New York (Platts)--8Oct2008

Standard & Poor's on Wednesday said it expects rising coal prices over
the long term and predicted "the degree to which the power sector's strategies
adapt to rising coal prices succeed will have a real impact on [generators']
credit quality."

"As commodity prices have risen, coal has proven no exception. Even as US
power plants have been looking more to natural gas, alternative energy, and
new technologies in anticipation of new environmental regulation, they've had
to scramble to cope with greater price volatility for this once stable
commodity," said four S&P analysts in the report: "Return of the King: Coal
Markets from a US Power Sector Perspective."

Power generators account for more than 90% of US coal consumption and
about half of the US generation fleet uses coal as its fuel source.

The price surge was partly due to higher natural gas, and increasingly,
crude oil prices, possibly because of speculation, as a hedge on inflation,
the ratings agency said.

"Recent moderation in rates, for instance, is likely because crude and
natural gas prices have declined," S&P said, and "while coal prices should
come off current highs, spot prices will likely remain volatile through 2011
because any disruption in existing supply will result in upward pressure."

It added, however, that a "decline in consumption because of a global
economic slowdown could result in lower prices. A decline in shipping rates
and completion of new ships to transport coal for 2009 delivery could also
result in availability of more seaborne coal."

S&P, like Platts, is a division of The McGraw-Hill Companies.