Exhibit 99.1
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JP Morgan 3rdAnnual Basics and Industrials Conference Steve Leer, Chairman and CEO Arch Coal, Inc. New York City June 3, 2008 |
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Forward-Looking Information This presentation contains “forward-looking statements” – that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance, and often contain words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” or “will.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain. For us, particular uncertainties arise from changes in the demand for our coal by the domestic electric generation industry; from legislation and regulations relating to the Clean Air Act and other environmental initiatives; from operational, geological, permit, labor and weather-related factors; from fluctuations in the amount of cash we generate from operations; from future integration of acquired businesses; and from numerous other matters of national, regional and global scale, including those of a political, economic, business, competitive or regulatory nature. These uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. For a description of some of the risks and uncertainties that may affect our future results, you should see the risk factors described from time to time in the reports we file with the Securities and Exchange Commission. |
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LONG-TERM MACRO FUNDAMENTALS CLIMATE CONCERNS AND CLEAN-COAL TECHNOLOGIES CURRENT TRENDS ABOUT ARCH COALDeveloping nations will increase energy use, putting pressure on global supplyElectricity Usage per Capita Passenger Vehicles per 1,000 People15,000 600U.S. Italy U.S. Australia Australia 12,000 450U.K.9,000S. Korea300 -hours per capitaRussia U.K.6,000MalaysiakilowattItalycars per 1000 peopleS. Korea150Russia Malaysia3,000Mexico Mexico China India India China0 0 $0$ 10,000 $20,000 $30,000 $40,000 $0 $10,000 $20,000 $30,000 $40,000 GDP per capita (in U.S. $) GDP per capita (in U.S. $) Source: United Nations’ Human Development Report 2007, 2006 World Development Indicators (World Bank) Slide 3 |
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LONG-TERM MACRO FUNDAMENTALS CLIMATE CONCERNS AND CLEAN-COAL TECHNOLOGIES CURRENT TRENDS ABOUT ARCH COALCoal’s advantage: billions of tons abundant, secure and widely dispersed of oil equivalent 200 Coal 100 Natural Gas 0 OilRussia North America Europe Middle East China India Other Asia Pacific Central and South America AfricaBased on current production levels and proven reserves, coal should outlast both gas supplies and oil reserves byroughly 4 timesSource: ACI, Bank of America, BP Statistical Review 2007 and Blackwell Energy Research Slide 4 |
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LONG-TERM MACRO FUNDAMENTALS CLIMATE CONCERNS AND CLEAN-COAL TECHNOLOGIES CURRENT TRENDS ABOUT ARCH COALLargest U.S. coal plant build-out since 1980 is ongoing, but not enough to satisfy America’s energy needsAnticipated Supply Region for• Build-out of 16 GW equates to59 Coal Plants Under Construction(in millions of tons)million tonsof new annual coal demand over next five years 21 – Arch’s reserve base positioned to service two-thirds of these plants 14• Roughly 8 GW – another25 million tons– in advanced permitting stages 7• Other fuels used for electric 0 generation are challenged to grow 2008 2009 2010 2011+ or represent niche players PRB CAPP Illinois NAPP Other · Reality is that we need all fuels –along with conservation and efficiency – to meet our growingenergy needsSource: Platts and ACI Slide 5 |
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LONG-TERM MACRO FUNDAMENTALS CLIMATE CONCERNS AND CLEAN-COAL TECHNOLOGIES CURRENT TRENDS ABOUT ARCH COALReserve margins for the U.S. power grid will fall below target levels without adequate investmentYear when reserve margin is expected to fall below target level, by region 2010 2009 2009 California New England S. Nevada Arizona 2011 New Mexico New York Rocky Mtn. 2012 2015 2009America has long had one of theworld’s most reliable power systems. Without investment, that could soon change. Source: NERC 2007 Long-Term Reliability Assessment Slide 6 |
