Critical Issues In Recent Coal Project Financings

Ladies and Gentlemen, There have been no less than ten major coal project financings in the last eighteen months. Each of these has been in the order of $100 million to $1 billion for the development of a coal property and its associated infrastructure. It is appropriate at this time to review the nature of these past financings. Why has there been so much activity? There are primarily two reasons. The first is due to the large number of contracts which were signed as a result of OPEC oil shocks. High projections were made for increased coal consumption particularly in world trade. This is distinct from domestic coal mine/power plant projects which often tap a government source of funds. Second is the high cost of coal development in the 1980's compared with a typical company's corporate borrowing capacity.