North American Coal

Business Highlights

Coal Production Overview

Coal fuels about 49% of the country's electrical generation

  • Natural Gas 20%
  • Nuclear 19%
  • Hydroelectric 7%
  • Fuel Oil 2%
  • Other 3%

The country's abundant recoverable coal reserves of over 264 billion tons help to provide a lower-cost energy source and offer U.S. energy independence

  • Coal production in the U.S. in 2007 was approximately 1.2 billion tons
  • Coal is one of the lowest cost fuels for base-load electric power generation‚ considerably less expensive than natural gas or oil
  • Natural gas prices are likely to continue to stay high due to domestic supply limitations

Energy sector shows moderate growth, but growth could be higher in coal industry if natural gas prices stay high and coal gasification technology continues to develop

  • New technologies, including coal gasification, show promise in cost-effectively capturing CO2

NAC Focuses on Lignite Coal

NAC is the nation's largest miner of lignite coal, and the 8th largest coal producer nationwide as of December 31, 2007, delivering 33.7 million tons of lignite coal in 2007

NAC has 2.3 billion tons of lignite coal reserves, including unconsolidated project mining operations, of which 1.2 billion tons are committed to current customers (as of December 31, 2007)

Click on the diagram at right to see a comparison of lignite coal to other types of coal

Diverse Mining Locations

Click on the map at right to see NAC's mine locations

Dependable Financial Performance

  • Steady operating income and cash flow before financing activities
  • High returns on equity

Minimal Exposure to Coal Prices

  • Contracts structured to minimize exposure to fluctuations in coal prices
  • Long-term agreements establish mining services NAC will perform and mechanisms for compensation

Stable Operating Income Streams

Three Unconsolidated Project Mining Operations (North Dakota and Texas)

  • Cost plus an agreed pre-tax profit or management fee per ton
  • Modest up front equity investment by NAC
  • Debt financing guaranteed by utility customer; non-recourse to NAC
  • No coal market price risk
  • Long-term contracts (2012-2045)
  • 2007 deliveries of 26.9 million tons

Three Consolidated Mining Operations (Louisiana, Texas and Mississippi)

  • Louisiana and Mississippi Mines
    • Fixed price with agreed cost escalators
    • NAC assumes operating risks; greater initial capital investment and greater profit opportunity
    • Financing by NAC and not the customer
  • Texas Mine
    • Management fee contract with performance incentive
    • Financing provided by customer; non-recourse to NAC
    • No coal market price risk
  • Long-term contracts (2010-2032)
  • 2007 deliveries of 6.8 million tons

Six Limerock Dragline Mining Operations (Florida)

  • Fixed fee or cost plus an agreed pre-tax profit per cubic yard of limerock removed from quarry, including annual price escalator
  • 2007 deliveries of 37.6 million cubic yards

Outstanding Mining Skills

  • Use of technology to increase efficiency
  • Award-winning environmental protection and safety record

Future Mining Project Potential

  • Potential for further lignite mining projects
  • Potential for additional limerock dragline or other natural resources mining projects

New Project Opportunities

  • Pursue various projects related to new coal-based energy technologies, including coal-to-liquids conversion, coal gasification and other clean coal technologies
  • Pursue managing coal mining projects worldwide for other utilities

 

 


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