Washington (Platts)--12Feb2008

Although the odds now favor a US recession, the Federal Reserve's quick
action in lowering interest rates in January will help keep the downturn under
control, Standard and Poor's analysts said in a commodities and the economy
conference call Tuesday.

For coal, the big question is carbon and what actions the federal
government takes. The administration's and Congress' decisions will go a long
way toward determining coal's use in the future, said Michael Scerbo, S&P
director and team leader for natural resources.

Coal and the other fossil fuels face considerable challenges from other
power sources. More than half of the lower 48 states have some kind of
renewables standard and wind is the leader, he said. When tax incentives for
wind expire in 2008, Scerbo expects significant changes in the power market.

During the interim, companies looking to borrow money can expect tighter
reviews while the market remains "inhospitable to new issuers," said Andrew
Watt, managing director at S&P.

"Relatively good market conditions" are expected to continue in the first
half of 2008 as commodity prices stay up and a "good" supply/demand balance is
maintained, Scerbo said. Coal companies, along with other mining companies,
are using their cash for upgrades and infrastructure work, he added.

Mergers and acquisitions have been "feverish over the past several
years," he said, with "abundant access" to capital and an influx of private
equity. But with leverage rates up, even for previously conservative
companies, there are significant negative ratings, a trend that S&P expects
will continue, he said.

Electric utilities will be active in the debt markets in 2008, said John
Whitlock, managing director and team leader for utilities and infrastructure
ratings.

For oil and gas, the robust positive ratings in 2007 are unlikely to
continue into 2008, said Tom Watters, senior director. These businesses face
recession concerns, cost challenges, increasing debt to fund capital
expenditures and weaker refinery margins.

S&P, like Platts, is owned by The McGraw-Hill Companies.

This is an excerpt. For more news, request a free trial to Platts Coal Trader
at
http://www.platts.com/Request%20More%20Information/index.xml?src=story