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LONG-TERM MACRO FUNDAMENTALS CLIMATE CONCERNS AND CLEAN-COAL TECHNOLOGIES CURRENT TRENDS ABOUT ARCH COALCoal is – and will remain – a vital part of America’s energy futureU.S. Energy Reserves U.S. Petroleum Supply U.S. Fuel Prices(in trillion Btu) (million barrels per day) ($/million Btu at 5/23/08)$22.15 >22x = OPEC Other $128 35% Imports per 30% $13.02 bbl >13x Coal: 94% Domestic 35% $0.97Coal Natural Gas Oil Domestic OPEC Non-OPEC PRB Natural Crude 8800 Gas OilFOB rail Wellhead (2009) (January 2009)Source: EIA, Platts, Argus Coal Daily and NYMEX Slide 7 |
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LONG-TERM MACRO FUNDAMENTALS CLIMATE CONCERNS AND CLEAN-COAL TECHNOLOGIES CURRENT TRENDS ABOUT ARCH COALOver the long term, clean-coal technologies can broaden market demand for coal A plug-in hybrid is one Coal can be converted Gasification can reduce entry for coal into the into transportation fuel emissions and transform transportation market coal into pipeline-quality• At current oil prices, natural gas• Likely to create coal-to-liquids significant off-peak facilities are• IGCC and CCS should demand for electricity economically feasible enable coal to prosper in a carbon-constrained world Public policy initiatives aimed at domestic energy security are spurringdebateon energy legislation andincentivesfor clean-coal technology development Source: ACI Slide 8 |
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LONG-TERM MACRO FUNDAMENTALS CLIMATE CONCERNS AND CLEAN-COAL TECHNOLOGIES CURRENT TRENDS ABOUT ARCH COALSince 1970, coal has been used in increasingly clean ways in the United States 200%GDP +203% Electricity from150%coal +182%100% 50%US population +46%0% -50%NOx-33%-55%SO2-100%PM10-83%1970 1975 1980 1985 1990 1995 2000 2005 2006• Moreprogressis expected under existing regulations• Higher efficiency rates andcarbon capture technologiescreate opportunities for reducing carbon intensity as well Source: NMA, EPANOx (Nitrogen Oxide), SO2 (Sulfur Dioxide), PM10 (Particulate Matter)Slide 9 |
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LONG-TERM MACRO FUNDAMENTALS CLIMATE CONCERNS AND CLEAN-COAL TECHNOLOGIES CURRENT TRENDS ABOUT ARCH COALDeveloped nations must adopt climate solutions and export them to developing nationsCO2Emission Trends• China surpassed(1990 — 2030)the U.S. inGHG15Rest of emissionsin 2007Non-OECD12• The growth rate of GHG emissions inChina developing nations9 2 is likely to significantlyRest of OECDGt of COUnited Statesexceed that of 6 developed nations 3• Developed nations must invest in moreclean coaltechnology 0 research & development 1990 1995 2000 2005 2010 2015 2020 2025 2030 Source: IEA World Energy Outlook 2006, Guardian Slide 10 |
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LONG-TERM MACRO FUNDAMENTALS CLIMATE CONCERNS AND CLEAN-COAL TECHNOLOGIES CURRENT TRENDS ABOUT ARCH COALExplosive growth in international coal markets underscores the shortage of energy around the globeAmericas Europe/Africa Asia/Pacific Americas expected to Europe/Africa should Asia’s net exports almost double net increase its net projected to decline coal exports in 2008 imports in 2008 significantly in 2008–Driven by increase in–Significant export–Driven by strong exports from USA declines from economic growth in South Africa developing nations Americas imports expected to decline–Large switch from–Severe supply from 2007 levels domestic to imported constraints in coal in Europe traditional coal–Driven by lower export nations–Coal production import levels into USA declines in EuropeGlobal coal supply and demand flows suggest that the world isshort of coalby 25 million to 35 million metric tons in 2008, with continued significant supply deficits in 2009 and beyond Source: ACI Slide 11 |
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LONG-TERM MACRO FUNDAMENTALS CLIMATE CONCERNS AND CLEAN-COAL TECHNOLOGIES CURRENT TRENDS ABOUT ARCH COALIn the United States, Arch expects growth in coal demand to accelerate over the next three years(in million tons)2008 2009 2010 Growth at Existing Coal Plants +11 +11 +11 New Coal Plant Demand1/4 22 19 Increase in Gross Exports 20 10 10 Decline in Imports 8 1 - Incremental Demand Growth +43 +44 +40 Cumulative +87 +1271/ Net of coal plant retirements.• U.S. coal demand to grow bymore than 3%annually through 2010 – U.S. coal generation fleet hasincreased average utilizationby 1 percent annually over the past 10 years – Newcoal plant build-outwill expand coal consumption meaningfully – U.S. is expected to become a moresignificant net exportergiven shortage of coal supply worldwide and available port capacity Source: ACI and Platts Slide 12 |
