other assets can be used to secure these types of financial
instruments. Although this finance structure is very flexible and
varies widely from project to project, the typical underlying process
is as follows:

  1. Mine/Project is identified
  2. Real Estate and mining rights/permits are obtained
  3. Bank or financial institution issues a Bank Guarantee, Standby
    letter of credit, or Medium Term Note using the
    Real Estate, project, or other assets as collateral
  4. Financial Instrument is “monetized” and/or used as collateral by a
    lender to provide financing quickly and at rates of 3.5 percent to 7.5
    percent.
  5. Funding takes place within one to two weeks

This “Collateralized Instrument Based Funding” process can be
beneficial to all parties involved. The bank earns a fee on the
financial instrument that it issues while at the same time limiting its
financial exposure in the transaction (because the bank is not actually
lending any money). Meanwhile the lender finances the transaction with
a AA rated bank guaranteeing the repayment of the loan via the
financial instrument (the loan amount will typically coincide with the
face value of the financial instrument). Lastly, the mine/project owner
secures very desirable terms on financing using the financial
instrument as collateral without providing financials, third party
reports, undergoing months of underwriting, or giving away any profits
and/or equity. Again, depending on the project/mine, this financial
structure can be a “win-win” for all parties involved. Typically the
only hang up or hurdle that is faced in this type of transaction is
proving the value of the assets put up as collateral for the financial
instrument. Depending on the bank chosen to provide the financial
instrument, this process can take as little as one month to complete.
Many lenders will provide financing against collateralized financial
instruments at rates between 3.5 percent to 7.5 percent without
requiring any ownership or profit sharing in your project.

Bio of Author:

Bryan J. Clark is President of Lion CFC Inc., a firm dedicated to
providing innovative finance structures and funding to the coal mining
and alternative energy industries. Author can be reached via email at:
info@lioncommercial.com

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01. October 2007 by
Categories: Marketplace Information, Staff Calendar | 5 comments