Washington (Platts)--23Jan2008

Coal companies got some "very nice" extensions of loan terms, revolvers and
credit facilities before they needed them, and now with cash on hand and
earlier conservative actions, the companies are not likely to have many
problems while the stock market is so volatile, according to a veteran
industry analyst.

Massey Energy and Peabody Energy both reworked their liquidity in the past
couple of years, as did other companies, Monica Bonar, director at Fitch
Ratings, said Tuesday. She follows mining and minerals in North America. The
coal producers tapped the financial market before they needed the financial
resources.

When hedge funds were moving into and out of coal companies, "the coal guys
smelled it in the air" and did a good job of protecting their holdings and
lining up cash on hand and various credit facilities, she said.

Following the global lead of a downturn on Monday, the Dow Jones Industrial
Average opened Tuesday down 460 points, but before the market even opened, the
Federal Reserve cut the federal funds interest rate to 3.50%, which boosted
confidence. Global markets took heart as well. The US Dow Jones Industrials
closed down 128 points, a 1.1% drop, to 11,971, the lowest it has been in 15
months, according to market reports.

One broker said he spent the day calling his clients ? all of them.

The market just never knows where the economic crunch will hit or when. A few
years ago, bond companies were under stress in the early days of one downturn,
and they are again now. They would want to see more liquidity now, Bonar said.


Going forward, Bonar said she expected to see continued lowered production and
reduction of costs, but the European offtakes continue to help the business.
She said 2007 was not the best year, but 2008 may be better.

Many factors influence the coal market, but two ?electricity demand and the
weather ? are especially important. If industrial production drops as it would
in a recession, thereby reducing the demand for electricity, as long as the
weather is cold, the coal burn could stay up, said a veteran coal industry
analyst Tuesday. That demand would keep coal producers busy.

Metallurgical coal prices are "sky high" right now, keeping producers
exporting both met and steam coal, which shores up prices in the East, the
analyst said.

In another scenario, if gas prices drop significantly so that gas is
competitive with coal and plants switch, coal prices could drop. But most coal
companies don't have a lot of book debt, so they have good credit lines now
for the most part, the analyst said.

--Charlotte Wright, charlotte_wright@platts.com,
--Marcin Skomial, marcin_skomial@platts.com and
--Regina Johnson, regina_johnson@platts.com

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