February 4, 2011
Coal Powered: Massey and Alpha Natural Resources Inc. to Merge
Alpha Natural Resources Inc. is taking over Massey Energy Corp., the latter of which is valued at $8.5 billion for takeover purposes. The deal will be the biggest coal-related purchase in history. Alpha Natural Resources agreed to pay a 55% premium to make the deal happen, making clear that, at least in the world of finance and big business, coal is not going anywhere soon.
Power generation from coal makes up about 50% of the U.S. energy mix, about 90% here in North Dakota, but a number of utilities are shifting generation to natural gas. However, overall, coal demand continues to increase, especially in China and India, for both steel production and power generation. The Energy Information Administration also predicts that coal consumption will stay relatively stable between now and 2035 (see pdf here).
This is one of many places where I'm confident markets don't lie. Coal is not going anywhere, and if we're going to make any productive changes to our energy policy, and our energy mix, we need to recognize that. That doesn't mean functioning with the status quo. It simply means that, to plot a better course, we need to understand the map. This acquisition of Massey just provided that map an update.
February 4, 2011 | Permalink