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Interview: Kevin Crutchfield, Alpha Natural Resources

The Chairman and CEO of Alpha Natural Resources discusses coal prices




Around 75% of Alpha’s met coal production is destined for the export market, and India’s been a key customer of yours in the past.  How do you see India’s demand for met coal developing over 2015-2016?

 
India has been an important market for us indeed, and the commissioning of new coke ovens this year portends well for future demand. But our ability to flex production and logistics from so many mines and through several ports means that we’ve historically been able to accommodate surges in different regions and countries each year, rather than be reliant on one.  In 2013, the last year we have publicly available figures for, Turkey was our largest export destination, and before that it’s been other countries like Brazil, Canada and Japan. 
 
You recently said that market conditions could see only 2-4 ‘really, really’ large US coal producers in future. What opportunities do you see for M&A in the US coal space in the current environment?
 
We’re actually almost there, in terms of the number of producers that have sufficient size, scale, and flexibility for the new world we operate in today. In my opinion further consolidation will only happen if the chemistry works between the acquirer and the acquired, and by that I mean synergies that have real dollars attached to them. Whether it’s in logistics or customer mix or production or SG&A, synergies become an even more important driver to acceptable valuations when you’re in a cyclical trough. Balance sheets will also be a key consideration in the M&A space given leverage levels across the producers. 
 
In your view, what is the single biggest variable affecting thermal coal prices on the domestic US and international coal markets respectively?
 
I don’t think it’s news to anyone that in the U.S., shale gas production and the propensity of utilities to switch between fuel sources drive thermal pricing right now. I see that almost going hand-in-hand with the expansive regulatory agenda being pushed out of Washington, which is dictating who wins and who loses while creating great uncertainty for the utility industry and their coal suppliers. Finally I think surplus production capacity is emerging as an issue. Overseas, we also have an oversupply situation and generally weaker economic activity which have depressed electricity consumption. 
 
Your presentation at the 15th Coaltrans USA conference will focus on ‘Aligning policy with progress.’ Can you give us an insight into what your presentation will cover at the conference, and the implications of EPA regulation for the coal sector?
 
The point I’d like to make is that when government advances environmental ideals at the expense of the public, it often has disastrous and immoral consequences. No one should have to choose between “heat or eat,” yet in some places the boutique fuels that comprise green energy have become so costly that people can’t afford the power to heat their homes. We all should be horrified by that. And our country should be very, very wary. When Americans start to experience disruptions to the grid, or power rationing, or rising fuel poverty, they will demand to know why public policy left our nation and our economy vulnerable to such harm and disruption.   
 
You have been in the coal industry for about three decades, and with Alpha since its formation in 2003. Who has inspired you most in the course of your career and why?
 
While I’ve really been fortunate to have been inspired by so many individual colleagues, mentors and close friends, I’d have to say that, collectively, all the coal miners I’ve had the pleasure to know and speak with have made the most lasting impression on me. Coal mining is one of the noblest professions there is, and yet I don’t think miners get the recognition or respect they deserve. I for one am blessed to be engaged in important work with people I respect so much.
This content is provided by Coaltrans Conferences for informational purposes only, and it reflects the market and industry conditions and presenter’s opinions and affiliations available at the time of the presentation.

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