Exhibit 99.1
Approaching Capital in a Recessionary Environment
Phil Cavatoni, Chief Strategy Officer
October 1, 2009
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Certain statements made by management during this call and webcast constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are
not guarantees of future performance. Risks and uncertainties are inherent in our future performance.
Many factors could cause our actual results, performance or achievements, or industry results, to be
materially different from any future results, performance or achievements expressed or implied by such
forward looking-statements. These factors are discussed in detail in our Annual Report on Form 10-K and in
our other filings with the SEC, which you access through the investor relations section of Alpha’s website or
the SEC website. Given these risks and uncertainties, prospective and current investors are cautioned not to
place undue reliance on such forward-looking statements. We make forward-looking statements based on
currently available information, and we assume no obligation to update the statements made today or
contained in our Annual Report or other filings due to changes in underlying factors, new information,
future developments, or otherwise, except as required by law.
statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are
not guarantees of future performance. Risks and uncertainties are inherent in our future performance.
Many factors could cause our actual results, performance or achievements, or industry results, to be
materially different from any future results, performance or achievements expressed or implied by such
forward looking-statements. These factors are discussed in detail in our Annual Report on Form 10-K and in
our other filings with the SEC, which you access through the investor relations section of Alpha’s website or
the SEC website. Given these risks and uncertainties, prospective and current investors are cautioned not to
place undue reliance on such forward-looking statements. We make forward-looking statements based on
currently available information, and we assume no obligation to update the statements made today or
contained in our Annual Report or other filings due to changes in underlying factors, new information,
future developments, or otherwise, except as required by law.
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v Headwinds in 2009
v Lower industrial demand for electricity
v Decreased demand for metallurgical coal
v Reduced net coal exports from the U.S.
v Coal-to-gas switching for electricity generation driven by low gas prices
v Milder-than-normal weather
v Demand for metallurgical coal recovering
v U.S. steel inventories at service centers bottomed at 25-30 year lows
v U.S. capacity utilization less than 45% in 1H09
v U.S. capacity utilization has been increasing for several weeks, now approaching 60%
v Investor focus on near-term international demand for metallurgical coal
v China met coal imports up significantly YOY, driving up spot prices in Asia
v Asian demand reduces availability of Australian coking coal in Atlantic Basin
v Steel production can be expected to recover in Europe, Brazil and the United States
which will increase demand for Appalachian coking coal
which will increase demand for Appalachian coking coal
v Valuations for metallurgical coal assets reflect investors’ enthusiasm
Source: WSA , Credit Suisse research
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v Challenging market for domestic steam coal
v U.S. electricity generation down 4% YTD; coal-fired generation down +10%
v Nationwide inventory of 180-190 million equates to greater than 65 days of burn
v Annualized run-rate of production cutbacks total ~100 million tons
v Today’s spot prices force some high cost, uneconomic production from the market
v Domestic steam coal is currently out of favor
v Domestic steam coal poised for eventual recovery
v U.S. entering a period of “easy comps”
v Evidence of economic recovery mounting
v Forward prices indicate that low-priced natural gas won’t last—switching could reverse
v Return to normal weather likely
v Today’s steam coal market could offer attractive investment opportunity
v Asia expected to drive long-term growth in steam coal demand
v Global coal consumption rose approximately 40% between 2000 and 2008
v China’s 2010 coal demand expected to be 3 billion tons (BTs), growing to 5 BTs in 2030
v Worldwide coal demand is forecast to rise from 7.4 BTs in 2010 to 9.9 BTs in 2030
v How should a U.S. company position itself to benefit from this growth?
Source: EIA, Stifel Nicolaus research, internal analysis
Foundation Coal - A Practical Example
Pre-merger
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v Large number of small mines
v Limited number of organic projects
v 600 MTs of reserves
v Cyclically volatile earnings
v Concentrated in CAPP
Post-merger
ü Added large mines with long lives in NAPP, PRB
ü Organic potential in NAPP, CAPP including new met
ü 2.3 BTs of reserves
ü Positioned to mitigate volatility through diversification
ü Most geographically diverse domestic producer
v Limited scale
ü Third largest U.S. producer by most metrics
Strategic Fit
From a strategic perspective, the merger significantly strengthened Alpha’s
business model and positioning in the domestic industry
business model and positioning in the domestic industry
Source: internal projections
Northern Appalachia
Central Appalachia
Illinois Basin
Powder River Basin
Production Capacity | 55.0 |
2008 Shipments | 49.2 |
Reserves | 760 |
Reserves | 26 |
Production Capacity | 17.3 |
2008 Shipments | 17.9 |
Reserves | 800 |
Production Capacity | 25.0 |
2008 Shipments | 32.1 |
Reserves | 762 |
Note: Figures pro forma as of 12/31/08.