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LONG-TERM MACRO FUNDAMENTALS CLIMATE CONCERNS AND CLEAN-COAL TECHNOLOGIES CURRENT TRENDS ABOUT ARCH COALU.S. coal supply growth is not keeping pace with projected U.S. coal demand so far in 20081Q08 Estimated ProductionTons(Change in Output by Region vs. 1Q07)Producing Basin (in millions)N. Lignite: -0.7 millionPower River Basin 123.6 Central Appalachia 58.3 Northern Appalachia 34.1Powder River Basin Illinois BasinIllinois Basin 23.7+9.5 million -2.4 million N. Appalachia Western Bituminous 18.0-1.7 million Western Bit.Gulf Lignite 11.2flatNorthern Lignite 7.1 Four Corners 6.7C. AppalachiaSouthern Appalachia 5.6-0.4 millionOther 0.9Four Corners S. Appalachia Total 289.2-1.1 million +0.4 million Gulf Lignite -0.3 million Other: -0.1 million 3.2 million Total U.S.: +Source: MSHA and ACINote: Figures may not tie due to roundingSlide 13 |
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LONG-TERM MACRO FUNDAMENTALS CLIMATE CONCERNS AND CLEAN-COAL TECHNOLOGIES CURRENT TRENDS ABOUT ARCH COALPRB coal has gained market share in border states just east of the Mississippi RiverBorder States East of MS Border States East of MS Border States East of MSBurn by Coal Type circa 1990 Burn by Coal Type circa 1995 Burn by Coal Type circa 200732% 78% 58% 50% 31% 69% 18% 22% 42%PRB Non-PRB PRB Non-PRB PRB Non-PRB•Eastern border state• By 1995, power plants• Current 69 percent power plants in Wisconsin, in these four states mix of PRB coal has Illinois, Tennessee and increased their mix of been achieved with Mississippi historicallyPRB coalfrom 22 relativelymodestburned a small mix of percent to 42 percentcapital investmentPRB coal in just five years Source: ACI and Energy Velocity*Border states represent WS, IL, TN and MSSlide 14 |
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LONG-TERM MACRO FUNDAMENTALS CLIMATE CONCERNS AND CLEAN-COAL TECHNOLOGIES CURRENT TRENDS ABOUT ARCH COALWe foresee increased PRB market expansion opportunities further east of the Mississippi River · Eastern power plants inNon-Border States East of MSnon-border states areBurn by Coal Type circa 2007generally comparablein design to plants in the border states31%• Consequently, these non-51%border state plants should be able toincrease their 18% PRB coal usesignificantly with minimal investment PRB• Based on historical PRB switching opportunity Non-PRB switching in the border states and the lower heat content of PRB coal, thetheoretical PRB switching opportunityin the East exceeds 300 million tons Source: ACI and Energy Velocity Slide 15 |
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LONG-TERM MACRO FUNDAMENTALS CLIMATE CONCERNS AND CLEAN-COAL TECHNOLOGIES CURRENT TRENDS ABOUT ARCH COALArch Coal is positioned for the future• One of thelargestcoal producers in the U.S.• Core business isproviding U.S. power generatorswith cleaner-burning, low-sulfur coal for electric generation – Supplies roughly 12% of U.S. coal needs – Provides source fuel for roughly 6% of U.S. electricity• Talentedworkforceoperates large, modern mines• Industryleaderin mine safety, productivity and reclamation Source: ACI Slide 16 |
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LONG-TERM MACRO FUNDAMENTALS CLIMATE CONCERNS AND CLEAN-COAL TECHNOLOGIES CURRENT TRENDS ABOUT ARCH COALArch’s national scope of operations and reserve base includes presence in four major U.S. coal basinsIllinois Basin Powder River Knight Hawk Basin 1 2 1. Coal Creek 2. Black Thunder1 2 3 214 4 3 Western Central Bituminous Appalachia 1. Skyline 1. Mountain Laurel 2. Dugout 2. Coal-Mac 3. Sufco 3. Cumberland River 4. West Elk 4. Lone Mountain 2.9-Billion Ton Reserve BaseCompliance Low-sulfur PRB WBIT ILB CAPP (1,753) (460) (376) (338) High-sulfur Source: ACI at 12/31/07 Slide 17 |
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LONG-TERM MACRO FUNDAMENTALS CLIMATE CONCERNS AND CLEAN-COAL TECHNOLOGIES CURRENT TRENDS ABOUT ARCH COALArch is continuing to enhance reputation as a responsible energy company• Operating the world’s safest coal mines – Awarded MSHA’s Sentinels of Safety honor for operating the nation’s safest underground coal mines in 2006 and 2007 – Ranked first among coal industry peers for safety performance last year• Acting as responsible citizens and goodenvironmental stewards– Inaugural 2007 social responsibility report elevates awareness of Arch’s environmental programs – Earned 3 National Good Neighbor Awards in 4 years• Achieving superior financial performance –Forbesrecognized Arch as one of the 100 most trustworthy U.S. companies of 2008 – Expect 2008 to be a record earnings year for Arch Source: ACI, Forbes Slide 18 |
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LONG-TERM MACRO FUNDAMENTALS CLIMATE CONCERNS AND CLEAN-COAL TECHNOLOGIES CURRENT TRENDS ABOUT ARCH COALArch has one of the industry’s strongest and cleanest balance sheetsNet Debt as Percentage of Capitalization Legacy Liabilities of(at 12/31)$3,431 Largest U.S. Coal Companies(12/31/07, in millions)83.9%Workers’ Comp Post-Retirement Medical Reclamation58.0%Pension46.2% 46.0% $1,302 38.9% $759 $389 $3362000 2002 2004 2006 2007 Peer 1 Peer 2 Peer 3 Peer 4 ACI Source: SEC filings compiled by ACI Slide 19 |
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LONG-TERM MACRO FUNDAMENTALS CLIMATE CONCERNS AND CLEAN-COAL TECHNOLOGIES CURRENT TRENDS ABOUT ARCH COALArch’s mines are strategically positioned to respond to dynamic trends in coal marketsCentral Appalachia Western Bituminous Powder River Basin• Customers span five• Export growth and• Supply constraints in continents supply pressures in other regions and eastern U.S. are sufficient PRB rail• Expect to ship 4.5 boosting demand capacity should pull million tons into global coal east and domestic met• Arch benefits as markets in 2008; largest producer• Arch will benefit from 5-6 million in 2009 rising domestic prices• Have signed• Pursuing incremental significant export• In discussions to margin opportunities business export PRB coal Source: ACI Slide 20 |
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LONG-TERM MACRO FUNDAMENTALS CLIMATE CONCERNS AND CLEAN-COAL TECHNOLOGIES CURRENT TRENDS ABOUT ARCH COALArch is advancing clean-coal technology development via a proposed coal-to-liquids plant in WyomingWorld Total Liquids Production Mine-Mouth CTL Plant(in million barrels per day, per EIA) Non-OPEC117.7OPEC84.3 48% 42% Transportation Fuel Chemical Feedstock 52% 58%2005 2030• World oil consumption needs are growing, and increasingly will be• Arch owns an equity interest in supplied by OPEC DKRW Advanced Fuels• CTL can have a positive impact•Proposed plant would capture CO2 on the U.S. economy, security to enhance recovery and environment in domestic oil fields Source: EIA and ACI Slide 21 |
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LONG-TERM MACRO FUNDAMENTALS CLIMATE CONCERNS AND CLEAN-COAL TECHNOLOGIES CURRENT TRENDS ABOUT ARCH COALArch’s selective approach to signing new contracts retains future upside potentialArch Unpriced Volume Benchmark Steam Coal Index Prices(in millions of tons at 3/31/08) ($/short ton for 2009 delivery as of 5/23/08; 52-week % price change )$152.96 95-105 +135% 75-85 $98.13 +103% $56.00 +59% 8-13 $17.00 +73% PRB 8800 Utah/CO CAPP CSX CIF ARA2008 2009 2010 11,700 12,500 11,2750.8# SO2 Steam Coal Metallurgical Coal0.9# SO21.4# SO2<1.8# SO2FOB railcarSource: ACI, Argus Coal Daily Slide 22 |
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LONG-TERM MACRO FUNDAMENTALS CLIMATE CONCERNS AND CLEAN-COAL TECHNOLOGIES CURRENT TRENDS ABOUT ARCH COALArch continuously evaluates all avenues for value creationOrganic Growth Strategic GrowthInvest in core businesses to Consider acquisitions or enhance profit growth and other investments that return on capital, evaluate strategically fit opportunities to further upgrade and create value and expand reserve baseShareholder Returns Market Expansion Capital Structure EnhancementConsider investments to Maintain strong balance sheet, expand market for coal and consider other vehicles (and improve coal’s value proposition) for value creation, such as through Btu-conversion and other share repurchases or dividend advanced coal technologies increases, when advantageous Source: ACI Slide 23 |
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JP Morgan 3rdAnnual Basics and Industrials Conference Steve Leer, Chairman and CEO Arch Coal, Inc. New York City June 3, 2008 |