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14%
86%
20%
15%
12%
53%
29%
18%
53%
35%
32%
32%
1%
Source: internal projections
Source: Public filings and company press releases.
(1) Market data as of 9/9/09.
(2) Based on Alpha Natural Resources, Inc. reported EBITDA and Foundation Coal Holdings, Inc. adjusted EBITDA as reported in Form 10-Qs for the quarterly periods ended June 30, 2009, both of which are available on our
website at www.alphanr.com.
(1) Market data as of 9/9/09.
(2) Based on Alpha Natural Resources, Inc. reported EBITDA and Foundation Coal Holdings, Inc. adjusted EBITDA as reported in Form 10-Qs for the quarterly periods ended June 30, 2009, both of which are available on our
website at www.alphanr.com.
Market Capitalization(1) ($ in billions)
LTM 6/30/09 Revenue ($ in billions)
LTM 6/30/09 EBITDA(2) ($ in millions)
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Foundation Coal - A Practical Example (con’t)
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v Similar corporate cultures
v Complimentary management teams
v Compatible workforces
v Robust and replicable integration process
v Shared mission, vision and values unite the combined organization
The ability to manage the integration in terms of scope, process, operations and personnel
was given careful consideration in advance, and execution has gone according to plan.
was given careful consideration in advance, and execution has gone according to plan.
Manageability
Foundation Coal - A Practical Example
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Alpha emerged from the transaction well-positioned for the future.
ü Strong post-closing liquidity of approximately $1 billion
ü Approximately $500 million in cash
ü Highly hedged book of business
ü Low leverage ratio at 1.3x debt-to-EBITDA
ü Favorable terms on remaining debt
ü Able to entertain future M&A or organic growth opportunities, or both
Empirical evidence suggests that greater scale and diversification will be accorded higher
valuation multiples in the coal mining industry.
valuation multiples in the coal mining industry.
While we had a view going into the transaction, investors will judge the appropriateness
of the valuation and return characteristics of the Alpha/Foundation merger.
of the valuation and return characteristics of the Alpha/Foundation merger.
End State
Valuation/Return
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Build or buy?
Metallurgical or steam?
Which geographic region?
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v Business cycle
v Market valuations
v Expected returns and cash flows
v Speed of implementation
v Potential synergies
v Marketing considerations
The decision to grow internally or through acquisition will be
determined by:
determined by:
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This decision will be heavily dependent on our current and forward
-looking view of the markets
-looking view of the markets
v Met coal assets have been bid up in expectation
of a strong recovery
of a strong recovery
v Met coal is a scarce resource that can command
strong margins in a healthy market
strong margins in a healthy market
v Steam coal remains out of favor
v Current prices for eastern steam coal are under
the cost of production for a significant portion of
Central Appalachian production
the cost of production for a significant portion of
Central Appalachian production
v Currently bloated inventories are anticipated to
correct and demand for thermal coal is
projected to rebound over time
correct and demand for thermal coal is
projected to rebound over time
v Political and permitting pressures on CAPP
production could limit supply in the future
production could limit supply in the future
This decision will be guided by a balance of factors, including
diversification, opportunity set, market view, and possible synergies
diversification, opportunity set, market view, and possible synergies
v If thermal coal demand recovers and CAPP
production gradually declines, CAPP opportunities
could make sense
production gradually declines, CAPP opportunities
could make sense
v Permitting and MTR challenges limit CAPP volumes
v Current prices below production costs forcing high-
cost production out of the market
cost production out of the market
v Are bankrupt assets attractive—probably not
v NAPP is attractive, but opportunity set is limited
v As CAPP declines ILB, PRB & WBIT can fill demand
v ILB is attractive with large reserves, low-costs and
transportation advantages
transportation advantages
v PRB is the fastest growing region in the U.S.
v ~ ½ of new coal-fired generation to rely on PRB
v Now out of favor due to prices and utility
inventories, PRB & WBIT could hold promise
inventories, PRB & WBIT could hold promise
v Global demand growth will be driven by Asia, so
international opportunities are significant, but
logistics, culture & politics must be considered
international opportunities are significant, but
logistics, culture & politics must be considered
